Abstract
In spite of, or maybe even because of the scandals that have emerged over the last 30 years, corporate governance in Chile has evolved a regulatory framework and accepted best practices, thanks also to having to meet higher benchmarks on joining OECD in May 2010. As in other Latin American market, Chilean companies—traded or otherwise—are also closely held, but unlike elsewhere in the region, given the relative depth of its stock exchanges and bond markets, it has a greater presence of institutional investors. This has been a key driver molding corporate behavior for the better. These elements help explain something of the decision-making processes taken at both the shareholder and board levels, triggering significant regulatory changes in the country. Issues such as minority shareholder protections, related-party transactions and fiduciary duties, given the highly concentrated ownership of most local corporations and business groups, are some of the areas that have faced most significant change and heightened regulatory oversight. However, having a robust regulatory framework also raises different challenges, leading to nuanced approaches to self-regulation and the assumption of emerging ESG factors as ways to add both shareholder and broader stakeholder value.
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Notes
- 1.
According to the OECD Corporate Governance Chilean revision, the predominance of company groups, high ownership concentration, and low liquidity in Chilean markets are characteristics that tend to weaken the effectiveness of market mechanisms, leading to the Chilean authorities’ own conclusion that “the central corporate governance challenge in Chile is the risk of minority shareholder expropriation at the hands of controlling shareholders” (OECD, 2011a).
- 2.
- 3.
- 4.
Thesis developed by La Porta et al. (1999).
- 5.
For an in-depth analysis, see Losada-Otálora and Andonova (2017).
- 6.
Although not analyzed in this chapter, this is a good example of AFP activism. In 2011 Endesa Spain sought to bring about a capital increase in Enersis Chile under terms that would not be favorable to all its shareholders. Through AFP activism, the Chilean regulator deemed the capital increase to be a transaction among related parties that require stricter regulation and granting better terms for minority shareholders. The terms of the agreement were subsequently discussed in 2015 in a new restructuration process and, again, the AFPs played a vital role in reinforcing to respect minority shareholder rights.
- 7.
“Chispas” in Spanish means “sparks”, as in electrical sparks, in English.
- 8.
The so called “Chispas” companies were: “Compañía de Inversiones Chispa Uno S.A.”, “Compañía de Inversiones Chispa Dos S.A.”, “Compañía de Inversiones Luz S.A.”, “Compañía de Inversiones Luz y Fuerza S.A.”, and “Compañía de Inversiones Los Almendros S.A.”.
- 9.
Other Laws were subsequently issued making up what is considered as a “Capital Market Bicentenary Reform Agenda”—a collaborative process that allowed the private sector to contribute with initiatives. Part of this reform process is contained in the regulations:
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Law 20,522 of 2011, that modernizes and promotes the competition of the financial system;
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Law 20,544 of 2011, relating to derivatives taxation;
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Law 20,667 of 2012, relating to the insurance contract;
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Law 20,715 of 2013, on protection of credit debtors;
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Law 20,712 of 2014, also known as Single Funds Act (“LUF” as per its Spanish acronym); and.
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Law 20,789 of 2014, which gives legal recognition to the Financial Stability Board (already created by decree in 2011).
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- 10.
Later, consequence of the commentaries of the market authority to the first disclosure process in 2015, it was clear that the approach was rather a “comply or not, and explain” approach, where an explanation was required irrespective of the answer given.
- 11.
The Chair is appointed for the same term as the President of the Republic (4 years); the commissioners are appointed to staggered terms by the President and ratified by the Senate, holding office for 6 years and replaced in pairs every three years, as applicable.
- 12.
When listed companies reach a market capitalization of 1.5 million Unidades de Fomento (USD60 million approximately) and at least 12.5% of the company’s voting shares are held by shareholders that control or possess less than 10% of all the company’s shares, an independent director must be appointed, and a Board Committee must be established.
- 13.
As per General Rule No. 386, the annual report shall contain information about diversity in the board of directors, reporting on the number of directors by gender, nationality, age-range, and years as director. It shall also include information about the professions or occupations of directors appointed during the last two years.
- 14.
Law No. 21,121, enacted in late 2018, incorporated “Disloyal Management” to the Chilean criminal system. This new criminal offense penalizes any person’s mismanagement of third-party assets, resulting in a loss, when performed through or with an abuse of his/her authorities or other actions or omissions that are manifestly contrary to the asset owner’s interests. Law provides that this criminal offense aims at managers and directors of listed companies and certain regulated corporations.
- 15.
This minimum notification period in advance for notifying shareholders of any kind of meeting—including the annual general meeting—was recently amended by Law N°21.314 published on 13 April 2021, previously, it was 20-days).
- 16.
Enacted on April 13, 2021.
- 17.
Centro de Gobierno Corporativo of the Pontificia Universidad Católica de Chile, comments made to the CMF in connection to the amendment of General Rule No. 30.
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Zegers Ruíz-Tagle, M., Meza Morales, C. (2023). Chile. In: Callund, J., Jiménez-Seminario, G., Pyper, N. (eds) Corporate Governing in Latin America. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-85780-6_8
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