NEWS ABOUT CORPORATE GOVERNANCE - October/1999
- Practically all better corporate governance practice codes agree that it is the role of the Board of Directors to protect and maximize shareholders’ interests. Within this context, company evaluation methods rank high among the topics examined in corporate governance. Accordingly, on November 23, 1999, at the Fundação Getúlio Vargas in São Paulo, the Brazilian Corporate Governance Institute - IBGC will give a seminar on the most advanced company evaluation method, the EVA - Economic Value Added, and its relationship with corporate governance. Among the individuals involved in this seminar which targets entrepreneurs, shareholders, members of boards of directors, institutional investors, and top level executives, are representatives of Bradesco-Templeton, Stern Stewart & Co, Embratel, and the US Pension Fund, CalPers, the latter speaking directly by videoconference from the USA. Further information available at tel.: (11) 3043 7008, fax: (11) 3043 7005 or e-mail ibgc@amcham.com.br
- In addition to being responsible for the application of improved corporate governance practices in many countries, institutional investors have become increasingly important as shareholders in reinforcing the movement in defense of minority shareholder rights, and taking an active role as company shareholders. This contribution by institutional investors is very timely, particularly, in the case of publicly traded Latin American companies. A recent survey showed that, in the opinion of most top executives, seventy-eight percent (78%) of these companies have scant regard for their minority shareholders.
- Although, from the best corporate governance practices point of view, it is inadvisable for the Chairman of the Board of Directors to also hold the position of CEO, the Chevron Corp., the world’s fourth largest oil company, has decided to maintain this standard US company policy, despite increasing pressure to the contrary from US capital market investors. The current Vice-Chairman of the Board of Directors, Mr. David O’Reilly, will succeed the present Chairman of the Board of Directors and CEO, Mr. Kenneth Derr, who will retire in January 2000, and will take over these two positions, so essential to the success of any company.
- Studies have shown that, among the world three leading world economies, both the USA and Germany apply the best corporate governance practices, although Japan has recently made considerable efforts in this respect. Despite this somewhat unfavorable comparison, the current position and trends of corporate governance practices, particularly, in certain Japanese companies, are very different when compared with certain other Asian countries. The opinion of activist shareholder, Jang Hasung, referring to South Korean conglomerates, in a recent statement to The Economist, is that “Corporate Governance in Korea is a total mess”.
- Little doubt exists that the Management Report is a vital tool in guaranteeing transparent communication by companies with their shareholders and to the general public and, thus, is good corporate governance practice. Within this context, more and more companies are describing their corporate governance practices in their annual reports. A good example is Alcan’s 1998 annual report which contains a section exclusively dedicated to describing the company’s corporate governance practices.
- The Brazilian Central Bank now publishes economic and financial data on banks operating in Brazil through the Internet (www.bcb.gov.br). In addition to facilitating public access to Brazilian financial system data, this will greatly contribute to increased transparency in the capital market by banks whose shares are traded in the stock market, an excellent corporate governance practice.
- During the CVM (Brazilian Securities Commission) seminar to be held on October 25 and 26 in Rio de Janeiro, to examine more efficient methods of protecting minority shareholders, ANIMEC (National Association of Capital Market Investors) will be formed. The chief aim of this Association is to represent and defend the interests of minority shareholders.
- A quote from the Best Corporate Governance Practices Code - Brazil:
- Size of the Board of Directors. “A Board of Directors should be as small as possible. Depending on the size of the company, it should vary between no more than five (5) and nine (9) members”.
