The Corporate Governance of Privately Controlled Brazilian Firms

48 Pages Posted: 16 Apr 2008 Last revised: 7 Aug 2013

Bernard S. Black

Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo

Érica Gorga

Yale University - Center for the Study of Corporate Law; São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP

Date Written: December 1, 2009

Abstract

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

Keywords: Brazil, corporate governance, boards of directors, minority shareholders

JEL Classification: G18, G30, G34, G39, K22, K29

Suggested Citation

Black, Bernard S. and De Carvalho, Antonio Gledson and Gorga, Érica, The Corporate Governance of Privately Controlled Brazilian Firms (December 1, 2009). U of Texas Law, Law and Econ Research Paper No. 109; as published in Revista Brasileira de Finanças, Vol. 7, 2009; U of Texas Law, Law and Econ Research Paper No. 109; Cornell Legal Studies Research Paper No. 08-014; ECGI - Finance Working Paper No. 206/2008. Available at SSRN: https://ssrn.com/abstract=1003059

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)

Brussels
Belgium

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo ( email )

R. Itapeva, 474 - 7o. andar
Sao Paulo 01313-902
Brazil
+5511 3281-7767 (Phone)

Érica Gorga

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP ( email )

R. Rocha, 233, Bela Vista
São Paulo, 01330-000
Brazil

Yale University - Center for the Study of Corporate Law ( email )

127 Wall Street
New Haven, CT 06511
United States
203-988-6500 (Phone)

HOME PAGE: http://www.law.yale.edu/faculty/EGorga.htm

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