NEWS ABOUT CORPORATE GOVERNANCE - May-June/2000

Brazilian Corporate Governance Institute

-  The Course for Members of Boards of Directors given by the IBGC (Brazilian Corporate Governance Institute), its fifth in São Paulo, starts on August 10.  This revamped and compacted course is given in eighty (80) hours.  The two classes will be limited to twenty-five (25) students.  It is of especial interest to entrepreneurs, members of boards of directors, company heirs, shareholders, investors, fund representatives, and CEOs.  As in the past, interested parties may take the entire course or just specific modules.  Further information at Tel: (11) 3043-7008; fax: (11) 3043-7005; e-mail; ibgc@ibgc.org.br; or site www.ibgc.org.br.

The CVM (Brazilian Securities Commission) seeks greater transparency

- One of the most important aspects of good corporate governance practices is total transparency.  Aware of the importance of this quality, the CVM has drawn up a preliminary draft bill amending chapter 15 of Brazilian Corporation Law (6404/76) governing accounting matters.  With the intent of “facilitating access to information”, the bill proposes that such data no longer be published in the Diário Oficial da União (Official Federal Gazette), but be restricted to the Diário Oficial do Estado-sede (Official State Gazette).  This proposal has been criticized by companies based in the states of São Paulo, Rio de Janeiro, and Bahia, since publication costs charged by their official state gazettes are significantly higher than those of the Federal Gazette.  Under this bill, the greater powers would be given to the CVM, which could even require financial statements to be published in yet another newspaper, or, ideally, made available via the Internet.

The Entrepreneur and Corporate Governance

- The importance of the Entrepreneur’s role in business is unquestionable.  However, it is only recently that their relationship with Corporate Governance has been become a matter of interest to official entrepreneurial organizations.  In May, the CDE (The Entrepreneurial Development Center), part of FUNDACE and FEA/USP Ribeirão Preto held a Seminar/Debate on “The Entrepreneur and Corporate Governance”.  Attended by more than one hundred (100) people including executives, shareholders, heirs, professors, and students, speaker, Luciano Carvalho Ventura debated with his fellow speakers, entrepreneur Rui Guião, professors Alberto Matias and René Werner, post-graduate degree student, João

Cascaldi and attendees, the natural growth of successful entrepreneurial activities for the Family Owned Business, its need for and difficulties in utilizing and abiding by good Corporate Governance practices.  

Survey of Brazilian Boards of Directors

- Recently, Spencer Stuart, an executive search and assessment world leader, a vital and useful service for all boards of directors, published the “ Index of Boards of Directors”, an assessment of how the most important Corporate Governance mechanism functions.  In addition to covering a sample section of 92 organizations, this fourth edition of the research results includes quality-related topics to.  High on this list are aspects relating to the IBGC’s recommendations in its “Best Corporate Governance Practices”. The Brazilian business magazine, Exame, published an interesting article on this survey, entitled “If There’s Government, I’m for It”, published in the Technical Material section of this site.

Boards of Directors continue to show their authority

- Unlike in the past, Boards of Directors, especially the more professionally oriented, are now taking increasingly rapid action in cases of CEO failure.  The latest case was the Xerox Corporation whose CEO of little more than a year, Richard Thurman, was ousted by the Board of Directors.  This was due to his ill-starred attempt to reorganize the organization’s sales teams, negatively impacting profits and resulting in plummeting share values, a record drop of fifty percent (50%).  Last year, Fortune Magazine ascribed this uncompromising reaction to CEO results and subsequent Board counteraction, to institutional investors.

National Association of Corporate Directors

- The compensation of Executive Officers and Members of the Board of   Directors is one of the most controversial issues in corporate governance and a balance should be reached between their interests and those of the shareholders. To assist in the decision-making process regarding director’s compensation, the National Association of Corporate Directors-NACD, USA recently published a new survey about the compensation paid to board directors in the United States. The NACD survey is the most complete work made on this subject and is based on the findings obtained in 1,210 small, medium and large-sized companies of 27 segments of the American industry. It is worth mentioning that, according to the survey, the manner of remunerating board directors is undergoing the deepest change of the last ten years, mainly driven by shareholders who are activists in corporate governance, especially institutional investors. This change, which has been recommended for some time now by NACD, consists in paying the larger portion (something between 50% and 100%) of the directors’ remuneration with shares. The complete results of this survey can be obtained at the NACD site (www.nacdonline.org).

Corporate Governance and Family Businesses

- Similarly to a significant portion of large companies, Toyota Motor Co. that was born as a family controlled enterprise, has in the last thirty (30) years opted to follow the path to the dispersion of capital and to the professionalism of management. Today, the Toyoda family that founded the company, is the owner of only two-percent (2%) of the original capital. In spite of the strong influence that the Toyoda family still exerts on the company management, the “Chairman” and the “CEO” are not members of the family. The likelihood of a Toyoda coming to occupy a prominent position in the company concentrates on the talented executive Akio Toyoda who has been step by step making his ascent into the company. In this event, and according to the company’s Chairman Hiroshi Okuda, it would have been the consequence of rigorous professional criteria. Considering the importance of the Toyota and the weight of its impressive example, Japan has taken a remarkable step in the direction to adopt the best practices of corporate governance in family controlled enterprises if the succession process is conducted according to Mr. Okura’s prevailing opinion.

More Active Participation of Shareholders in General Meetings in Japan

- Anywhere in the world, shareholders have adopted a more questioning position in general meetings whereas considered as the highest level of corporate governance practices and Japan is not an exception. Recently, the Brazilian Carlos Ghosn, or in another words Ghosn-san as he is respectfully treated in Japan, was elected Nissan’s CEO, the second automotive industry in Japan. During a hostile general meeting he was charged with disconcerting questions by the shareholders. The accomplished executive was even admonished by a shareholder because he had not bowed properly in the Japanese style when he saluted. “When you come to Japan, do as the Japanese do” taught one shareholder before posing a question. During the four (4) hours of the meeting and in front of more than six hundred (600) people, Mr.Ghosn endeavored to maintain a perfect control when answering each of the questions and showed that the lessons had been quickly learned. Very humble, he mentioned that he was willing to learn more about the Japanese customs and when mentioning that Nissan would not distribute dividends he stood up, together with the Board of Directors, and bowed in front of the audience of shareholders in the solemn materialization of an apology.

Principles of Corporate Governance

- A recent count revealed no less than forty-nine (49) best corporate governance practice codes in twenty-one (21) countries.  An important addition to this extensive reference material is the “Principles of Corporate Governance” drawn up by some institutions or companies.  This is the case of BTAM (Bradesco Templeton Asset Management), an association of Banco Bradesco, the largest private asset management organization in Latin America, and Templeton Worldwide, one of the largest US asset management organization, present in over thirty countries. BTAM actively encourages the application of good corporate governance practices in the companies that are members of its investment fund, Fundo Bradesco Templeton de Valor e Liquidez, and has drawn up its own corporate governance principles.