Creating shared value and modern corporate governance

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By João Paulo Mateus – Compliance Director, EDP Brasil

 

 

 

EDP Brasil’s strategic planning focusses on creating shared value. The company seeks to sustain a high standard of corporate governance and sustainability to ensure creation of shareholder value, involving the control of market, financial and regulatory risks. Consequently, the company depends on the support of management systems aligned to strategy, as well as improved internal and external communication processes.

To that end, EDP Brasil’s governance model follows the best market practices with strict transparency rules. It adopts several recommendations from the Brazilian Institute of Corporate Governance (IBGC) and undertakes the necessary commitments to integrate the Novo Mercado da Bolsa de Valores de São Paulo (BM&FBovespa – New Market of the São Paulo Stock Exchange), that ensure a fair and equal treatment to shareholders, associates, customers and suppliers.

According to the company’s bylaw, the EDP Brasil corporate governance structure is comprised of the board of directors, executive board and consulting committees within the board of directors and a general meeting of shareholders. All members of the board of directors and the general and supervisory board sign a statement of consent for the Novo Mercado listing regulation.

The board of directors

The highest governance level of the company, the board of directors is responsible for setting, reviewing and approving general business policies and guidelines, including risk aspects and defining the long-term strategy. It is also responsible for electing members of the executive board and monitoring their work, as well as supervising EDP Brasil’s performance and management.

The members are elected at the general meeting for one year of office and re-election is permitted. In December 2016, EDP Brasil board of directors was comprised of seven members, four of them nominated by the controlling shareholder and three independent members. Annually, the members of the board of directors perform a self-evaluation and an evaluation of EDP Brasil’s executive board, prepared through individual and confidential questionnaires that include financial, social and environmental aspects.

EDP Brasil’s board of directors holds ordinary meetings every quarter. Extraordinary meetings may be convened whenever necessary by the chairman, the vice chairman or any of its two members jointly, upon written notification delivered five days prior to the meeting. In 2016, the board of directors met 16 times.

“EDP Brasil adopts a series of strict internal control measures to mitigate risks of corruption, bribery, money laundering, insider trading, price fixing, child labour, slavery or forced labour, among others, in 100 per cent of the company’s operations”

Comprised of up to five members, elected by the board of directors, the executive board takes the following positions: chief executive officer and investor relations officer; vice chief financial officer; vice chief of generation and sales officer; vice chief of grids officer; and vice chief of strategy and business development officer.

The executive board

Responsible for all topics related to the business administration, except those which the law or the bylaw assign to the general meeting or the board of directors, the executive board monitors the operational demands of business units. In weekly meetings, the executive board assesses the company’s economic, environmental and social development. The executive board is also responsible for the approval of the annual sustainability report

Consulting committees

EDP Brasil also has four consulting committees to the board of directors, whose members are the directors themselves (audit committee, sustainability committee, corporate governance and related parties committee, and remuneration committee). Among the four committees, independent board members lead the audit and the corporate governance and related parties. The audit committee meets quarterly and the others hold at least one meeting a year.

Risk management

EDP Brasil has a corporate rule that has guided its risk management strategy since 2006. This rule is managed by the internal audit and compliance board, which directly depends on the company’s presidency and is responsible for identifying, monitoring and assessing risks and mitigating activities (action plans).

In 2016, the board’s challenge was to change the internal public’s view regarding compliance, making sure that it went beyond respecting rules, regulations and laws – an area worked under a risk management viewpoint, an essential philosophy to business continuity. To this end, one of the initiatives was to revitalise the risk committee comprised of members from the EDP Brasil executive board. The committee meets every quarter.

Developed internally, according to the market best practices, EDP Brasil risk methodology is based on recognised structures and standards, such as COSO (Committee of Sponsoring Organizations to the Treadway Commission), enterprise risk management (ERM) and ISO 31000 (risk management).

EDP Brasil adopts a series of strict internal control measures to mitigate risks of corruption, bribery, money laundering, insider trading, price fixing, child labour, slavery or forced labour, among others, in 100 per cent of the company’s operations. In 2016, a new compliance assurance process was implemented in relation to third-party agreements.

Code of ethics

The code of ethics sets ethical principles and boundaries that govern all EDP Brasil practices and businesses in all regions where it operates, respecting the legislation in force as well as the commitments undertaken to stakeholders (associates, customers, shareholders, suppliers, community and government). The goals are to ensure a high level of individual ethical awareness, minimise the risk of corporate unethical practices and keep a corporate culture based on values, such as transparency, trust in relationships and accountability for decisions. Among its principles are compliance with legislations, integrity when handling financial matters, fight against corruption, bribery and conflicts of interests, proper use of information and assets, respect for human and labour rights, transparency and corporate social and environmental responsibility.

Attached to the agreements signed by all suppliers and service providers is a printed copy of the code of ethics, which is also given to newly hired associates who undergo a special training on its content during the integration process. Additionally, it is available on the company’s website, which also hosts an ethics channel to receive reports, anonymous or identified, about conducts that violate the code of ethics principles, internal policies and local legislation. Such reports are also accepted by letter, email or telephone.

In 2016, 33 cases were registered on the channel – the same number as registered in 2015. All of them were reviewed by the ethics committee, which determined disciplinary measures for every case always and only when justifiable. This committee was created in 2006. Although it is not a consulting committee from the board of directors, it is an extremely important entity for the company and its chairman is also EDP Brasil’s CEO, working alongside eight members – four of them from the company’s executive board. In monthly meetings, the committee reviews, monitors and decides on ethics issues reported by areas or received through the contact channels available. Every three months, any unethical conducts are reported to EDP Ethics Provider in Portugal, which is the centre for all complaints of such nature in the entire EDP Group. In 2016, no cases of corruption involving EDP Brasil were registered.

 

About the Author:

João Paulo Mateus is the Compliance Director at EDP Brasil. With an 11 years career within the company, he has already worked as Project Manager, Advisor to the CEO, Head Cabinet of the CEO, Head of Corporate Development and Sustainability, Advisor to the Board of Directors, Head of Finance and Management Support and Board Member at EDP Foundation, both in Brazil and Portugal.