An evaluation of board practices in Brazil

Abstract

We survey board practices in Brazil. Brazilian companies are commonly controlled by family groups or through shareholders agreements. Controlling shareholders hold a very large portion of voting shares, much more than the minimum necessary to retain control. There is widespread evidence of shareholder expropriation, legal protection is week, and stock issuance has been halted by low valuations and tax avoidance. Half of the boards are either too small or too big. Board committees are ineffective. Board procedures are rarely formalized and board members and CEOs are not evaluated in most cases. Most board members are not shareholders. No more than 21% of board members are independent and only 2% of them are elected by independent shareholder groups. It is likely the improvements in board structure and procedures be restricted to large public corporations with foreign stock ownership while most companies avoid going public.