One Decade of Evolution of Corporate Governance Practices in Brazil

27 Pages Posted: 29 May 2015 Last revised: 3 Feb 2016

See all articles by Ricardo P. C. Leal

Ricardo P. C. Leal

The COPPEAD Graduate School of Business

Andre Carvalhal

The COPPEAD Graduate School of Business

Ana Iervolino

Brazilian Institute of Corporate Governance

Date Written: May 27, 2015

Abstract

This study presents the evolution of the quality of corporate governance practices of listed Brazilian companies from 2004 to 2013 by means of a broad corporate governance index (CGI). Results indicate that the quality of corporate governance practices improved, notably after the creation of voluntary membership exchange trading lists that require better corporate governance and disclosure practices. The average CGI score of 5.8 (out of 10.0) in 2013 may be considered low and points to the need for further improvement. Moreover, firms score very low in the ethics & conflicts of interest aspects of the CGI, when compared to its disclosure, board composition & functioning, and shareholders rights components. The very small number of firms that ban loans to related parties and that facilitate participation in the shareholder meetings is a concern. The decrease in the use of control enhancement mechanisms, such as non-voting shares and indirect control structures, was a remarkable achievement. Even so, shareholder agreements are increasingly used as instruments to interfere with director independence and leverage the controlling bloc power.

Keywords: corporate governance index, conflicts of interest, board of directors, disclosure, shareholder rights, Brazil

JEL Classification: G32, G34

Suggested Citation

Leal, Ricardo Pereira Câmara and Carvalhal, Andre and Iervolino, Ana, One Decade of Evolution of Corporate Governance Practices in Brazil (May 27, 2015). Available at SSRN: https://ssrn.com/abstract=2611372 or http://dx.doi.org/10.2139/ssrn.2611372

Ricardo Pereira Câmara Leal (Contact Author)

The COPPEAD Graduate School of Business ( email )

Rua Pascoal Lemme
355 - Cidade Universitária
Rio de Janeiro, Rio de Janeiro 21941-918
Brazil
39389871 (Phone)

Andre Carvalhal

The COPPEAD Graduate School of Business ( email )

Rua Pascoal Lemme
355 - Cidade Universitária
Rio de Janeiro, Rio de Janeiro 21941-918
Brazil

Ana Iervolino

Brazilian Institute of Corporate Governance ( email )

São Paulo
Brazil

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