Brazilian Institute of Corporate Governance officials Emilio Carazzai and Heloisa Bedicks talk to the Brunswick Review about reforms in the culture of business leadership
In a surprising showing, the value of m&a activity in Brazil rose to $61.77 billion in 2017. While still fairly low by global standards, that number marks a 33 percent increase over 2016.
The catalyst behind that jump was the nation’s famous “Lava Jato,” or “Car Wash,” investigations into corruption. Large Brazilian groups under pressure from the probes were forced to sell major assets as their financing options became scarce.
Some of these deals naturally represented great opportunity for buyers in terms of valuation. But some also came with a fair share of risk, as they may still hold undocumented liabilities, or carry legacies from historically poor governance structures.
These deals and the probes themselves have heated up the discussion about corporate ethics in Brazil, highlighting the importance of the supervisory role of boards and the identification of risk not only in M&A transactions but in any capital allocation decision. At the center of that discussion are Emilio Carazzai and Heloisa Bedicks, respectively the former Chairman and General Superintendent of the Instituto Brasileiro de Governança Corporativa, a leading authority on corporate governance standards in the country.
In 1995, when IBGC was created, one of the first issues the founding group had to deal with was the proper Portuguese translation for “governance.” At that time, Mr. Carazzai and Ms. Bedicks say, board meetings at most companies were mere periodic lunch meetings, a leisure activity for a group of gentlemen to discuss everything but corporate issues. Meeting minutes were written in advance to be signed afterward, just as a formality.
Fast forward more than 20 years to the present day: The Lava Jato probes have made “governança corporativa” the phrase of the moment. The investigations started in 2014 and are the biggest ever into corruption in Brazil. However, according to Mr. Carazzai, the growing talk about governance has as much to do with the groundwork that had already been laid regarding a shift of culture toward international best practices. Lava Jato only threw additional light on its importance.
“It is not fair to say that the evolution of corporate governance in Brazil was accelerated due to Lava Jato,” he says. “The revised fifth edition of IBGC’s Corporate Governance Best Practices Code was published in November 2015, but the first one was published in 1999. Many other developments have assured the dynamism of governance-related themes in Brazilian capital markets, which would have happened with or without Lava Jato.”