NEWS ABOUT CORPORATE GOVERNANCE - March-April/2001
IBGC
– Brazilian Corporate Governance Institute
- The IBGC (Brazilian Corporate Governance Institute) appointed some new members to its Board of Directors in the Ordinary General Meeting held on April 17. The following members, with mandates to April 2002, were elected: Celso Varga, Maria Helena Santana, Paulo Vasconcellos, Paulo Villares, Roberto Faldini, and Ronaldo Veirano (re-elected). The following, whose mandates were still in force, remained on the board: Celso Giacometti, Lélio Lauretti, and Leonardo Viegas. In the Board of Directors’ Meeting, held on the same date, Paulo Villares was elected Chairman, and Celso Giacometti and Ronaldo de Camargo Veirano as Vice Chairmen. There were changes also at Executive management board level: Sandra Guerra resigned from the board for reasons involving new professional challenges and was replaced by Heloisa Bedicks, a former IBGC board member, Coordinator of the Qualifying Committee, and IBGC course lecturer.
Banco
Itaú upgrades its Corporate Governance
practices
-
For the first time in its 56 years of existence, the Banco Itaú
shareholders elected professional board members who are not related to the
controlling shareholders’ families, and who are not directors or
employees of the bank. These
independent board members are: Pérsio Arida, former President of the
Brazilian Central Bank and Roberto Teixeira da Costa, the first CEO of the
CVM (Comissão
de Valores Mobiliários, similar to the US SEC), and a leading light
among Brazil’s professional board members.
In an announcement to the press, the Chairman of Banco Itaú,
Roberto Setúbal, pointed out that this decision is in line with good
Corporate Governance practices. He added that these new board members, all of them of
unquestionable competence and whose viewpoint differs from that of the
controlling shareholders, are sure to make a decisive contribution to the
administration of the bank.
The
Board of Directors and Corporate Strategy
Among
its more important and complex duties, a Board of Directors, a body
indisputably regarded as the chief mechanism for good Corporate Governance,
are the definition and supervision of the company’s corporate strategy.
With a well-prepared and efficiently monitored strategy, a company
is well on its way to success. On
the other hand, the business world has innumerable examples of companies
that, despite operating efficiently, they were unable to even survive, due
to wrong and poorly supervised strategies. Leonardo Viegas, board member
of both the IBGC
and Varig,
and a specialist in corporate strategy, has published an article on this
topic, entitled “Don’t Delegate Strategy” in the Technical Material
Section of the LCV website (www.lcvco.com.br).
In
Brazil, Annual Reports are beginning to mention Corporate Governance.
Transparency
is one of the most highly regarded values in good Corporate Governance
practices and must always include disclosure to the market of the company’s
Corporate Governance practices. This
procedure, commonly practiced in the USA and Europe for a good number of
years, was pioneered in Brazil by WEG and rapidly followed by Perdigão.
At the beginning of the year, these companies published in their annual
reports, a specific chapter on the Corporate Governance practices applied.
Admittedly, in both cases, this consisted of a very summarized
description of such practices but it was unquestionably an excellent start
and an example to be followed by other companies.
Further to such annual information disclosure to the market, the
trend is for publicly quoted Brazilian companies to be more dynamic, as
can be seen from the fact that, by the close of February, 64 companies had
disclosed balances for 2000 as compared with 56 last year. Also, the use
of the Internet in the quest for transparency is on the increase. Souza
Cruz was the first publicly traded Brazilian company to completely abandon
printed annual management reports, in favor of the Internet to disclose
its financial data. The
business newspaper, Gazeta Mercantil,
published an interesting table comparing the benefits of printed and
on-line annual reports, summarized as follows: Printed report: a) can be
handled and read by the user anywhere; b) The material can be sent to
libraries and files; c) It does not require access to a computer with
Internet nor IT knowledge to be read; d) The sophisticated quality of the
report acts as a marketing device. On line report: a) The CEO can be heard
recording his message in his own voice; b) Significantly lower costs; c)
With Internet navigation, data can be added and compared; d) Content can
be constantly updated; e) Search tools offer facilities; and f) Greater
ease of access for parties interested in obtaining information on the
company.
The
House of Representatives approves Brazil’s new Corporation Law
This
new law differs drastically from the original draft proposal to extend
minority shareholder rights in publicly traded companies, aimed at
attracting investments in the Brazilian capital market.
But the important fact is that despite its controversial content,
it has received the approval of the House of Representatives, within
current political limits. Since
the modifications approved represent the degree of advance that is truly
feasible in the present environment, it is now incumbent upon minority
shareholders to study and exercise the new rights that the law will give
them, after the Senate has given its approval.
This last stage could even reinstate some of the rights included in
the original draft bill. Stephen Kanitz, director and minority shareholder
recently published an interesting article entitled “Executives without a
future”, transcribed in the in the Technical Material Section of the LCV
website (www.lcvco.com.br)
Globalization of balance sheet data
Before
it is even approved in the Senate, the chapter of the new Corporation Law
governing accounting standards is certain to be amended.
In the current environment of globalization, it is essential to be
in tune with international accounting practices.
The proposed change has already been viewed by the Ministry of
Finance and will shortly be examined by Congress.
In line with
The CVM (Brazilian Securities Exchange Commission) toughens its stance wherever possible.
In
the wake of the reformed Corporation Law, comes the proposal to strengthen
the CVM.
The plan is to transform the CVM
into an independent autarchy with no ties to the Ministry of Finance, with
its own budget and a mandate for its directors.
But until this is confirmed, the CVM
will carry out its supervision and penalizing powers as it sees best.
Since the beginning of the year, it has applied US$ 1million in
fines on a variety of administrative cases, and cancelled the
authorizations of several publicly traded companies to operate in the
market.
The Neuer Markt and the new Bovespa (São Paulo Stock Market) market
Germany’s
Stock Market investors have been disillusioned by the poor performance of
the Neuer Markt. It is a fact that the Neuer has dropped 78% since the
peak attained on March 10, 2000 that coincidentally occurred on the same
date that the NASDAQ Composite reached its highest point.
Several companies listed in the New German Stock Market filed for
bankruptcy. Is there any
analogy here with the new Bovespa
market that has barely begun operating? Yes, the analogies are numerous,
among them the requirement to apply good Corporate Governance practices.
However, the major difference lies in the type of company listed in
the German Stock Exchange New Market and the type of company that hopes to
be listed in the new Bovespa
market. In Germany, most
listed companies are part of the new economy while here, it is hoped, that
with the reduced enthusiasm for Internet companies, the majority of the
companies listed will be part of the old and solid economy.
International Corporate Governance Network
The
ICGN (International Corporate Governance Network), the institution
dedicated exclusively to the topic of increasingly globalized Corporate
Governance, will hold its Seventh World Meeting in Tokyo, Japan, from July
11 through 13, 2001. Brazil
will be represented with the attendance of some professional board members
and some IBGC (Brazilian Corporate Governance Institute) representatives.
It is a timely decision to hold this event in Japan at precisely
this moment of
Best
Corporate Governance Practices
The
IBGC (Brazilian Corporate
Governance Institute) has introduced a new Corporate Governance code.
It expands the prior version and covers topics that extend beyond
the Board of Directors, such as the CEO, external auditors, and the
shareholder appointed audit board.
-
Extract from the Best Corporate Governance Practices Code – Brazil.
One share/one vote:
This
principle should apply to all types of companies.
Companies intending to go public should think only in terms of ordinary shares. Companies already listed with ordinary and preference shares, should consider the feasibility of transforming all their shares into ordinary shares or, if insurmountable difficulties exist, in granting voting powers to the preference shares, but restricted to matters of direct interest to such preference shareholders.
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