The end of Grifols’ conference call with its investors to dispel any doubts about the contents expressed by the bearish fund Gotham City Research was approaching when one of the participants brought up the elephant in the room: When will pharmaceutical governance improve? To which the company’s executive chairman and CEO, Thomas Glanzmann, quickly acknowledged that there is still room to make progress both in this aspect and in communication. Those who have followed the path of the Catalan company will not be surprised by this dialogue, as it has constantly been repeated in the latest meetings held with its investors, as confirmed by sources close to Grifols. If failures in good governance are openly acknowledged by the person leading the company, how far does the problem extend?
Let’s start with the official data. In the latest Annual Report on Corporate Governance 2022 prepared by the National Securities Market Commission (CNMV), it is confirmed that Grifols partially compliant the recommendation that urges the maintenance of a majority of proprietary and independent directors on the board of the administration, providing information about its members on the web and that the the audit committee has additional functions. Between 2020 and 2022 the company never complied with the recommendation to keep the nomination and compensation committees separate.
The good governance report delivered by the company to the CNMV includes the relationship between Raimon Grifols Roura, Tomás Daga and Víctor Grifols Rourathe three as “minority shareholders, for the purposes of the Securities Market Act”, de Scranton Enterprises, the investment vehicle of the family that controls 8.40% of Grifols. At the same time, Raimon Grifols and Víctor Grifols Roura appear in the document as “shareholders” of Deria SA, the family company that controls 9.19% of the pharmaceutical company, with the difference that the latter is also the person representing the company on the market the Grifols board of directors. Víctor Grifols Deu, for his part, appears as a partner of Ralledor Holding Spain, whose owner is Nuria Roura (mother of Víctor Grifols), and holds 6.154% of Grifols.
Grifols is too the third most opaque company of the Ibex 35, surpassed only by ArcelorMittal and Unicaja, according to the 2023 transparency and good governance ranking on ethics and compliance practices prepared by the Haz Foundation. Failure to publish the audit committee report and its conclusions, failure to manage the ethics channel, establishment of a body responsible for the compliance system, failure to publish this compliance policy and failure to authorize an independent institution to carry out an external audit of Esso. And another one is added to these data: Grifols has 25 companies distributed in 6 tax havens, according to the Pending subject report. The limited progress in the fiscal responsibility of large companies’ by Oxfam Intermón.
The family business marches on the Ibex
The pharmaceutical company has had governance problems for years. With the start of 2023 Grifols has committed to improving it. On February 15, it launched an operational improvement plan that predicted cost savings of 400 million euros on an annual basis, mainly resulting from an 8% reduction in its workforce. A week later, Steven F. Mayer, then executive chairman since September 30, 2022, when Víctor Grifols Roura left the presidency, resigned. Thomas Glanzmann, vice-chairman of the company’s board of directors since January 2017, took over the baton. five monthsGrifoli It was chaired by three different people. Market sources point out that “Grifols has a very international shareholder base” and its structures are far from international expectations, which require close to 100% independence in the board of directors, greater control of operations and greater isolation of the founding family. the management of the company.
“The structure of the company is completely opaque”According to Javier Rivas, professor at EAE Business School, “no investor knows exactly whether Gotham is telling the truth.” There are two key points that impact both the governance and credibility of the company: the consolidation by Grifols and Scranton of the two companies sold by the pharmaceutical company to the Catalan family’s investment vehicle, Biotest US Corporation and Haema, and Scranton itself. “Many families have their own investment vehicle, relationship-wise,” he adds. In this case there is joint debt and there is evidence of cross payments and transactions between the two companies. During the meeting with investors, the company tried to cover up that “in Scranton there are 22 investors and only three members of the Grifols family, who own 20% of the company”, without explaining who the other members are or what to each of them belongs to a part of the company.
These are unknowns that had to be resolved this Thursday, during the conference call with investors where in the end the result was the opposite. The company collapsed on the stock market by 16.17% and lost 2,651.63 million euros in just three days since the publication of the Gotham City Research report in which it is accused of manipulating its accounts and hiding part of its debt. “The feeling after the investor conference is good absolute communication chaos“, specifies Rivas. Some sources explain that “in Spain communication has been left aside to be effective and complete in some companies”, which coincides with the case of Grifols. The CNMV asked the pharmaceutical company to know all the investors who are in Scranton before ten days, which began last Thursday, to clarify who is related to the group’s founding family. Its auditor, KPMG, is silent. And investors, in the absence of further information, are wary and selling its actions.
2024-01-14 05:50:39
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