CORPORATE ETHICS IN

SPAIN GROUP7:SONALI JAIN-31PRIYANKA JOSHI-32RISHABH JYANI-33GARIMA KALGTKER-34RAHUL KALYANI-35

SWOT ANALYSISSTRENGTHS:

• Spain is a EU member & has Euro as a common currency.

• Improvement in the financial situation of businesses

• High-quality infrastructure

• Significant tourism potential

WEAKNESS:

• Declining birth rate.

• Unemployment surge.

• Still High Levels Of Private And Public Debt, Very Negative Net External Position

• Large Number Of Relatively Unproductive Small Companies

• Fragmented Political Landscape

SWOT ANALYSISOPPORTUNITIES:

• Attractive domestic market

• Highly qualified work force.

• Incentives for Investments.

• Has better connectivity with SA & NA countries, including EU.

• Moderate Tax structure.

THREATS:

• Housing Bubble

• High Debt

• Illegal immigrants from Africa

• Demand for separate Catalonia state.

ECONOMIC SCENARIO

• Spain has the 14th Economy by Nominal GDP in the World & 5th in EU zone.

• Has a GDP of $1.7 trillion PPP in 2016.

• Faced certain levels of Euro debt crisis.

• Unemployment rate at 18% in 2016

• Reduction of funds flow from EU

• Per Capita income $30,587

POLITICAL SCENARIO• Spain is a parliamentary Monarch where head of state is the monarch & PM is the head of

government.

• To uplift the economy Spain has introduced financial austerity programs( wage cuts).

• The judiciary system is slow-moving & some what politicized

• Unstable government due to failure of coalition among parties

• PM Rajoy is facing corruption charges

SPAIN ON CORRUPTION ,GOVERNANCE & LAWS

• Spain has recently passed Anti-corruption laws which are fairly strong.• Penalties for bribery include fines and of up to six years’ imprisonment, and public officials risk

being disqualified from public employment for up to 12 years.• The Spanish parliament has passed Transparency Law, Access to Information and Good

Governance to enhance accountability & transparency.

SPAIN – ANTI BRIBERY LEGISLATION

• Regulation of conflict of interest Laws (MPs and govt. officials need to disclose their assets and interests)

• Law on transparency (Right to information on how public funds are spent)

• Anti money laundering and terrorist financing act (Compliance with EU money laundering directive)

Source – business-anti-corruption.com, EUACR (EU anti corruption report)

The Penal Code (Articles 404 to 445)1. The Criminal Code makes it illegal for individuals to

offer or accept bribes to/from corporate individuals, along with Spanish and foreign public officials.

2. Penalties for bribery include fine and of up to six years imprisonment , and public officials risk being disqualified from public employment for up to 12 years

3. Facilitation payments are prohibited, and gifts and hospitality may be considered illegal depending on the value, intent and benefit obtained

4. A corporate entity may be held liable for corruption offences committed by its employees

5. Corporate administrators can be given prison sentences and heavy fines for receiving illegal financing

SPAIN – ANTI BRIBERY LEGISLATION

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HIERARCHY OF LAWS IN SPAIN

• THE HIERARCHY OF SPANISH LAWS:

1. THE CONSTITUTION

2. INTERNATIONAL TREATIES

3. THE LAW IN ITS STRICT SENSE: ORGANIC LAW (WHICH REQUIRES AN ABSOLUTE MAJORITY FROM THE CORTES GENERALES), ORDINARY LAW AND REGULATORY LAWS (AMONGST WHICH ARE FOUND THE ROYAL DECREE OF LAW AND THE LEGISLATIVE ROYAL DECREE)

4. LAWS STEMMING FROM THE EXECUTIVE, WITH ITS OWN HIERARCHY BASED ON THE FUNCTION OF THE BODY THAT MADE THEM (ROYAL DECREE, DECREE, MINISTERIAL ORDER, ETC.)

REGULATORY SYSTEM IN SPAIN

• THE JUDICIARY OF SPAIN CONSISTS OF COURTS AND TRIBUNALS, COMPOSED OF JUDGES AND MAGISTRATES (JUSTICES), WHO HAVE THE POWER TO ADMINISTER JUSTICE IN THE NAME OF THE KING OF SPAIN

• THE SPANISH LEGAL SYSTEM IS A CIVIL LAW SYSTEM BASED ON COMPREHENSIVE LEGAL CODES AND LAWS ROOTED IN ROMAN LAW, AS OPPOSED TO COMMON LAW, WHICH IS BASED ON PRECEDENT COURT RULING

• OPERATION OF THE SPANISH JUDICIARY IS REGULATED BY ORGANIC LAW 6/1985 OF THE JUDICIARY POWER, LAW 1/2000 OF CIVIL JUDGEMENT, LAW OF SEPTEMBER 14 1882 ON CRIMINAL JUDGEMENT, LAW 29/1998 OF ADMINISTRATIVE JURISDICTION, ROYAL LEGISLATIVE DECREE 2/1995, WHICH REWROTE THE LAW OF LABOUR PROCEDURE, AND ORGANIC LAW 2/1989 THAT REGULATES MILITARY CRIMINAL PROCEDURE

CONSTITUTIONAL PRINCIPLES• THE SPANISH CONSTITUTION GUARANTEES RESPECT FOR THE ESSENTIAL PRINCIPLES NECESSARY FOR THE CORRECT

FUNCTIONING OF THE JUDICIARY:

• IMPARTIALITY: TO GUARANTEE THE ASSURED EFFECTIVE JUDICIAL TRUSTEESHIP TO ALL CITIZENS BY THE CONSTITUTION, JUDGES MUST REMAIN IMPARTIAL IN CASES THAT THEY JUDGE AND MUST ABSTAIN FROM CASES THAT THEY HAVE NO REASON TO ENTER INTO

• INDEPENDENCE: COURTS AND TRIBUNALS ARE INDEPENDENT OF ALL AUTHORITY OR PEOPLE IN THE EXERCISE OF JURISDICTIONAL POWER

• IRREMOVABILITY: JUDGES AND MAGISTRATES ARE IRREMOVABLE AND CANNOT BE REMOVED, SUSPENDED, SEPARATED OR RETIRED WITHOUT CAUSE AND WITH GUARANTEES ESTABLISHED BY LAW

• RESPONSIBILITY: JUDGES AND MAGISTRATES ARE PERSONALLY RESPONSIBLE FOR THEIR DISCIPLINARY INFRACTIONS AND CRIMES COMMITTED IN THE EXERCISE OF THEIR OFFICE; THIS RESPONSIBILITY CAN ONLY BE REQUIRED BY THE ESTABLISHED LEGAL DISCIPLINARY TRACT, WITHOUT INTERFERENCE BY THE EXECUTIVE OR LEGISLATIVE BRANCHES OF THE GOVERNMENT OR THROUGH ORDINARY LEGAL PROCEEDINGS

• LEGALITY: IN THE EXERCISE OF THEIR JURISDICTIONAL FUNCTIONS, JUDGES AND MAGISTRATES ARE SUBJECT TO THE CONSTITUTION AND TO THE REST OF THE LAWS JUST AS OTHER BRANCHES OF GOVERNMENT AND CITIZENS ARE

• THE JUDICIARY CAN BE ORGANIZED INTO DIFFERENT LEVELS OF TERRITORIAL ORGANIZATION:

1. THE NATIONAL COURTS

2. THE AUTONOMOUS COMMUNITIES OF SPAIN

3. THE PROVINCES OF SPAIN

4. THE JUDICIAL DISTRICT

• THE JUDICIARY CAN BE ALSO ORGANIZED INTO FIVE JURISDICTIONAL ORDERS, WHICH ARE EACH COMPOSED OF SEVERAL DIFFERENT CIRCUITS:

1. CIVIL JURISDICTION

2. CRIMINAL JURISDICTION

3. ADMINISTRATIVE JURISDICTION

4. LABOUR OR SOCIAL JURISDICTION

5. MILITARY JURISDICTION

• UNI-PERSONAL COURTS ARE THOSE COURTS THAT ARE CONTROLLED BY ONE JUDGE AS OPPOSED TO THE REST OF THE HIGH COURTS OF JUSTICE CONTROLLED BY PANELS OF JUDGES. THEY ARE THE BASIC UNITS OF JUDICIAL PROCEDURE IN SPAIN

GOVERNANCE• Governance Of The Spanish Judiciary – General Council Of The Judiciary

• Oversees The Work Of All Courts And Tribunals Of Spain

• Allocates Judges And Magistrates To Each Of Them

• The General Council Composition – 20 Members, 12 Of Who Must Be Judges And Magistrates And The Remaining 8 Other Jurists (Lawyers, Professors Etc.) Of Renowned Competence And With More Than Fifteen Years Professional Experience

• Of The Twelve Judges, 6 Are Elected By The Congress Of Deputies And 6 By The Senate By Three Fifths Supermajority From A List Of 36 Candidates Proposed By Professional Associations Of Judges And Magistrates According To The Size Of Their Membership Or Any Independent Candidate Who Obtains The Endorsement Of Two Percent Of Their Colleagues

• Of The 8 Jurists 4 Are Elected By The Congress Of Deputies And Four By The Senate By Three Fifths Supermajority

EASE OF DOING BUSINESS IN SPAIN• Ranked 12th In The World For Foreign Direct Investment (FDI) Inflows

• Received FDI Inflows Of USD23 Billion

• Ranked 33rd In The World Bank's 2016 Doing Business Rankings, Moving Up One Place From 34th In The Year Prior

• The Ranking Recognized Reforms Enacted By Spain To Make Doing Business Easier In The Country

• This Included Strengthening Minority Investor Protection By Requiring Major Sales Of Company Assets To Be Subject To Shareholder Approval

• Made Paying Taxes Less Costly By Reducing Rates For Corporate Income, Capital Gains And Environment Taxes And Made It Easier By Introducing An Online System For Filing VAT Returns.

• Small And Medium Entrepreneurs Across Spain Face Large Differences In Regulatory Practices Depending On Where They Do Business

EASE OF DOING BUSINESS IN SPAIN• Differences In Regulations And Implementation At The Municipal, Regional And National Level

Determine How Easy It Is To Do Business

• Except For Construction Permits, All Regions Perform Below The European Union Average

• Based On The Aggregate Rank Across The Four Areas Analyzed In The 19 Regions And Cities, It Is Easier To Do Business In La Rioja And The Community Of Madrid

• Easier To Start A Business In Andalusia, Obtain A Construction Permit In La Rioja, Connect A Warehouse To Electricity In Catalonia And Transfer Property In Ceuta And Melilla

• All Locations Have Good Practices That They Can Share With Others, But They Could Also Learn From Others. If All The Good Practices Analyzed Were Adopted In A Hypothetical City, Spain’s Global Performance Would Improve

Population 46.4 millions GDP (US$ billions)1199.7GDP (PPP) per capita (US$)34819.45GDP (PPP) as share (%) of world total1.42Unemployment 21.9%FDI inflow $9.2 Billion

World Rank 69Regional Rank 31Economic freedom status moderately free

ECONOMIC FREEDOM REPORT

The courts have a solid record of investigating and prosecuting cases of corruption.. The top individual income tax rate has been cut to 45 percent, and the top corporate tax rate has been cut to 25 percent.The overall tax burden equals 33.2 percent of total domestic income. Government spending has amounted to 44.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 5.8 percent of GDP.

Procedures for setting up a business have been streamlined. Despite some progress, labor regulations remain restrictive.Price controls have all but disappeared except in sectors still controlled by the national government, such as farm insurance, stamps, public transport, and medicines. Regional governments also control a few prices in their jurisdictions The value of exports and imports taken together equals 64 percent of GDP. The average applied tariff rate is 1.5 percent. The financial sector continues to improve its overall conditions, with the banking sector regaining stability. The share of nonperforming loans remains high

COMPETITIVENESS INDEX

RANK- 32/138 SCORE – 4.7/7

MOST PROBLEMATIC FACTORS FOR DOING BUSINESS• TAX RATES - 14.5

• INEFFICIENT GOVERNMENT BUREAUCRACY- 14

• RESTRICTIVE LABOR REGULATIONS- 13.2

• INSUFFICIENT CAPACITY TO INNOVATE-12.1

• ACCESS TO FINANCING- 11

• POLICY INSTABILITY- 9.1

• CORRUPTION- 7.4

• INADEQUATELY EDUCATED WORKFORCE- 6.1

• TAX REGULATIONS- 4.4

• POOR WORK ETHIC IN NATIONAL LABOR FORCE- 3.7

• INADEQUATE SUPPLY OF INFRASTRUCTURE- 2.5

• GOVERNMENT INSTABILITY- 1.4

• FOREIGN CURRENCY REGULATIONS- 0.4

• INFLATION -0.2

• POOR PUBLIC HEALTH-0

• CRIME AND THEFT-0

TRANSPARENCY INTERNATIONAL• CORRUPTION PERCEPTION INDEX – 41/176

• SCORE – 58/100

• GLOBAL AVERAGE SCORE – 43/100

• Over Two-thirds Of The 176 Countries And Territories In This Year's Index Fall Below The Midpoint Of Scale Of 0 (Highly Corrupt) To 100 (Very Clean).

• Ti-spain Has Been Elaborating And Publishing In The Last Years Five Indices Of Transparency: A) The Transparency Index Of The Town Council B) The Transparency Index Of The Autonomous Communities C) The Transparency Index Of Water Management D) The Transparency Index Of The Diputations And E) The Transparency Index Of The Parliaments.

AMNESTY REPORT

• New Cases Of Torture And Other Ill-treatment, Excessive Use Of Force And Collective Expulsions By Police Officials Were Reported

• Investigations Into Allegations Of Torture And Other Ill-treatment Were Sometimes Not Effectively Conducted.

• Authorities Accepted The Resettlement And Relocation Of Only A Few Hundred Refugees, Far Below The Commitments Undertaken.

• Spanish Authorities Continued To Refuse To Co-operate With The Argentine Judiciary To Investigate Crimes Committed During The Civil War And By The Franco Regime.

INVESTMENT AND TRADE REGIME

• Rapid Growth In International Trade And Foreign Investments

• Spain Is Ranked 17th In The World As An Exporter And 14th As An Importer; While In The Trading Of Services It Occupies 7th Place As An Exporter And 14th Place As An Importer

• Spanish Exports And Imports Of Goods Account For 1.70% And 2.0%, Respectively, Of The Worldwide Total, While Spanish, Exports And Imports Of Services Represent 3.40% And 2.40% Respectively

• Spanish Exports To The European Union Accounted For 62.8% Of Total Exports And Sales To The Eurozone Represented 49.5% Of The Total. Imports From The European Union Accounted For 50.2% Of The Total And Those From The Eurozone Represented 40.4%

LEGISLATION ON FOREIGN INVESTMENT• Royal Decree 664/1999 Deregulated Practically All Transactions Of This Kind (With The Conditions And Exceptions Set Forth Below),

Adapting Spanish Domestic Law To The Rules On The Freedom Of Movement Of Capital Contained In Articles 56 Et Seq. Of The Treaty Of The European Union.

• As A General Rule, Foreign Investments Must Be Reported Afterwards, Once The Investment Has Been Made. The Only Exceptions Are: (I) Investments From Tax Havens, Which In General Must Be Notified Beforehand; And (Ii) Foreign Investments In Activities Directly Related To National Security, And Real Estate Investments For Diplomatic Missions By Non-eu Member States, Which Require Prior Authorization By The Spanish Council Of Ministers. There Is No Obligation For Foreign Investments To Be Formalized In The Presence Of A Spanish Public Certifying Officer (Unless An Express Provision Provides Otherwise).

• Only Foreign Investments In The Air Transportation And Radio Industries, In Industries Relating To Raw Materials, Minerals Of Strategic Interest And Mining Rights, In The Television, Gaming, Telecommunications And Private Security Industries, In Industries Concerned With The Manufacturing, Marketing Or Distributing Of Arms And Explosives And In National Security-related Activities (These Latter Activities Are Subject To The Clearance Rules), Will Be Subject To The Requirements Imposed By The Relevant Bodies Established By Industry-specific Legislation, Although The General Provisions May Apply To Them Once Those Requirements Are Met.

FAILURE AND SHINING EXAMPLES IN GOVERNANCE

• For Much Of The Past Decade, The Country Made Headlines For Its Tottering Banks And Free-falling Economy, For Its Corrupt Politicians And The Ever-expanding Army Of Unemployed

• But In A Year That Has Seen The Uk Vote To Leave The Eu And The Us President Donald Trump, At A Time When Populist And Xenophobic Parties Are On The Rise In Europe And Political Tensions Are Flaring Around The Globe, Spain Is Finally Starting To Abandon Its Defensive Crouch.

• Compared With The Political And Economic Uncertainties Gripping So Many Other Countries, The Nation’s Strengths Are Starting To Shine A Little More Brightly.

• “Spain Has A Very Big Advantage Now: We Are Off The Radar Screen In Terms Of Political Uncertainty,” Says Luis De Guindos, The Economy Minister.

• The Country’s Strengths Include, Most Obviously, An Economic Recovery That Is Now In Its Third Year And Still Going Strong. Unemployment, Though Still Very High At 18.9 Per Cent, Is Falling Steadily. Growth Is Forecast To Reach 3.2 Per Cent This Year, Almost Twice The Pace At Which The Eurozone As A Whole Is Expanding. Even The Long-moribund Housing Market, Which Created The Bubble That Triggered Spain’s Economic Collapse In The First Place, Is Finally On The Mend.

• “The Measures That We Took During The Crisis Are Paying Off. Job Creation Is Strong And Growth Is Strong So That Shows That The Reforms Have Worked,” Says José María Roldán, The President Of AEB, The Spanish Banking Association.

LIST OF MNC’S • Arbertis

• ACS Group

• Almirall

• Banco Satander

• Ebro Foods

• Inditex

• Logista

• Natraceutical

• Repsor

• Ufinet

• Viscofan