Corporate Governance and Access to Finance - ESBG

A distinctive characteristic of CMAC is its governance structure. The supremedecree that regulates CMAC establishes as governing bodies the Boardof directors and the joint management. A very interesting feature ofCMAC is that, despite having only one shareholder (the Municipality),the appointment process of the board of directors involves differentstakeholders. The board consists of 7 members: three elected by themunicipal representatives or town councillors (two elected by the majorityand one by the minority, which cannot be one of the councillors); onedesignated by the Catholic Church; one from the chamber of Commerce,one from Corporación Financiera de Desarrollo (COFIDE) – a second tierpublic bank – and finally one from the local association of MSME.This plurality implies that the board represents the interest of differentstakeholders. This corporate governance system enhances theindependence and representativeness of the Board.Like in the case of similar institutions in other countries, CMAC face somechallenges from the point of view of increasing their capital throughmechanisms different from retaining profits. Several possibilities havebeen explored to broadening the capital base, including a partnershipwith multilateral organizations. The law does not exclude the presence ofother shareholders, different from the Municipality. However, there arechallenges to their participation in the board. According to the bankingsupervisor, if this participation does not reach 50 percent, it is difficult forthe new shareholders to get a seat in the Board; if it exceeds 50 percent,the new shareholder would take over the board and decide on the directorywithout a restriction, which would damage the plurality of the Board.The fact that there is only one shareholder entails some problems fromthe corporate governance point of view. Rating agencies have declaredthat they are not increasing the rating unless there are privateshareholders. There have been attempts, but there is strong politicalresistance in some municipalities for the risk of a loss of their identity.The board of directors exercises the institutional representation of theCMAC and does not have executive responsibilities. The board of directorsdesignates the Joint Management members for four-year renewable periods.It is formed by three managers and it has under its command the legalrepresentation of the CMAC, being this the only executive unit responsiblefor its economic, financial and administrative functioning. The jointmanagement has a common responsibility for the daily conduct of business,which instils a culture of consensus in the decision making process.146