Post on 02-Jun-2020
transcript
Advances and Trends in Chilean Boards
Dieter Linneberg A.Executive Director
Centro de Gobierno Corporativo y Mercado de Capitales
Universidad de Chile
Context
A study conducted by the center of corporate governanceand capital markets, based on responses of boardmembers of the most important Chilean companies(market cap over 70% of IPSA Index), has found importantresults on the status of corporate governance in ChileanCompanies.
This study includes results about the board structure andfunctioning, principles and practices of corporategovernance and risk management among others.
This presentation focuses on the strengths and weaknessesof corporate governance. It also presents suggestions toimprove corporate governance in Chilean companies.
Strengths of Corporate Governance in Chilean Companies
74% of Chilean companies has a functioning best practices code on corporate governance.
82% of the executives are not members of the Board
72% has policies to protect minority shareholders (e.g. tag along rights, disclosure policy for stakeholders, etc)
Yes
74%
No
26%
Is There a Best Practices Code
Functioning in the Company?
Yes
72%
No
28%
Does the Company have
Policies to Protect Minority
Shareholders?
Yes
18%
No
82%
Are any Board Members also
Executive?
Strengths of Corporate Governance in Chilean Companies
Wide support among Chilean board members on benefits of corporate governance.
There is awareness in the boards of the benefits of corporate governance
62%
62%
64%
68%
68%
72%
75%
77%
82%
82%
86%
89%
95%
Reduces Capital Costs
Facilitates Succesion Process
Reduces Risk of Conflicts Between Board Members and Executive Management
Ensures Survival of the Company
Ensures BMetter Representativity of Minority Shareholders
Allows to Separate Family Issues from Society Issues
Facilitates Access to Capital
Allows Better Alignment Between Shareholders and Executives
Attends Legal and Regulatory Requirements in a Better Way
Reduces Risk of Company Conflicts
Improves Company's Corporate Image
Improves Transparency
Improves Company Management
Benefits of Corporate Governance
Weaknesses of Corporate Governance in Chilean Companies
Committees still developing. 75% of the companies have a Board Committee, but this committee is mandatory for public firms.
There is room for improvement in diversity within the board. 76% of the boards do not count on female presence.
No
Women on the
Board76%
Only
one16%
Two or
More8%
Women in The Board
75%
52%
33%
21%
21%
19%
10%
4%
Board Committe
Audit Committe
Finance Committe
Risk Committe
Strategy Committe
Human Resources Committe
Ethics Committe
Succession Committe
Existence of Board's Committees
Weaknesses of Corporate Governance in Chilean Companies
In 77% of the boards there is no formal mechanism of board assessment.
In only 8% of the firms, the remuneration of the board is linked to long term results.
3% 3%
3%
14%
77%
Board Assessment
360º Assessment
External Evaluators
Other
Self Assessment
There is no formal mechanism
72%
31%
26%
8%
8%
2%
Fix
Linked to presence in meetings
Linked to company's short term results
Linked to company's long term results
Other
Linked to board assesment
Board Remuneration
Board Responsibilities
Top responsibilitiesare related tocompany´sstrategy.
Monitoring andcontrol are theother importantresponsibilities.
3.9
4.0
4.2
4.2
4.4
4.5
4.5
4.7
4.7
Aprobar las indicaciones de los miembros de la Plana Ejecutiva
Definir y monitorear la estructura de capital
Evaluar el desempeño de los miembros de la Plana Ejecutiva
Representar fielmente las creencias y propósitos de los
accionistas
Garantizar que los patrones de conducta, políticas internas y las
exigencias legales sean …
Monitorear el desempeño de los negocios y la salud financiera de
la empresa
Monitorear los principales riesgos del negocio y definir su
gestión
Definir directrices y validar la estrategia de la empresa
Tomar decisiones de importancia estratégica
Responsabilidades del Directorio
Main Issues in Board Meeting
The main subjects are related to short term performance. Company’s strategy is in 4th place
This shows a contradiction with board responsibilities, where the strategy was the most important.
2.6
3.1
3.2
3.3
3.5
3.7
3.8
4.0
4.0
4.1
4.6
Evaluación de los ejecutivos de la
empresa
Política de divulgación de
informaciones
Política de gestión de conflicto de
intereses
Buenas prácticas corporativas
Auditoría independiente
Estructura de capital / Pasivos
Discusiones sobre los principales
riesgos del negocio
Estrategia de la empresa
Portfolio de negocios, inversiones
y desinversiones
Metas de la empresa
Desempeño del negocio
Principales temas en la reunión de Directorio
Board qualities
In board members’ opinion, personal qualities are more important than knowledge about the company or industry.
Personal integrity, having a strategic vision and motivation are the three most important.
3.5
3.6
3.7
3.7
3.8
3.9
4.0
4.0
4.1
4.3
4.3
4.3
4.4
4.5
4.6
4.8
Experiencia internacional e …
Liderazgo
Conocimiento de la industria
Conocimiento de las …
Conocimiento de la empresa
Experiencia como alto ejecutivo
Disponibilidad de tiempo
Visión externa del mercado
Conocimiento de buenas …
Entender estados financieros y …
Independencia/ausencia de …
Apertura a nuevas ideas
Sentido Crítico
Motivación
Visión estratégica y de largo …
Integridad personal
Cualidades de un Director
Risk Management
69% of the boardmembers surveyed findrisk managementimportant or veryimportant.
55% of Chileancompanies have anexplicit risk policy and54% has a specializedrisk management area.
These results don’treflect the importancethat the board assigns toRisk Management
Yes
54%No
32%
NS/NR
14%
Does the company has an
specialized area in charge of
risks?
Yes
55%No
34%
NS/NR
11%
Does the Company Has a Explict
Risk Policy?
Weaknesses of Corporate Governance in Chilean Companies
In 77% of the boards there is no formal mechanism of board assessment.
In only 8% of the firms, the remuneration of the board is linked to long term results.
3% 3%
3%
14%
77%
Board Assessment
360º Assessment
External Evaluators
Other
Self Assessment
There is no formal mechanism
72%
31%
26%
8%
8%
2%
Fix
Linked to presence in meetings
Linked to company's short term results
Linked to company's long term results
Other
Linked to board assesment
Board Remuneration
Suggestions to Improve Corporate Governance Practices in Chilean Companies Promote the creation of committees. This will help the
board to make better and more informed decisions. It will make board members more expert about important subjects to the company.
Encourage boards to perform assessments. This can help to identify strengths and weaknesses to improve management of the company.
Finally, to provide the right incentives to create value from the board. These incentives should refer to short and long term, looking to increase the value of the company without compromising the future.
Advances and Trends in Chilean Boards
Dieter Linneberg A.Executive Director
Centro de Gobierno Corporativo y Mercado de Capitales
Universidad de Chile