|Are the inspectors in place?|
Ever since the 2002 Sarbanes-Oxley Act (SOX), some Brazilian companies have taken inspiration from the American model and introduced audit committees into their governance systems. Formed by members of the board of directors, the group has the critical mission of analyzing and inspecting the quality of the financial statements released to the market. Other companies, despite being listed in the U.S. and being subject to SOX, have chosen to make use of a privilege granted by the Securities and Exchange Commission: using the supervisory board prescribed by the Corporate Act in place of said audit committee.
The Brazilian Institute of Corporate Governance (IBGC) soon reacted against this. In its code, it clarified that the two boards have different roles and should coexist. Because they are elected at shareholders meetings — i.e., are under strong influence of the controller —the members of the supervisory board do not have the necessary independence to perform the attributions of an audit committee. The latter, in turn, should have an independent majority so as to adequately carry out its role.
This month, Comply or Explain researched two aspects: whether the sampled companies had an audit committee and whether it had a majority of independents. Out of a total of 80 companies, 27 were found that fulfilled the two criteria. The remaining 53 complied with neither or only one of them.
Out of the 27 companies that sent in an explanation to CAPITAL ABERTO, Braskem, Confab, Cosan, CPFL, Cemig, Brasil Ecodiesel, Net, Ultrapar and VCP believe that the existence of a permanent supervisory board, with independent members and compliant with the law, is enough to fulfill the needs of their shareholders.
GVT justified that its "audit committee, also known as the supervisory board, is created only when one of the company's voting shareholders makes a formal request at a shareholders meeting", which has not happened until this time. The company said that it is open to this possibility and emphasized that it submits its numbers to independent external auditors. Following the same line, Klabin affirmed that the information it releases to the market is "audited by a specialized, independent and competent company". Cyrela confirmed that it has no audit committee in place and argued that this practice is not required by the Novo Mercado, the higher governance tier where it is listed.
In companies such as Lojas Renner, Weg and PDG Realty, the audit committee's attributions are performed by other entities. In the first two, the task is assigned to the entire board of directors. Weg affirmed that it does not like to divide the board into committees. "The participation of all board members in the process produces decisions more efficiently and effectively", the company said. At PDG, the attribution is assigned to the internal auditors. According to the company, the department fulfills the same objectives as the committee and is staffed by professionals from several different areas, with accounting, financial and legal knowledge. This practice also enables the company to eliminate the costs that would come from hiring external members.
Others have shown an interest in assembling an audit committee. Such was the case of Lupatech, MRV and BicBanco. The latter is even undergoing recruitment of such professionals. Agrenco informed that it "does not have an audit committee due to an ongoing judicial recovery process". However, it has plans to set one up in 2010. At Rossi, a specialized consultancy was hired and "adopting a majority of independent members is within the scope of the study". Cesp said that it has been studying the possibility of installing a committee despite not being listed in the United States.
Gafisa subsidiary Tenda and BR Malls were not able to participate in this section. They are undergoing quiet periods due to ongoing IPOs.