Corporate Governance in Brazil

Abstract

We examine the corporate governance practices of Brazilian public companies. We identify areas where their governance is relatively strong and weak. Many firms have small boards, comprised entirely or almost entirely of insiders or representatives of the controlling family or group. Even some very large firms have no independent directors. Formal board processes are limited. Audit committees are uncommon, but many firms use a substitute body – the fiscal board – which does not require that the firm have independent directors to staff the audit committee. Financial disclosure is mixed. Some firms voluntarily provide English language disclosure, but many do not provide cash flow statements or consolidated quarterly financial statements. Brazilian corporate law often provides limited protection to minority shareholders, but the Brazilian stock exchange, Bovespa, provides optional governance rules which go beyond the legal minimums. These optional rules have become increasingly popular with Brazilian firms.

For a more detailed study, see Black, de Carvalho and Gorga, The Corporate Governance of Privately Controlled Brazilian Firms, Revista Brasileira de Finanças vol. 7 (2009), at http://ssrn.com/abstract=1003059 (Portuguese version at http://ssrn.com/abstract=1528183

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

JEL Classification: G15, G38, K22