NEWS ABOUT CORPORATE GOVERNANCE - November/December/1999
- According to an article published in "The Economist", the greater professionalization of the Boards of Directors is leading CEOs to lose their "tenure". In former days it was very unusual for a Board of Directors to dismiss a CEO, but the Boards of many American and British companies have come to realize that it is a mistake not to remove a bad CEO from office, and that the failure to do so can be damaging to their reputation as members of the board. Apparently this trend started in 1992 with the dismissal of Robert Stempel, CEO for General Motors, on account of the enormous loss of market share suffered by the company in the automobile segment. Recently there have been various similar cases such as Eckhard Pfeiffer of Compaq, Derek Wanless of NatWest and Martim Grass from Ride Aid.
- On March 17, 2000, the Instituto Brasileiro de Governança Corporativa – IBGC (Brazilian Institute for Corporate Governance) will promote, for the fourth time in the city of São Paulo, its Training Course for members of Board of Directors. This course, which is unique in Brasil, now has a new format; it was divided into 2 segments, STRATEGIES and TECHNIQUES, plus an INTRODUCTION MODULE for those participants who feel that they need to attend a basic course before enrolling in the Extensive Course. For additional information please call: (11) 3043 7008, Fax: (11) 3043 7005 or by e-mail; ibgc@amcham.com.br.
- The effort made by the Japanese to improve corporate governance practices in their companies is widely recognized. Even the sokayas, supposed to be experts in shareholders’ meetings but, in fact, denying all good corporate governance practices, since their position is to adopt a passive attitude in shareholders’ meetings, in exchange for some kind of financial compensation on the part of the companies, are losing their power nowadays. In the past, even Japan Airlines paid US$ 9,2 million in air travel tickets discounts to the sokayas. Recently, however, the companies, the police and even public opinion have turned against the sokayas and last April, Ryuichi Koike, the most important member of the organization was put in jail. In addition, new and stricter laws were enacted against this type of practice so harmful to good corporate governance practices.
- In spite of that, Corporate Governance is inevitable in Asia. David Chiang, chairman and managing patner of Lombard Asian Private Investment Company, examines the future of corporate governance in Asia in The Wall Street Journal. Chiang argues that the advent of the internet and the resulting proliferation of web sites geared towards shareholder rights, combined with the need for foreign capital, make Asia’s fold into international corporate governance inevitable. Chiang cites the activist efforts of Templeton, a U.S. fund manager , and Jang Ha Sung and the role of the Hong Kong Institute of Company Secretaries in promulgating the doctrine of sound corporate governance as evidence of the inevitable. From The Lens Library.’
- The CEO, as it is known, is an integral and relevant part of the corporate governance process. In addition to the fact that many Brazilians, differently from the past, currently occupy CEO positions in multinational companies, Brazil is exporting this type of professional to other countries. One of the better-known examples is Pirelli, whose CEOs in Hungary, Argentina and Chile are Brazilians.
- Some important changes are being introduced in Brazilian corporate legislation in order to protect minority shareholders. These changes are related to corporate governance practices, especially as to the composition of the Board of Directors and the shareholders-appointed Audit Board. The final wording of the Alternative to Bill No. 3115/97, which addresses the changes in Corporate Law, is available at the web address http:// www.kapaz.com.br
Principal recommendations to the OECD’s Governance Report
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Encourage member countries to adapt corporate governance regulatory frameworks to changing competitive and market forces.
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Formulate minimum international standards of corporate governance designed to promote fairness, transparency, accountability and responsibility.
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Issue suggested guidelines for voluntary ‘best practice’ for boards to improve accountability and encompass board independence.
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Encourage common principles for adressing the comparability, reliabity and enforcement of corporate disclosure.
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Emphasize the impact which change in corporate governance practices would have on society at large, and on the need to clarify responsibilities between the public and private sector .
Merry Christmas and a Happy New Millenium
