10 Years Fighting the Good Fight

The daily hurdles can easily make us forget about the most important things – those that bring impacts in the long term. And it’s amid one of the worst crisis experienced by our capital markets that Amec – the Association of Capital Market Investors – celebrates the first decade of its existence.

Throughout these years, many things have changed… and many things have remained the same. But maybe the most relevant one is the increasingly clearer perception that the respect for shareholders is a crucial factor for the development of a healthier capital market.

Amec has consistently evolved since its creation. When it was established, it was seen with reservation by some critical market participants. A “class association” that would act as a megaphone and reinforce the pressures claimed by its most activist members.

It was soon clear that such critical market participants were wrong. Since the beginning, Amec has positioned itself as one of the main voices in the debate about the capital markets. As a participant has recently said, we have become the “conscience” of the market. It’s interesting to analyze how that has happened as it provides us with a powerful message about both Amec’s mission and the management of an association with its profile.

Such success has happened for two reasons, both seeded since the beginning our activities: vision and consistency. The vision of our founders, who designed a solid and balanced governance capable not only of attracting the most diverse institutional investors, but also of ensuring a work based and focused on principles, without the risk of “capture” by any interested party. And a consistent management over these years to remain faithful to the vision of our founders – despite the intense pressure in some situations that could have led us extrapolate our mission.

In 2006, it was already clear that fighting the abuses against minority shareholders would be a sine qua non condition to seek a healthy capital market. The Novo Mercado arose as the right answer to the lack of symmetry as to the power and access to information by decision makers – and, accordingly, the lack of symmetry as to the distribution of the companies’ value. The Novo Mercado was created based on the perception that investors will only take part in the capital market “game” if they know their rights will be respected.

This perception has reinforced the need of ensuring that these investors are actively heard – especially the institutional investors, who have a professional structure, scale and the fiduciary duty of acting according to their clients’ interests. But creating an association of activist investors was not enough as, because of its characteristics, it would always be a niche entity. By the way, this option had already been attempted and failed. It was important to make the voice of large investors – the mainstream ones – heard.

It was based on such vision that Amec’s founders gathered through the Anbid leadership – at that time headed by Alfredo Setúbal – to create a very representative association. The idea was to bring independent managers and financial institutions together – further expanded to include foreign investors and pension funds. And then Amec – the Association of Capital Market Investors – was created.

The association’s structuring process was led by Edison Garcia, former Superintendent of CVM – the Brazilian Securities and Exchange Commission. Edison combined the sensibility and the minority shareholders’ agenda with the discipline gained as a public officer, what would prove to be of utmost importance for the creation of Amec’s pillars. Five years later, he became the CEO of the association.

The first CEO chosen was Luiz Fernando Figueiredo, former director of the Central Bank, a fact that provided Amec with high credibility before the market and regulators. He was responsible for raising the first flags and beat the significant prejudice against our association. His successor was Walter Mendes who, besides highly experienced in the variable income market, was a sign of the strong commitment of large banks to Amec’s efforts as, at that time, he was Itaú’s variable income manager.

These 10 years are the symbol of Amec’s maturity. The consolidation of a correct and necessary project that is translated into the disproportional impact Amec has on the debate, considering its limited size and budget. We do more with less – and we do it right.

Our history can be divided into three major stages. In the first one, Amec was primarily focused on specific abuse of power cases in voting processes. The problems in Telemar, Arcelor, Brasil Telecom, Trafo, Cosan, Rhodia-Ster, Petrobras, Ipiranga, and UOL showed that the then unpunished transactions started to be strongly criticized based on informed opinions of a truly independent association – always from a systemic view about how the precedents of these cases would impact the market in general terms. Corporate restructuring processes and problems with appraisal reports were major concerns in the mentioned cases and, accordingly, subject to fierce debates and opinions expressed by Amec.

The second stage shows a more institutional work conducted by Amec. The association started to closely collaborate with regulators and self-regulators in the development of a healthier market. It was when the debate about the takeover panel, which led to the creation of CAF – the Brazilian Takeover Panel – started. The reform of Novo Mercado, in 2010, was strongly supported by the association. Additionally, the association started to play a more evident and critical role in the materialization of many of the shareholders’ rights established by the law, but which application was difficult or impossible. We are talking mainly about the proxy voting process and the election of independent board members. Although such right was set forth by the Brazilian law – further enhanced with the Law 10,303 in 2001 – the difficulties and hurdles affecting its efficiency were often unfeasible to be overcome. Amec’s engagement to this agenda has given rise to significant changes to the international voting processes of Brazilian companies, regulatory changes and, more directly, changes to the Ruling of the Office of the Superintendent of Companies of CVM and the issue of the Instruction #561, which deals with the distance voting process.

The third stage has just started, simultaneous to the celebration of our 10th anniversary. Amec has begun to influence its own representatives by focusing on the exercising of their fiduciary duties. In 2015, the association introduced corporate governance courses for investors in partnership with IBGC – the Brazilian Institute of Corporate Governance. Also, we are launching the Amec Stewardship Code, which brings the best international practices in this sphere to our country with the stewardship concept.

We are experiencing a time when investors are recognizing their role in the building of a healthier capital market, better companies and better served clients.

We will be facing countless challenges over the next 10 years. The crisis we are experiencing has exposed the ulcers of the greed, the short-termism, the pragmatism at the expense of the principles and of the disrespect for shareholders’ rights. Amec’s agenda proves to be more urgent than ever, and our mission is to continue to fight for it, with a determined and balanced posture, until we are able to say that, in Brazil, those who buy 1% of a company do have 1% of its real economic value.