Companies Circle: “Practical and Hands-On” Guidance from Private Sector Leaders

What makes board directors and top executives from 19 leading Latin American companies carve out two or three days from their busy schedules—every year?

The Latin American Companies Circle held its sixth annual meeting in November in Lima, Peru. Participants reviewed two draft reports (on annual general meeting practices and on board evaluations), discussed case studies of good-practice corporate governance reforms by its members, and set the 2012 agenda.

The Companies Circle is an initiative of the Latin American Roundtable and is supported by IFC, the OECD, and the Forum. Established in 2005, it quickly earned a reputation as one of the region’s most vibrant and effective advocates for good corporate governance. The Companies Circle provides private sector input into the work of the Roundtable and, increasingly more important, a forum where directors and top executives can frankly discuss corporate governance issues of common concern and share practical solutions.

“What makes the Companies Circle unique is the sharing of experiences by its members with one another but also with companies throughout Latin America,” says Sandra Guerra, the Circle’s coordinator. “Companies that are interested in how good corporate governance practices can be implemented can see how similar companies did so, and learn about benefits of these reforms. This practical and hands-on guidance is invaluable.”

She also notes that, even though most members are public companies, the steps they have taken in board composition, shareholder and stakeholder relations, internal controls, and disclosure approaches provide important lessons for closely held private corporations, including family firms.

The draft report on annual meeting practices, discussed at the meeting, examines three topics: presentation of business results, election of the board of directors, and board and management compensation approval. One practice the report emphasizes is the release in advance of all the information investors need to help them prepare for the annual meeting and, as a result, be better prepared to vote.

André Covre of Ultrapar, discusses good practices for Annual General Meetings.

“We think it’s important for companies to relate their results, their strategy, and operating environment, telling investors how economic, social, and other factors have an impact on their businesses,” says André Covre, chief financial officer and investor relations officer for Ultrapar (Brazil). “In particular, companies must explain their risk-management systems—we call this the anti-Enron proposal. Investors must understand the reliability of the numbers that a company reports.”

Another report on board evaluation was also approved at the annual meeting. Drawing from the experiences and practices of the Latin American Companies Circle companies, the report set out the most effective practices and processes. Of the 19 member companies, 15 conduct board evaluations.

Both reports will be finalized and made available for the general public in 2012.

Following the discussion of the reports, four member companies—Embraer, Los Grobo, Carvajal, and Ultrapar—presented cases from their own businesses. The companies shared experiences in the adoption and implementation of new best practices and mechanisms in corporate governance. They also proposed solutions for common problems that affect companies that are pioneering new practices in corporate governance.

The event was hosted by Peruvian Companies Circle members Buenaventura, Ferreyros and Graña y Montero.

To learn more, download The Practical Guide to Corporate Governance: Experiences from the Latin American Companies Circle.

Early in February 2012, the Forum will also make available several insightful video interviews from the annual meeting.