The following section presents the main legal and regulatory elements that characterize corporate governance in Mexico. The Stock market law/Act requires a model of corporate governance for public companies that includes the roles, responsibilities and activities of each corporate structure. In Mexico, the Code of Best Corporate Practices (CMPC), last amended in April 2010, specifies principles for strong corporate governance for both public and private companies.
Boards of Directors
According to the Stock market law/Act, the Board of Directors is the governing body responsible for overseeing and monitoring the strategic operations for the business. Among its main functions are to establish a strategic vision, monitor business management, to approve the operational policies, compensation and the use of corporate assets, and approval of related party transactions. Similarly, the CMPC indicates that the Board of Directors should ensure the creation of shareholder value, oversee responsible disclosure of information, establish internal control mechanisms, promote formal succession plans and issue a code of ethics.
As noted in the Stock market law/Act, the Audit Committee is a subsidiary body of the board that is intended to safeguard the assets of the organization to fulfill its responsibilities among which are: to monitor the activities of internal and external audit, review fiscal,regulatory and legal compliance, monitor related party transactions, monitor risks and ensure credibility, transparency and quality of financial information issued by the company.
Societal Practices Committee
Under the Stock market law/Act, the Corporate Practices Committee is another subsidiary body of the board whose main function is to monitor business strategy and business growth. Specifically, its responsibilities are to: review the strategic plan and business management, follow up on social responsibility programs, ensure the proper functioning of the ethics code, authorize the budget, prevent conflicts of interest, review related parties in the operation of the business, and nominate, evaluate and compensate key officers and directors.
The CMPC recommends the implementation of a governance body that is responsible for risk management and issuance of operational, prudential and self-regulatory standards that apply to the company, its debtors and creditors. Similarly, the Code contains a section focusing on management and risk control, as well as on the criteria for disclosure thereof. It is recommended that a report reviewing all identified risks is presented to the committee at each of its meetings.
The Stock market law/Act states that the Board of Directors, supported by the Corporate Practices Committee, is responsible for the appointment and compensation of the CEO and key officers. Additionally, the CMPC recommends that policies for determining the remuneration of the Director General and senior officials be reasonable and that the board consider issues relating to its functions, the scope of its objectives and the assessment of its own performance.
Laws and Regulations
Stock Market Law/Act
Last updated May 2009
A legal document that aims to develop the securities market in an equitable, efficient and transparent manner, while protecting the interests of public investors; minimizing systemic risk, promoting healthy competition and regulating the activities of companies.
Best Corporate Practices Code
Best Corporate Practices Code
Last updated April 2010
Document issued by the Business Coordinating Council to establish recommendations for better corporate governance of companies in Mexico, while contributing to its institutionalization, competitiveness and sustainability over time.