Document Type



We provide the first detailed picture of firm-level corporate governance practices in an emerging market. We report on the corporate governance practices of Brazilian public companies, based primarily on an extensive 2005 survey of 116 companies. Most firms have a controlling shareholder or group. Board independence is an area of weakness. The boards of most Brazilian private firms are comprised entirely or almost entirely of insiders or representatives of the controlling family or group. Many firms have no independent directors. Financial disclosure is a second area of weakness. Only a minority of firms provide a statement of cash flows or consolidated financial statements. However, many provide English language financial statements. Audit committees are uncommon, but many Brazilian firms use a home-grown substitute known as a fiscal board. A minority of firms provide takeout rights to minority shareholders on a sale of control, above the legal minimum. Shareholders agreements among the members of a controlling family or group are common. The overall picture is hard to reconcile with models in which firms optimally choose those governance structures which best meet firm-specific needs. It suggests instead the potential value of legal or institutional reforms which impose minimum quality rules on public firms.

Date of Authorship for this Version

July 2008


Brazil, Corporate governance, Board of directors, Minority shareholders