Corporate Governance of Company Groups: International and Latin American Experience Preliminary version for comment. Hosted by : Please send written comments to [email protected] by 5 December, 2014 Latin American Roundtable Task Force on Corporate Governance of Company Groups 17 November, 2014 Hotel Hilton Bogotá, CARRERA 7 NO. 72-41, BOGOTA, 00000, COLOMBIA http://www.oecd.org/daf/ca/latinamericanroundtableoncorporategovernance.htm With funding support of: TABLE OF CONTENTS International and Latin American Overview ............................................................................. 3 1. Introduction............................................................................................................................ 3 2. Economic Rationale for Corporate Groups and the Role of Corporate Governance ............. 4 3. International Work on Corporate Governance of Groups ...................................................... 8 4. Economic Relevance of Company Groups in LatAm .......................................................... 12 5. What is an Economic Group in LatAm? .............................................................................. 12 6. Structure of the Regulatory and Supervisory Framework ................................................... 13 7. Protection of Minority Shareholder Rights .......................................................................... 14 8. Economic Groups and Conflicts of Interest ......................................................................... 15 9. Multinational Company Groups and Cross-border Activity ................................................ 17 10. Regional Guidance on Corporate Governance of Groups ................................................. 18 10. Policy Options and Challenges .......................................................................................... 19 11. Conclusions and Issues for Discussion .............................................................................. 20 ANNEX ....................................................................................................................................... 22 Excerpts from the Joint Forum’s “Principles for the Supervision of Financial Conglomerates”22 Structure of the Financial Conglomerate ................................................................................. 23 Suitability of Board Members, Senior Managers and Key Persons in Control Functions ....... 25 Responsibility of the Board of the Head of the Financial Conglomerate ................................ 26 Remuneration in a Financial Conglomerate ............................................................................ 27 ARGENTINA.............................................................................................................................. 29 1. Data: Relevance of Company and Economic Groups for the Economy .............................. 29 2. Definitions ........................................................................................................................... 29 3. Protection of Minority Shareholder Rights: Regulatory Oversight and Enforcement ......... 30 4. Other Corporate Governance Issues for Groups .................................................................. 31 5. Corporate Governance Issues for Multinational Economic Groups .................................... 31 6. Policy Options for Consideration ........................................................................................ 31 BRAZIL ...................................................................................................................................... 33 1. Data: Relevance of Company and Economic Groups for the Economy .............................. 33 2. Definitions ........................................................................................................................... 33 3. Supervision of Brazilian Company Groups ......................................................................... 34 4. Protection of Minority Shareholder Rights .......................................................................... 35 5. Related Party Transactions .................................................................................................. 35 6. Other Corporate Governance Issues for Groups .................................................................. 36 7. Corporate Governance Issues for Multinational Economic Groups .................................... 37 8. Policy Options for Consideration ........................................................................................ 38 CHILE ......................................................................................................................................... 39 1. Data: Relevance of Company and Economic Groups for the Economy .............................. 39 2. Definitions ........................................................................................................................... 40 3. Protection of Minority Shareholder Rights: Regulatory Oversight and Enforcement ......... 41 4. Other Corporate Governance Issues for Groups .................................................................. 42 5. Corporate Governance Issues for Multinational Economic Groups .................................... 42 6. Policy Options for Consideration ........................................................................................ 43 1 COLOMBIA................................................................................................................................ 44 1. Colombian Company Groups .............................................................................................. 44 2. Definition and Regulation of Colombian Company Groups ............................................... 44 3. Supervision of Colombian Company Groups ...................................................................... 45 4. Restrictions on Colombian Company Groups ..................................................................... 46 5. Related Party Transactions and Conflicts of Interest ........................................................... 48 6. New Corporate Governance Benchmark in Colombia ........................................................ 50 7. Policy Options for Consideration ........................................................................................ 51 MEXICO ..................................................................................................................................... 51 1. Data: Relevance of Company and Economic Groups for the Economy .............................. 52 2. Definitions ........................................................................................................................... 52 3. Protection of Minority Shareholder Rights: Regulatory Oversight and Enforcement ......... 53 4. Other Corporate Governance Issues for Groups .................................................................. 54 5. Corporate Governance Issues for Multinational Economic Groups .................................... 54 6. Policy Options for Consideration ........................................................................................ 55 PERU ........................................................................................................................................... 56 1. Peruvian Company Groups .................................................................................................. 56 2. Definition and Regulation of Peruvian Company Groups ................................................... 56 3. Supervision of Peruvian Company Groups ......................................................................... 57 4. Disclosure of Information Regarding Company Groups ..................................................... 57 5. Restrictions on Peruvian Business Groups .......................................................................... 58 6. Related Party Transactions and Conflicts of Interest ........................................................... 58 7. Control Environment ........................................................................................................... 59 8. Policy Options for Consideration ........................................................................................ 59 Tables Table 1. Current Regulatory Structures in Surveyed Countries ........................................ 14 Figures Figure 1. Number of Business Groups (End-year Data; 2014 as of September) ................ 39 Boxes Box 1. Company and Economic Groups: What are They? ........................................................ 4 2 International and Latin American Overview1 1. Introduction 1. This draft report has been prepared as a reference for the 17 November, 2014 meeting of the Latin American Corporate Governance Roundtable’s Task Force on Company Groups, and for the Roundtable’s subsequent discussions of these issues on 18-19 November. It provides an overview of international and Latin American frameworks for and experience in addressing the challenges associated with corporate governance of company and economic groups, with specific country chapters on Argentina, Brazil, Chile, Colombia, Mexico and Peru. It will be modified in light of the discussions and input provided from these meetings. 2. The report builds on and makes use of the previous work of the Roundtable and its Task Force on Related Party Transactions (RPTs). The Task Force first began meeting in 2012 to exchange