Corporate Governance in Brazil: Landmarks, Codes of Best Practices, and Main Challenges

Abstract

This paper provides a qualitative and in-depth discussion of corporate governance in Brazil. It is divided into five sections: i) historical perspective and corporate governance landmarks; ii) main recommendations of the two Brazilian codes of best practices; iii) Bovespa's Novo Mercado; iv) current level of compliance of Brazilian firms with main local and international recommendations; and, v) next issues and challenges on corporate governance in Brazil. Based on empirical evidence from recent researches, we draw three mains qualitative conclusions: 1) Brazilian codes of best practices have been useful in educating corporate players on the so-called good governance practices. However, few companies already adopt most part of their recommendations, and a even smaller number of companies publicly disclose their level of compliance with any code; 2) given the totally voluntary nature of compliance with such codes (not even a comply or explain approach is required) the evaluation of the corporate governance quality of local firms is still a challenge to outsiders. 2) given both the outstanding performance of local stock markets and the IPO boom in place from 2004 to 2007, the market didn't really test the quality of corporate governance practices of listed companies, including the practices of companies listed at Novo Mercado, the most requiring listing segments. This should happen in the coming years.