Board of directors and top management team: a study on CEO relative power and financial return

Best corporate governance practices published in the primers of Brazilian Securities and Exchange Commission and the Brazilian Corporate Governance Institute promote board independence as much as possible, as a way to increase the effectiveness of governance mechanism (Sanzovo, 2010). Therefore, this paper aims at understanding if what the managerial literature portraits as being self-evident - stricter governance, better performance - can be observed in actual evidence. The question answered is: do companies with a stricter control and monitoring system perform better than others? The method applied in this paper consists on comparing 116 companies in respect to the their independence level between top management team and board directors– being that measured by four parameters, namely, the percentage of independent outsiders in the board, the separation of CEO and chairman, the adoption of contingent compensation and the percentage of institutional investors in the ownership structure – and their financial return measured in terms return on assets (ROA) from the latest Quarterly Earnings release of 2012. From the 534 companies listed in the Stock Exchange of Sao Paulo – Bovespa – 116 were selected due to their level of corporate governance. The title “Novo Mercado” refers to the superior level of governance level within companies listed in Bovespa, as they have to follow specific criteria to assure shareholders ´protection (BM&F, 2011). Regression analyses were conducted in order to reveal the correlation level between two selected variables. The results from the regression analysis were the following: the correlation between each parameter and ROA was 10.26%; the second regression analysis conducted measured the correlation between the independence level of top management team vis-à-vis board directors – namely, CEO relative power - and ROA, leading to a multiple R of 5.45%. Understanding that the scale is a simplification of the reality, the second part of the analysis transforms all the four parameters into dummy variables, excluding what could be called as an arbitrary scale. The ultimate result from this paper led to a multiple R of 28.44%, which implies that the combination of the variables are still not enough to translate the complex reality of organizations. Nonetheless, an important finding can be taken from this paper: two variables (percentage of outside directors and percentage of institutional investor ownership) are significant in the regression, with p-value lower than 10% and with negative coefficients. In other words, counter affirming what the literature very often portraits as being self-evident – stricter governance leads to higher performance – this paper has provided evidences to believe that the increase in the formal governance structure trough outside directors in the board and ownership by institutional investor might actually lead to worse performance. The section limitations and suggestions for future researches presents some reasons explaining why, although supported by strong theoretical background, this paper faced some challenging methodological assumptions, precluding categorical statements about the level of governance – measured by four selected parameters – and the financial return in terms of financial on assets.

The relationship between board of director's nationality diversity and financial performance

Companies are moving to a more international structure; going into new markets and having an increased competition in all fronts. Therefore, the practices that lead companies to a more efficient and competitive position are praised. The management of the workforce comes as one of the main concerns of companies, aiming at performance enhancing and at creating better environments that both attract and maintain the professional talents. In an increasingly international environment, companies tend to look for the specialists and best professionals, regardless of their nationality. This new structure with several different nationalities working together poses new challenges for companies. Understanding if and how a more diverse has a relationship with financial performance is the starting point for better managing this new corporate structure.

Extreme poverty and development: the role of state in the assurance of minimal existence conditions

This paper follows the idea of Amartya Sen, Nobel Prize of economic, about the role of State in the assurance of minimal existence condition, and aim to answer how countries of Latin America (specifically Brazil) and countries of Europe (specifically United Kingdom) deal with the assurance of this minimal existence conditions. According to Amartya Sen’s view, development must be seen as a process of expanding substantive freedoms, such expansion being the primary purpose of each society and the main mean of development. Substantive freedoms can be considered as basic capabilities allocated to individuals whereby they are entitled to be architects of their own lives, providing them conditions to “live as they wish”. These basic capabilities are divided by Amartya Sen in 5 (five) kinds of substantive freedoms, but for this article’s purpose, we will consider just one of this 5 (five) kinds, specifically the Protective Safety capability. Protective Safety capability may be defined as the assurance of basic means of survival for individuals who are in extreme poverty, at risk of starvation or hypothermia, or even impending famine. Among the means available that could be used to avoid such situations are the possibility of supplemental income to the needy, distributing food and clothing to the needy, supply of energy and water, among others. But how countries deal whit this protective safety? Aiming to answer this question, we selected the problem of “fuel poverty” and how Brazil and United Kingdom solve it (if they solve), in order to assess how the solution found impacts development. The analysis and the comparison between these countries will allow an answer to the question proposed.

The effects of state ownership in the internationalization of emerging multinationals

Esta tese é um compendio de três trabalhos de pesquisa que visam analisar o efeito da participação do estado na estrutura de propriedade das Multinacionais de Países Emergentes (EMNEs). A participação do estado como acionista é um fenómeno que pode trazer novas contribuições no âmbito da governança corporativa, administração da empresa e a tomada de decisões estratégicas. Os estudos aqui inclusos permitem identificar, a partir de momentos, diferentes, até que ponto o estado, na posição de proprietário da EMNE, pode impactar a mesma. Os trabalhos vão desde os mecanismos de escolha de firmas nas quais investir ate o impacto no ritmo de internacionalização das empresas, explicando também os mecanismos que o estado usa para ganhar aceso à tomada de decisões por meio de mudanças na governança corporativa

The impact of corruption on the performance of state-owned companies: case of Petrobras Brasil

As empresas estatais são freqüentemente consideradas como componentes cruciais da economia de um país. Eles são responsáveis pela criação de vários postos de trabalho e proveem serviços essenciais que exigem um grande investimento de capital. Porém, em países com instituições fracas, onde a responsabilidade dos políticos é limitada e a gestão dos recursos financeiros das empresas estatais sofre pouco controle, os funcionários são muitas vezes tentados pela corrupção. Enormes quantidades de fundos públicos são facilmente desviados, e dinheiro que deveria ter sido investido nas despesas de capital, no pagamento de dívida da empresa ou no aumento do retorno para os acionistas, é usado para aumentar a riqueza privada de indivíduos ou para financiar ilegalmente partidos políticos. O desempenho da empresa sofre com essas alienações visto que parte dos lucros da empresa não são reinvestidos na empresa e dado que incentivos dos gestores estão desalinhados com os interesses dos acionistas. Petrobras, a maior empresa da América Latina em termos de ativos e receitas anuais, sofreu em 2014 e 2015 um escândalo de corrupção imenso, cujo impacto económico foi considerável, levando ao enfraquecimento da confiança de muitos investidores no Brasil após o evento. O escândalo expôs um extenso esquema de corrupção através do qual os contratantes foram conspirando para aumentar os preços de contratos de construção, com a aprovação da administração da Petrobras que pediu em troca ganhos pessoais ou fundos para o Partido dos Trabalhadores (PT). A exposição do escândalo na imprensa brasileira teve um grande impacto sobre a credibilidade da Petrobras: as contas da empresa estavam escondendo imensas irregularidades dado que a empresa tinha pago demais para os contratos de construção que não foram precificados no valor do mercado. Ao longo deste estudo, usamos o exemplo da Petrobras para ilustrar como a corrupção dentro empresas estatais prejudica o desempenho da empresa e como ela afeta as várias partes interessadas da empresa.