Abstract
In the 1990s, the corporate governance debate gained momentum both inside and outside academia, reflecting the overwhelming understanding among capital markets’ practitioners and scholars that the ruthless pursuit of shareholder value should be touted. This debate reached Brazil when its publicly traded companies were being managed with a noticeable bias in favor of controlling shareholders. Since then, several institutional and regulatory changes have emerged to protect investors and foster economic exchange and market efficiencies. This chapter reviews the key institutional features and actors that have shaped the Brazilian corporate governance landscape and discusses the current and future challenges in the corporate governance agenda.
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Notes
- 1.
The share of state-owned companies in B3 market capitalization plummeted from 61.2% in June 1997 to 22.3% in March 2007.
- 2.
In 2014, BNDESPar owned, among other equity stakes, 30% of the capital of Fibria, a company then affiliated to the Votorantim business group, 25% of JBS, 20% of Marfrig, 12% of Vale and 10% of its controlling company (Valepar), 13% of Telemar’s ordinary shares and 100% of its preferred shares, 12% of Suzano, 7% of CPFL Energia, 6% of Gerdau, and 5% of Embraer.
- 3.
In 2018, BNDES or BNDESPar held equity capital participation in, for example, the state-controlled companies Petrobras and Eletrobras (10% and 20%, respectively), and the privately-run JBS (21%), Marfrig (34%), Suzano (11%), Vale (6%), and Embraer (5%).
- 4.
CVM regularly reviews the regulatory framework by issuing either “Instructions,” norms regarding specific corporate issues such as securities offerings or information transparency and disclosure, or “Deliberations,” pronouncements that clarify any ambiguity underlying legal or normative aspects.
- 5.
IBEF is the association that represents private and publicly listed firms’ top level financial officers.
- 6.
A recent study analyzed the listed firms that did not comply with Instruction nº 480 during the injunction relief period and concluded that non-compliance behavior is associated with poor governance practices, finding no evidence that compensation disclosure incites acts of violence (crime rates) (Barros et al., 2020).
- 7.
According to CVM, initial public offerings (IPOs) between 1995 and 1999 raised USD550 million in Brazil and more than USD320 billion in the United States. In the late 1990s, Brazilian companies increasingly used the New York Stock Exchange to reach more liquidity. In 2000, the American Depository Receipts of 28 out of the 495 companies listed on the Brazilian stock exchange accounted for more than one-third of the entire Brazilian stock market trading volume (Santana et al., 2008).
- 8.
Valor Econômico, 29 October 2020, https://valor.globo.com/impresso/20201029/.
- 9.
Valor Econômico, 9 January 2020, https://valor.globo.com/politica/noticia/2020/01/09/gestores-de-fundos-de-pensao-sao-denunciados-por-aportes-na-sete-brasil.ghtml.
- 10.
Valor Econômico, 9 January 2020, https://valor.globo.com/politica/noticia/2020/01/09/gestores-de-fundos-de-pensao-sao-denunciados-por-aportes-na-sete-brasil.ghtml.
- 11.
AMEC is the acronym for the Association of Capital Market Investors.
- 12.
Valor Econômico, 26 November 2020, https://valor.globo.com/financas/noticia/2020/11/26/previ-busca-engajar-investidores-de-paises-emergentes.ghtml.
- 13.
For example, Brandes Investment Partners holds 15.1% of Embraer’s voting capital; BlackRock owns a 5% stake in Ultrapar Participações, 2% in Klabin and 5.2% in Vale, where Capital Research Global Investors has a 5.11% stake; Kapitalo Investimentos holds 5% of BRF’s capital, while Petros and Previ have 11.4% and 9.2%, respectively; Capital International Investors and Dynamo, 10% and 3.5% in Gerdau S.A.; and Goldentree Fundo de Investimento em Ações and XP Gestão de Recursos, 9.9% and 7.1% in Via Varejo.
- 14.
Econômico, 21 September 2020, https://valor.globo.com/financas/noticia/2020/09/21/irb-poderia-nao-ter-sobrevivido-a-fraudes.ghtml.
- 15.
- 16.
Valor Econômico, 17 August 2018, https://valor.globo.com/empresas/noticia/2018/08/17/fim-do-balanco-trimestral-volta-a-cena-com-trump-e-reforca-debate.ghtml.
- 17.
Valor Econômico, 18 December 2020, https://valor.globo.com/empresas/noticia/2020/12/18/companhias-abertas-terao-programa-de-inovacao.ghtml.
- 18.
Valor Econômico, 20 August 2018, https://valor.globo.com/financas/noticia/2018/08/20/ideia-reforca-debate-sobre-engajamento-e-longo-prazo.ghtml.
- 19.
IMK is a forum created by the Ministry of Economy in June 2019 to discuss and propose public policies to develop the Brazilian capital markets. This forum put together representatives from the Central Bank, CVM, the Economic Planning Secretary, the Treasury Special Office, the National Treasury, and private sector institutions, including AMEC, IBGC, ABRASCA, and ANBIMA.
- 20.
The founders of XP Investimentos, PagSeguro, and Stone launched the IPOs in the NYSE using a dual-class share structure to avoid losing control of their companies.
- 21.
O Estado de São Paulo, 3 November 2020, https://economia.estadao.com.br/noticias/governanca,proposta-de-voto-plural-limita-super-ordinaria-a-empresas-estreantes-na-bolsa,70003498682.
- 22.
- 23.
Out of the nine complainers, only two companies had controlling shareholders with the majority of the total capital and thus could complete mergers or acquisitions without preferred shareholders’ approval. Valor Econômico, 25 May 2020, https://valor.globo.com/financas/noticia/2020/05/25/direito-de-preferencialistas-no-nivel-2-gera-debate.ghtml.
- 24.
In May 2021, Congress approved the “Marco Legal das Startups” Bill Nº146/2019, while Bill Nº4458/2020) aiming to provide the judicial and extrajudicial framework to reorganize the bankruptcy procedures, including cross-border insolvency and cooperation between national and foreign courts, the possibility of suspension of liens during the judicial recovery, the inclusion of labor credits in extrajudicial recovery, the payment of debts with the Federal Government, and the inclusion of the negotiation processes during a period of public calamity.
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Mendes Aldrighi, D., Kabbach de Castro, L.R. (2023). Brazil. 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_7
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