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An initiative of eight Latin American companies
Winning the hearts and minds of managers and controlling shareholders is vital for Latin America to improve its corporate governance practices, according to a new report by the Companies Circle of the Latin American Corporate Governance Roundtable.
Published in November 2005, “Case Studies of Good Corporate Governance” (available in Portuguese, Spanish and English) describes the experiences of eight Latin American firms leading reform initiatives and improvements in corporate governance practices in three different countries: Brazil (represented by CCR, CPFL, Natura, Net, Suzano and Ultrapar), Colombia (represented by Argos), and Peru (represented by Buenaventura).
The publication shares practical solutions to corporate governance challenges with the broader Latin American business community, by examining each company’s motivations, challenges, and solutions for putting into place better governance rules and practices. It also explores the operational results and market benefits these companies have acheived through better governance.
The cases reveal common themes that can serve as points of reference for other companies considering corporate governance reform:
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The challenge of implementation is for each company to find the path and solutions that fit its circumstances;
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The company must have strong and active internal champions;
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Achieving market credibility is key;
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Good corporate governance is a journey, not a destination; and
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Improving governance yields positive and palpable returns.
According to Mike Lubrano, Head of the Investor & Corporate Practice of the Corporate Governance Department of International Finance Corporation (IFC), “The case studies presented reflect a depth and diversity of experiences not in the theory of corporate governance, but rather in the practical application of the goals of transparency and disclosure, accountability, respect for the rights of shareholders and equitable treatment of all stakeholders.”
The motivation for pursuing the path of good corporate governance was different for each of the eight companies. “For some, it was a response to the need to reconcile potentially divergent interests of members of the controlling family or different shareholder groups. For others, the stimulus was the desire to attract new investors or access new sources of external capital,” noted Lubrano.
At its second meeting, the members of the Companies Circle decided to prepare a Practical Guide for Implementing Corporate Governance, explaining the process step-by-step through all its distinct stages. The guide will be produced in Portuguese, English and Spanish and is expected to be launched during the first half of 2006.
The Companies Circle also decided to organize, in the first half of the next year, a meeting with Brazilian and international institutional investors, similar to the investor-company gathering in Rio de Janeiro in 2000 following the first meeting of the Latin American Corporate Governance Roundtable. The objective of this encounter will be to showcase the advances achieved in corporate governance in the region and present Latin American firms as opportunities for investors sensitive to governance issues.
The Companies Circle
The Companies Circle of the Latin American Corporate Governance Roundtable was launched by the Organisation for Economic Co-operation and Development, IFC and its founding members at a meeting hosted by BOVESPA in Sao Paulo in May 2005. The Circle brings together leading companies with practical experience in implementing best practices in corporate governance in the Latin American context. Its goals are: (1) to share with each other and the broader community of Latin American firms practical solutions to the corporate governance challenges facing companies in the region; and (2) to contribute to the work of the Roundtable the views and experiences of managers and directors who have successfully undertaken corporate governance reforms in their own companies. Representatives of the Circle participate in the plenary meetings of the Roundtable and Circle members have also agreed to undertake their own collective program of dissemination of best practices through meetings among its members, dialogue with representatives of the investor community and other stakeholders, and publications.
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