Change in the State-Owned Law reduces the value of companies, say experts

The State-Owned Companies Responsibility Law, enacted in 2016 and amended on Tuesday night (13) at the whim of the Chamber, improved the management of public companies and resulted in more value both for their shareholders and for Brazilian society, according to an evaluation of experts in the field.

A relaxation of the rules that restrict the appointment of politicians to positions on the boards and directors of these companies is an old demand from the Legislature. The theme gained strength this year, uniting allies of President Jair Bolsonaro (PL) and President-elect Luiz Inácio Lula da Silva (PT).

The State-Owned Liability Law (13,303/2016) was sanctioned by President Michel Temer (MDB), in response to a series of investigations that pointed to the political use of companies in previous administrations. The objective was to strengthen the governance of state-owned companies and shield them against political interference.

Danilo Gregório, manager of institutional and governmental relations at the IBGC (Brazilian Institute of Corporate Governance), says that, if the legislation were to be changed, it would be to make it stricter, which would hardly receive the support of parliamentarians.

IBGC surveys show that state-owned companies are increasingly adhering to the provisions of the law, but the lack of supervision and a body responsible for punishing those who do not comply with the legislation still weighs heavily. Gregório says that the application of the rules does not depend only on the state-owned company, but also on the attitudes of the controlling shareholder.

He claims that the purpose of the law is not to prevent the government from exercising its controlling role, but to avoid appointing people who are more interested in party issues than in the quality of the products or services delivered by the state-owned company.

“A well-governed company tends to generate better results for everyone. Not just for the shareholder. Employees will work in better conditions, and users and customers will receive better deliveries as a result of good governance,” he says.

Sylvio Coelho, who coordinated the drafting of legislation in the Senate in 2016, acting in the office of the rapporteur for the matter, Senator Tasso Jereissatti (PSDB-CE), says that the legislation follows the best international practices and OECD recommendations.

He says that there are a series of proposals in the Legislative that seek to reduce the requirements for access to management positions.

“We raised the level of demand to international standards, and Congress approved it. Subsequently, bills were presented in order to drastically reduce these requirements”, says Coelho.

For him, the legislation is still new and it is necessary to give more time for state-owned companies to implement their devices, but it is already possible to see remarkable results in terms of efficiency, effectiveness and effectiveness of the law.

In addition to improving management and company results, he highlights the gain in value. “Just check what happened to Petrobras’ shares in those days. The market reacts due to the possibility of a reduction in the quality of governance.”

Gustavo Cruz, strategist at RB Investimento, also highlights the market’s positive receptivity to the legislation and the negative reaction to attempts to change it.

“The law was important to protect shareholders in recent years. There was excessive political interference in state-owned companies, Petrobras was unable to publish a balance sheet because no external audit wanted to sign it, and this provoked a reaction from Congress”, says the economist.

He claims that the future government seeks to resume some practices and that these attempts to return to the past provoke a reaction from investors. “It may be that there are competent politicians who function as managers of these companies, but we are suspicious.”

In June of this year, members of the centrão defended changing the law to facilitate changes in command at Petrobras.

At the time, the possibility of flexibility had the support of the mayor, Arthur Lira (PP-AL), the leader of the government in the Chamber, Ricardo Barros (PP-PR), and the president of the PT, Gleisi Hoffmann (PR).

An eventual relaxation of the State-Owned Companies Law could jeopardize Brazil’s ambition to join the OECD (Organization for Economic Cooperation and Development).

In a report published at the end of 2020, the group of rich countries recognized that state-owned boards have become more independent of interference due to the State-Owned Companies Act.

The OECD also recommended that Brazil go beyond the achievements already achieved, extending the requirements and prohibitions to all committees of the board of directors and to the fiscal council.