2024 saw a continued trend of improving disclosure in the Latin American region. Although not a significant concern in Brazil, investors in the other Latin American markets have historically faced a challenging landscape due to the lack of timely disclosure of board nominees prior to shareholder meetings. However, in recent years, we have seen steady and sustained improvements, and 2024 continued this trend as approximately 47 percent of companies in the Spanish-speaking markets that held full board elections published the names of their proposed director nominees in a timely manner this year, a notable increase over the 41.8 percent that did so in 2023.
Source: ISS Governance Research & Voting
Also worth mentioning is that for the first time, Mexico, the second largest market in the region, saw more than 50 percent of the companies covered by ISS providing timely disclosure this year.
Meanwhile, meeting concentration in the region continues to worsen. Overall, during the 2024 proxy season through April 30, ISS covered 845 meetings, which was largely unchanged over last year.
However, the proxy season continues to become concentrated, illustrated by the two largest markets. During the 2024 proxy season, approximately 66 percent of all Brazilian meetings took place during the final four business days of April, up slightly from 65 percent in 2023. And in Mexico, 53 percent of meetings took place in these same final four business days in April, a significant increase over the 44 percent of meetings seen in Mexico for the same period in 2023. The ongoing trend of increasing meeting concentration is a concern for investors as it forces them to review, analyze, and vote in a higher number of meetings during a very short window towards the end of April.
Director Remuneration Policy in Latin America
2024 was the first year of the full implementation of ISS Benchmark’s new director remuneration policy.
The updated policy, which became effective as of February this year states that companies that report paying more to their non-executive board chair than to their CEO will generally receive an against vote recommendation for their annual binding say-on-pay resolution, unless a compelling rationale is provided.
Source: ISS Governance Research & Voting
In 2024, 15 Brazilian companies that fell into this scenario were identified and only one of them, retail company Lojas Renner, which is going through a succession process, provided a compelling rationale for its pay structure.
While this problematic pay structure is not a widespread practice in Brazil, it is nonetheless concerning as these highly compensated non-executive board chairs are oftentimes the controlling shareholders and/or the companies’ founders.
High-Profile Latin American Meetings
Probably the most high-profile meeting this proxy season was that of Petrobras, the Brazilian state-run oil company, which held its AGM on April 25. Once again, the company had a contentious board election, with 14 nominees presented for 11 board seats; minority shareholders presented five candidates and were able to elect four independent directors. The remaining seats were elected by the company’s controlling shareholder, the Brazilian federal government.
Aside from the high number of candidates, another contentious issue regarding the election of directors was the eligibility of certain management nominees. Four of the eight candidates nominated by the controlling shareholder were political appointees in the government and another served in the national directory of a political party; all five were elected.
On May 15, 2024, shortly after the contested election, Petrobras’ board announced the “negotiated early termination” of the company’s CEO and board member Jean Paul Prates, as Brazilian president Luiz Inacio Lula da Silva sought to appoint new CEO Magda Chambriard. The changes in the administration continue to illustrate the concerns with the governance of state-owned enterprises in Brazil.
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By: John Reidy, Ana Luiza Farias
