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Corporate Governance – portrayed in the individual cultural and legal framework, from the standpoint of equity capital.

VIPsight is a dynamic photo archive, sorted by nations and dates, by and for those interested in CG from all over the world.

VIPsight offers, every month:
transparent and independent current information / comments / facts and figures on corporate governance locally and internationally,

  • written by local CG experts,
  • selected and structured by the Club of Florence,
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VIPsight International


Welcome to VIPsight America - Brazil


Herbert Steinberg


21 August


The succession issue is not simple. The idea that someone needs a successor, by itself, creates discomfort, forces people to envisage the end of life. When we talk about succession plan in a family business we are talking about, therefore, to deal with the whole range of aspects: strategic, corporate, tax, management, behavioral and emotional.

It is about starting to go a long way and it needs to start as soon as possible. For this movement to happen harmonically, it is necessary to take the first step and lead the process so that successor  and succeeded  reach their goals and the business does not miss a beat.

While challeging, the owner of a family business needs to draw a strategic plan that will help the business to survive for several generations. Companies, be they family or not, are subject to having their life expectancy affected by different agents, often uncontrollable. Changes in market rules, life cycle of their products and services, behavior change and needs of its consumers, competition, new technologies, ultimately staying alive requires a willingness to face challenges and ability to renew itself continuously.

Show tomorrow and think of long-term actions are basic conditions for maintaining a business. And that requires planning. To John Ward, Professor Kellogg School of Management and IMD (International Institute for Management Development), the difficulty to think about the future is one of the major causes of a company failure. The strategic plan increases the options and responsiveness of a company facing changes; generates information that reduce uncertainties, improves internal organization and inhibits speculation; stimulates the company competitive strengths; helps conserve resources, improves their relationship with the different stakeholders, among other benefits.

A strategic plan necessarily undergoes  a succession plan. Any entrepreneur who think about business preservation for the future generations needs to think on its succession and how to manage this delicate transition.

Making It Happen

For a succession process to happen it is necessary that the business owner, the potential succeed, wants it. More than that, he needs to make it happen. Establish what is wanted for the business, preparing it for the future, defining how he intends to get there, backed by  what values and seeking to perpetuate his guidelines ​​on  the company’s mission. In addition to the tangible aspects of a succession plan, we must always keep in mind that the search for a new leader goes beyond the appointment of a new president.

The search for help in conducting this process is a valid recommendation. The company - and the family – will have issues to deal with, many variables and a degree of sophistication that the support of an expert becomes critical. Play the process as amateurs can result in risks to the business and probably to the relationships.

One of the reasons for a company to pay attention to a family succession plan are the requirements of an economy increasingly dynamic , and globalized and complex. Brazil is inserted in this context with considerable growth prospects, and the fierce competitiveness in all production segments is therefore a path of no return. There is no doubt that well structured companies in their management and with their bases consolidated in good corporate governance practices are more competitive and able to take care of succession.

Being a company able to meet the new times, capable to perform above average and so remain in the game is key. Also be perceived as such. Having a competent program, focused on the generation of new leaders, anchored on a succession plan for its key managers creates an environment that enables the company to perpetuate.



VIPsight Archives America - Brazil


13 July 2013

Brazilian Takeover Panel begins operating in August

São Paulo, June XX, 2013 – The Brazilian Takeover Panel (Comitê de Aquisições e Fusões – CAF)* begins operating in August. It aims to secure the compliance of equitable conditions in public tender offers and restructurings that involve Brazilian publicly-traded companies which, based on a self-regulation model, have decided to submit to the body.

The Brazilian Takeover Panel was conceived by and has the support of some of the main participant bodies on the Brazilian capital market: the Association of Capital Market Investors (AMEC), the Brazilian Financial and Capital Markets Association (ANBIMA) and the Brazilian Institute of Corporate Governance (IBGC). The Takeover Panel is ready to act and is chaired by the well-known lawyer Nelson Eizirik and integrated by ten more members whose expertise and reputation are recognized in the local financial and capital markets (see the enclosed member list).

The Brazilian Takeover Panel will apply and update a Self-Regulation Code, which reflects the consensus and current needs of the market participants. Technical support will be provided by a team that will be headed by the executive João Pinheiro Nogueira Batista.

The Self-Regulation Code does not substitute legal and regulatory provisions. It contains principles and rules that complement applicable law and regulations enacted by the Securities and Exchange Commission of Brazil (CVM), seeking rather to fill gaps that exist in the discipline of public offerings corporate restructurings.

To name some of the principles, the Code foresees equal treatment among shareholders; mandatory disclosure of information that is necessary for considered and independent decision-making; independence, discretion and impartiality of its members; and consistent information in appraisal reports, among other principles. When applying the Self-Regulation Code, it will be incumbent upon the Brazilian Takeover Panel to privilege meeting principles instead of the rules.

The Securities and Exchange Commission of Brazil (CVM) has already expressly manifested its institutional support of Brazilian Takeover Panel. It has decided that, according to a Cooperation Convention to come into effect between the Brazilian Takeover Panel and CVM, there will be the presumption of legitimacy of public offerings subject to registration with the government body, and corporate restructurings involving related parties, which follow the procedures established in the Self-Regulation Code.




18 June 2012

BM&FBOVESPA publishes first “Report or Explain” results

São Paulo, June 18, 2012 – During the Rio +20 United Nations Conference on Sustainable Development, BM&FBOVESPA presented the results of the “Report or Explain” initiative that seeks to encourage companies listed on the exchange to report sustainability related information to stakeholders. According to the findings, 45.31% of listed companies published information related to social, environmental and corporate governance dimensions, or explained why not.

Out of a total of 448 listed companies analyzed, 96 published sustainability reports or similar (21.43%), 107 did not publish but explained why not (23.88%) and 245 did not comment at all (54.69%).

Of the 94 companies in the current portfolio of the Brazil Index – IBrX (which measures the performance of the 100 most traded shares in the BOVESPA Segment in terms of number of trades and traded volume), 49 published a report (52.13%), 22 did not publish but explained why (23.40%) and 23 did not comment at all (24.47%).

The complete list of publicly-traded companies that published or did not publish a Sustainability Report or Similar is available on the BM&FBOVESPA website at: www.bmfbovespa.com.br; Markets/Equities/Listed Companies/Sustainability Report or Similar Document.

The companies had until the end of May to inform in item 7.8 of the Reference Form (“Description of the company’s relevant long-term relationships not elsewhere described”) whether they published a sustainability report or included socio-environmental information in their annual report, indicating where these data are available. If they do not they have to explain why.

BM&FBOVESPA created “Report or Explain” at the end of last year, seeking to encourage listed companies to report to all stakeholders (especially investors and analysts) information and results related to corporate disclosure along general lines, granting transparency to the market and encouraging ever more companies to adopt this practice.



7 January 2012

BM&FBOVESPA recommends listed companies publish a Sustainability Report or explain why they do not

The objective of this recommendation is to encourage listed companies to report information and results related to environmental, social and corporate governance issues, providing greater transparency for investors

São Paulo, January 4, 2012 – BM&FBOVESPA is recommending that as of 2012 listed companies state in item 7.8 of the Reference Form (“Description of the company’s relevant long-term relationships not elsewhere described”) whether they publish a regular sustainability report and where it is available, or explain why not.

BM&FBOVESPA believes that this report-or-explain initiative will encourage the adoption of sustainability reporting by a steadily growing number of listed companies. The goal is to make this database publicly available at Rio+20, the United Nations Conference on Sustainable Development, which will take place in Rio de Janeiro, from the 20th to the 22nd of July. Realized twenty years after the historic Rio Summit on Environment and Development of 1992, the event will have as one of its key themes the green economy in the context of poverty eradication and sustainable development.


In order to assist companies not familiar with sustainability reporting, the Exchange will hold training workshops on the 17th, 19th and 20th of January, in partnership with the Global Reporting Initiative (GRI), a non-profit organization based in Amsterdam, Holland, which is responsible for the development of a comprehensive sustainability reporting framework that is widely used by companies around the world. In 2010, BM&FBOVESPA became the second Exchange in the world and the first in the Americas to use the GRI sustainability reporting model in its Annual Report.

By recommending sustainability report on a report-or-explain basis, BM&FBOVESPA seeks to contribute to this growing international trend in the financial market. The publication of sustainability or similar reports by listed, privately held and state-owned companies was made a listing requirement by the Johannesburg Stock Exchange in 2010. It is mandatory for listed companies in France and Denmark, and for state-owned enterprises in Sweden. The European Union is studying the possible introduction of mandatory sustainability reporting for all member states in 2012.

BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros

Shareholder Brazil in December 2010 <click here>


8 December 2010

Hero or Bandit?

The role of the CEO has never been so complex as currently

Herbert Steinberg*

It is not easy being a CEO today. Either in Brazil or abroad, the leadership role has never been so inglorious. The reasons are many. A leader is expected, among other things to have an above-average ability to inspire people and to anticipate events.

Two tasks that in an unstable environment such as the one that the world has faced this year, require more than talent and skill.

The daily challenge is basically: in difficult times, the CEO needs to be attentive to details that previously were not part of his routine. In parallel, the CEO is increasingly charged to run the company for the short term, focusing on the present. However, if the CEO lets himself/herself be overpowered by the day-to-day and shift the focus from the future, he will be severely punished. The problem is that the CEO is no hero. The CEO is human.

The CEO then has to keep all senses connected on today, be a motivating leader to his followers and subordinates, think about the company in the long run, not losing sight of tomorrow, knowing how to accurately administer the investments and not forgetting, even for a moment, that if the planned outcome for the short term does not happen, he will be unemployed.

Times of crisis always bring about new and bigger challenges. In the corporate world, the speed of the change, the complexity of the negotiations and the globalization also contribute to the construction of a new scenario, where the actors need to recycle the whole time, to think along the paths and be ready for other finales, not always happy.

Everything is still not enough

With so many tasks and "missions" to fulfill and an agenda that has not changed - the day still has 24 hours - the CEO, from the absolute master, the god guy, almost a hero, became a villain. Currently, in the eyes of many, the CEO can often be seen as a villain. The demon that came to haunt us. Full stop. The large rooms, high wages and status are still part of the reality. But the price to pay became much higher. The nomenclature of the position imported from American culture, Chief Executive Officer - CEO - is now almost a taboo word. The Rambo style has no more room. Hero of the masses, who had control of the assemblies of shareholders, the CEO has now become the bad boy. The "suspect", someone who needs to be controlled by the Management Board. And he has accomplices. The CFO is also now in sight.

The fact is that leadership positions bring into the package a set of responsibilities and challenges. Being always ready to make decisions and undertake the consequences are just the beginning.

Balance, prudence, transparency. Leadership in crisis requires a never before required combination of talents, an ability to overcome, more and more. The current reality is this and it should not change anytime soon. The life of a CEO today is the sum of vectors ranging from meeting the expectations of shareholders, clients, suppliers, employees; even the ability to know in detail what happens behind the scenes of the company, and where to invest in order to ensure a positive future. Be well advised, rely on an also talented and well articulated executive team, makes a big difference.

It is up to the CEO to perform the task of making a very accurate reading of what is entered in relation to the different stakeholders, what the shareholders expect, the explicit objectives in contract and those not so explicit, unwritten and unspoken; but on which he surely will be held accountable. Currently, the CEO needs to foment people and motivate them to be in the play for the company to follow the outlined path. That is, there must be an attitude and a vision that the shareholders agree and co-opt with, validating his choices and being also inspiring for everybody who is on his side and under his command so that the expected results shall occur. The CEO cannot make a mistake. In some cases, getting too much can also be dangerous. Threaten the vanity of an heir can also bring problems to his life.

Even during the crisis that devastated the world and, of course, it spilled over here, the BRIC countries will advance. Among them, Brazil and India are by far the most promising markets. We do have such a potent economy, with a strong ability to leverage growth in our own market. Who may mange to look beyond the southeast and south borders of the country, caught by the records two thirds of the GDP are found there, will perceive an India right here in the West - the North and Northeast of the country.

* Chairman of Corporate Governance Board and Corporate Governance Committee of Amcham


28 June 2010

Best on the Board

After the troubles with derivatives, companies are favoring directors with more time to dedicate instead of status – and you guessed it, they haven't been easy to find

If the crisis that aggrieved the world's financial markets has had any positive effects, one of them has certainly been companies "growing up" when it comes to the role of boards of directors. Corporate governance had already been improving in Brazil in recent years, especially after the BM&FBovespa's Novo Mercado listing tier established standards of good corporate governance for public companies. But nothing could be more effective than a major scare to break up the "afternoon tea" mentality.

Companies that still weren’t taking the matter seriously saw that a board of directors cannot be merely a formality or a place for exchanging favors. After the world's financial shake-up and, specifically in Brazil, the exposure of flawed derivative operations, they found out that very important risks are at stake. Now they want more experienced – and dedicated – people on the board. "The consequences of the crisis have not been negative. They ended up enhancing the professionalization process that was already underway, and led companies to realize that they needed better directors", says headhunter Guilherme Dale from Spencer Stuart. "No one is going to call anymore the old friend who says yes to everything."

But the truth is that the right people for the job have also become scarcer. The game has changed, and most are no longer accepting invitations simply for the money or the prestige – the annual pay for board members ranges from R$ 45 thousand to R$ 180 thousand. They want guarantees that they will be able to work without risking their image or their own wealth. "For the first time, I'm seeing some fear and greater precautions from potential board members", says Dale. "Now they want to know more about the company, they answer invitations with ‘'it depends', whereas in the past they immediately said ‘it would be an honor'".

VISION BEYOND THE NUMBERS — Thomas Brull, a finance professor and the MBA program director at the Business School São Paulo (BSP), feels that the position is being given greater importance. As member of three boards, he emphasizes that the international turbulence and the incidents with derivatives have increased companies' concern with risk management and, with that, the board's responsibilities have become much greater. In the past, Brull was financial director of two IPOs: Tectoy, in the 1990s; and EDP Energias do Brasil, in 2005. His experience helps him face his mission. "We in the financial industry have to look deep into the numbers, but the risks go beyond that, to IT and people", Brull says.

Independent directors with finance experience are the most in demand. Eight out of every ten companies look for an ex-CFO or another professional from the financial market, estimates Herbert Steinberg, the founder of Mesa Corporate Governance, which specializes in board structuring and corporate governance. Within that profile, there are basically two favorite types, depending on the board's needs: comptrollers, for enforcement purposes; and financial engineering professionals. According to Steinberg, general managers – whether you call them chairmen, CEOs or business leaders – are also targeted, but in a much smaller proportion than financial experts. The third sought-after profile is specialist, or professionals who deeply know a given segment or business model.

This greater appetite for financial experts is no longer based on technical aspects of the financial world, however. In the past, they needed only to know how to read and analyze balance sheets, but now the market wants more. "The ability to interpret the market and a vision for corporate and people management have been gradually incorporated into that profile", says headhunter Francisco Ramirez, from Arc Executive Talent Recruiting. "They must have financial qualifications, know how to read the company's numbers, but a more comprehensive profile is sought." The crisis accelerated the practical application of what had already been recommended by governance manuals for some time. The recently launched IBGC director certification program, for example, is comprehensive and covers not only the basics of finance, but also some areas in human resources, compensation, civil law, corporate regulations and sustainability.

FEW CANDIDATES ¬— Mesa Corporate Governance has a database of over 300 directors, including consultants, former executives, notables (such as former Central Bank presidents) and governance activists. Steinberg calculates that no more than one thousand professionals in Brazil are mature enough to work as directors under the current set of requirements. He also explains that the hiring process for directors is much different than headhunting for a traditional position. When he sits for lunch for the first time with the client and the candidate, the deal is usually already made. "I can't invite a celebrated professional and then simply say that he wasn't chosen", he explains.

The requirements are indeed getting tighter. Released in September, the new best practices code of the Brazilian Institute of Corporate Governance (IBGC) carries a series of recommendations for boards. One is that a director cannot be part of more than five boards, in order to preserve the quality of his or her work. The story of one director, who prefers to remain anonymous, illustrates this problem well. Six years ago, he was part of 12 boards and had no time to prepare for the meetings. He ended up glancing through the documents just minutes beforehand, as he took the elevator up. "There are still some directors who lend their prestigious names to the board, but don't add much value beyond that", says IBGC chairman Mauro Cunha. "But that will become increasingly less frequent", he believes.

After participating in the Klabin paper company's supervisory board, in 2000, economist Luiz Alberto de Castro Falleiros became fascinated with this type of work and never turned back. Today, he heads a consultancy but dedicates most of his time to the four boards where he is a member: two supervisory boards and two boards of directors. This year in particular, Falleiros is noticing more pressure on board members. "Before the crisis, Brazil was growing, so everyone seemed happy and little attention was paid to important issues", says Falleiros, who has worked at companies such as Suzano, Sabesp and Banco Alfa. "Two years ago, for instance, if a company's managers came up to the board with a list of institutions in which to invest, nobody would disagree. A good rating was enough", he says. "Now, the directors not only ask questions, but also get more involved in the operations."

The origin, size and developmental stage of a company also influence the qualities wanted in a good director. Smaller, family-run companies, for instance, usually prefer someone with an economic-financial background who can make the family comfortable and even help with specific business operation matters. Larger companies usually go for the generalist type, especially someone who has occupied a chairmanship or been a CEO at another organization. "Consolidated companies require directors with strategic vision, people who know how the government works, for example. They don't need opinions about operations", explains Dárcio Crespi, directing partner at Heidrick & Struggles in Brazil.

Investing in education is never a bad idea. Carlos Bifulco, a consultant and former chairman of the Brazilian Institute of Finance Executives (Ibef), adds that directors must always seek continuous professional improvement. "At times of crisis, the most important people are those with a deep knowledge of the market", says Bifulco, who is currently a member of four boards.


24 March 2010

Dangerous practice

Directors’ interests should not be influenced by management incentives

The Brazilian capital market underwent more than a few changes in recent years. Throughout this process, new challenges and more complex scenarios appeared in the corporate world and, consequently, the agenda of management and governance discussions has become broader. Among the newly prominent themes is a reflection on the role of the board – as generator of a platform for decisions and actions – and the issue of director compensation.

Variable director compensation has been the theme of heated debates and a divider of opinions for quite some time. In mid-2008, it was the high point of discussions at the International Corporate Governance Network (ICGN) meeting held in Seoul, South Korea. Already then, I placed myself vehemently against variable director pay and argued that the board should receive a fixed salary. To work at full effectiveness and live up to a company’s expectations, a director must be independent. In other words, his or her interests must not be aligned with the same incentives which are guiding management. Establishing variable director pay means creating a conflicting environment, to say the least, if not dangerous and contaminated.

I thus believe that other parameters of value and reward must apply to members of the board. Their talent and expertise should favor decisions that guarantee the company’s future and preserve its reputation. It is therefore increasingly important to establish professionalized, independent boards, supported by strong control mechanisms. The variable element produces a harmful short-term view.

Also, shareholders should reflect on a few issues before offering variable pay to their directors. For example, would a director with stock options in his or her compensation package have the necessary independence to detect problems which could negatively impact the future value of those stocks? How would that director discuss executive pay, if his or her own compensation is tied to the performance of the company’s shares?
What are a director’s true motivations?

Given these questions, it becomes clear that intellectually and financially independent directors are the best choice for companies and their shareholders. This guarantees that the board will truly focus on the challenges imposed by the corporate environment and how much of a difference their expertise can make within that dynamic.

The latest edition of the best corporate governance practices code issued by the Brazilian Institute of Corporate Governance (IBGC) addresses this issue and provides very clear recommendations on board compensation. In the institute’s view, companies should avoid compensating their directors based on short-term results. Variable compensation mechanisms exist – as well they should – and are well justified when well-adjusted to an executive’s attributions. This is neither true nor pertinent when it comes to a director, especially an independent one.