The Corporate Governance of Privately Controlled Brazilian Firms

The Corporate Governance of Privately Controlled Brazilian Firms

Bernard Black, Antonio Gledson de Carvalho, Érica Gorga

Series number :

Serial Number: 
206/2008

Date posted :

January 01 2008

Last revised :

SSRN Share

Keywords

  • Brazil • 
  • Corporate governance • 
  • boards of directors • 
  • minority shareholders

We provide an overview of the corporate governance practices of Brazilian public companies, based primarily on an extensive 2005 survey of 116 companies. We focus on the 88 responding Brazilian private firms which are not majority owned by the state or a foreign company. We identify areas where Brazilian corporate governance is relatively strong and weak.

Board independence is an area of weakness: The boards of most Brazilian private firms are comprised entirely or almost entirely of insiders or representatives of the controlling family or group. Many firms have zero independent directors. At the same time, minority shareholders have legal rights to representation on the boards of many firms, and this representation is reasonably common. Financial disclosure lags behind world standards. Only a minority of firms provide a statement of cash flows or consolidated financial statements. However, many provide English language financial statements, and an English language version of their website. Audit committees are uncommon, but many Brazilian firms use an alternate approach to ensuring financial statement accuracy – establishing a fiscal board. A minority of firms provide takeout rights to minority shareholders on a sale of control. Controlling shareholders often use shareholders agreements to ensure control.

A Portuguese language version of this article is available at http://ssrn.com/abstract=1528183

For a less detailed version of this paper, with statistical tests for differences between subsamples intended for an international audience, see Black, de Carvalho and Gorga, Corporate Governance in Brazil, at http://ssrn.com/abstract=1152454

 

Published in

Published in: 
Publication Title: 
Revista Brasileira de Finanças
Description: 
Vol. 7, 2009

Authors

Real name: 
Fellow, Research Member
Northwestern University Law School and Kellogg School of Management Law School
Real name: 
Antonio Gledson de Carvalho
Real name: 
Érica Gorga