Brazil: An Update On The Brazilian Corporate Governance Program For State-Owned Enterprises

Last Updated: 8 October 2015
Article by Walter Stuber

On September 30, 2015 BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros ("BMFV") presented the State-Owned Enterprise Governance Program (the "Program")1, which was drawn up by the BMFV's regulation team2. It was created to enhance practices regarding the provision of information and corporate governance structures of state-owned enterprises ("SOEs"), seeking to restore investors' confidence and reduce SOEs' fundraising costs.

The target public of the Program is composed by those SOEs that are publicly traded or in the process of becoming so.

BMFV has based construction of the Program on concrete and objective measures that can be implemented in the short or medium term independently of legislation or rule changes. These measures have been grouped into four courses of action:

  1. Transparency (Disclosure of Information): the disclosure of information lets investors know the objectives of the controlling SOE. This makes the company and thus the investors' risk exposure predictable. The correct and appropriate disclosure of information allows implicit costs to be measured and permits inspection of the management and controllers' activities.
  2. Internal Controls: there must be the adoption of a functional control system that is capable of removing executives and board members that divert company activity away from the stated purpose in order to benefit public policies that go beyond the public interest remit foreseen in the legal authorization.
  3. Board Composition: there must be detailed nominations criteria encompassing the qualification and expertise of Members of the Board of Directors and Executive Board, notably in relation to the SOE's strategic areas of activity.
  4. Obligation of the Public Controlling Shareholder: the federal government bodies must demonstrate their commitment to corporate governance best practice.

These measures have been divided into mandatory and optional, separated by distinct considerations depending on significance or the degree of implementation difficulty.

SOEs that voluntarily adhere to the Program, implementing the 25 corporate governance measures foreseen in it, will be certified by BMFV in two categories: Category 1 in which all measures are mandatory; and Category 2 in which as well as six mandatory measures, the SOE must obtain 27 out of the 37 optional points.

Whenever new companies join the Program it will be duly communicated by all BMFV channels and participants. The interested company's submission of a request for analysis will be treated confidentiality.

Line of Action Measures Sets of Standards
Transparency Disclosure of Internal Policies and Internal Controls on the SOE's website 1
Enhancement of the Reference Form content Mandatory
Annual Corporate Governance Letter 1
Information Disclosure Policy 2
Integrated or Sustainability Report following the Global Reporting Initiative (GRI) model, for example 1
Internal Controls Encompassing decisions, separation of roles, training 1
Code of Conduct or of Ethics 4
Training about Code of Conduct 1
Installation of Compliance and Risk Area Mandatory
Attributes of the Compliance and Risk Area 2
Internal Audit and Statutory Audit Committee Mandatory
Disclosure of the records of the meetings of the Statutory Audit Committee 4
Risk Management Policy 2
Related-Party Transactions Policy Mandatory
Enhancement of the Attributes of the Fiscal Board 1
Board Composition Minimum Standards for the Appointment of Executives and Board Members Mandatory
Adherence to the Standards for the Appointment of Executives and Board Members Mandatory
Nominations Committee 1
Assessment of Executives and Board Members 2
Prohibition of Accumulation of Positions 2
Mandate of Board Members 1
Number of Members of the Board of Directors 1
30% independent directors 4
Training 2
Obligation of the Public Controlling Shareholder Obligation of the Public Controlling Shareholder 4

BMFV will carry out monitoring that is (i) periodical, on at least an annual basis; and (ii) events-based when it becomes aware of information that may result in the upgrading or downgrading of a category, placing certification in review until it is possible to confirm the effective adoption of the Program's measures.

After certification, the SOE may request withdrawal from the Program, but BMFV will make a final certification disclosure before ceasing to monitor the SOE.


1. In Portuguese this Program is called Programa Destaque em Governança de Estatais and it is available at BMFV's website at

2. At the beginning of April, BMFV launched initiatives to enhance the corporate governance of SOEs. After a wide-ranging discussion with corporate governance experts; government bodies; managers of companies partly owned by the federal government, states and cities; academics; lawyers; and market professionals, on April 22, 2015 BMFV presented its draft proposals to enhance the corporate governance practices of SOEs. These proposals were discussed in May in closed hearings attended by representatives from federal and state government, from SOEs and from market bodies and by experts in the area. Due to the quality of the debate and bearing in mind the significance of the matter BMFV decided to broaden the discussion, starting a Public Hearings process through the State-Owned Enterprise Market Advisory Committee (Câmara Consultiva de Mercado de Governança de Estatais - CCMGE), which put the Program before their members in order to gather enhancement suggestions over the August and September period. Once the suggestions period had ended, BMFV drew up a new document, consolidating the comments received, and resubmitted it for discussion to its deliberative bodies and to the CCMGE.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Walter Stuber
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