After a thorough analysis, the foreign investor should seek to understand in detail how corporate governance works in Brazil – a process through which companies are directed, monitored and encouraged by the partners, the board of directors, the board of directors, the supervisory bodies and other stakeholders – since this set of practices, when well executed, converts basic principles into objective recommendations, in order to preserve and optimize the economic value of the organization and balance the interests of stakeholders . In addition, of course, to facilitating the corporation’s access to resources and optimizing the quality of management.
At the beginning of the 21st century, an abundance of corporate scandals spurred movements that aimed to clearly structure what was expected of running a company. With this, in Brazil, the Brazilian Institute of Corporate Governance (IBGC) currently occupies a position of reference on the subject, disseminating knowledge about best practices in corporate governance, influencing the most varied agents in their adoption and contributing to sustainable performance of organizations.
The execution of corporate governance in the country permeates the four practices of the Code of Best Corporate Governance Practices – the main publication of the IBGC, launched in 1999 and currently in its 5th edition –, whose proper application results in the dissemination of a climate of trust both internally and externally. That said, let’s get to the practices:
1. Transparency is fundamental
Based on the availability of information of interest to the parties involved, not limited only to data imposed by laws or regulations. It is not restricted to economic-financial performance and also includes other factors, including intangibles, which guide management action and lead to the preservation and optimization of the corporation’s value.
2. Equity regardless of the stakeholder
Characterized by the fair treatment of partners and other interested parties (stakeholders), considering their rights, duties, needs, interests and expectations.
3. Clear
Also known as Accountability, accountability is the process in which governance agents must, necessarily, expose their actions clearly, taking responsibility for their attributions.
For foreign companies coming to Brazil, this is an essential corporate governance pillar. In contexts legal representation, a transparent and reliable partner is essential, as it guarantees the correct link with the matrix.
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4. Corporate Responsibility
This practice ensures that governance agents are responsible for ensuring the economic and financial viability of corporations, in addition to reducing negative externalities and enhancing positive ones. Therefore, the variety of capital (financial, manufactured, intellectual, human, etc.) in the short, medium and long term must be considered within a business model in which the organization is inserted.
In Brazil, with the development and application of governance practices, in addition to privatization processes and the opening of the Brazilian market in the 1990s, it was noticed that investors are willing to pay more to invest in companies that adopt management techniques transparent and accountable.
It is worth mentioning that despite having been created with a focus on large corporations, with capital on the stock exchange, for example, corporate governance is not an exclusive practice of these. Organizations of all sizes and niches can devise the necessary framework for sustainable growth through a few corporate governance practices.
5. Governance Structures
It is critical that governance structures ensure transparency around roles and responsibilities; responsibility and engagement with stakeholders and the drive for sustainable business practices.
6. Governance and Process Documentation
Governance documentation must be accurate and up-to-date, as it is responsible for establishing the rules by which the corporation is governed, defining the rights and obligations of shareholders and owners.
The same principle applies to processes. These must be properly documented for possible future reference.
7. Law and Regulations
The company must have clear policies and guidelines that group rules and principles aimed at day-to-day operations. These must be aligned with current legislation, with the organization’s objectives and strategies.
It is worth emphasizing the importance of broad dissemination of policies and guidelines within the corporation to ensure that everyone understands how tasks should be performed and what is expected of their roles and positions.
8. Reporting
Corporate boards perform better when they receive reports that contain enough information to make clear decisions, enabling them to develop business strategies focused on short-term and long-term growth, as well as, of course, the overall sustainability of the organization.
9. Record of Minutes (Meetings)
It is important that the minutes generated in the meetings are clear and free of ambiguity and contain the main points of discussion; the decisions made and the reasons for them; and the agreed actions.
10. Board of Directors Assessments
The board of directors of the corporation must, of necessity, be up-to-date with regulations and legislation.
Therefore, it is important to devote enough time to creating the company’s strategies and long-term plans; that there is a relevant combination of skills, knowledge, experience, and diversity; that easy and quick access to information is provided; that there is a commitment to the company regarding the performance of its individual responsibilities effectively; and that they obtain formal induction training and/or ongoing training.
11. Governance Policies for Branches
To ensure that corporate governance principles are disseminated consistently and effectively across branch offices, which represent a common business structure today, it is important that such organizations establish a standard governance structure that can be replicated, in addition to rules regarding the supervision of subsidiaries that respect local autonomy ; and provide guidance to local councils on their roles and responsibilities, requesting periodic reports to the parent company.
Conclusion
As seen, corporate governance provides the right incentive to owners as well as managers so that the business can achieve objectives that are in the interests of shareholders and the organization, as well as ensuring that the company is managed in a way that actually serves those involved, providing a practical way to guide decision-making at all levels of the company.
In addition to the positive impacts mentioned above, corporate governance, through the process of minimizing waste, corruption, risks and mismanagement, maintains the confidence of investors – which allows for an efficient increase in capital raising, ensuring the path for the company’s economic growth.
Corporation – and gains a greater ability to attract and retain talent, increasing the company’s market value through brand formation and development.
