Amec Warns about the Risks of Adopting Majority Voting in Brazil

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After recent proposals of changes in Vale’s bylaws, Amec issued a statement to warn the market about the risk of adopting “majority voting” in the election of new board members. The statement was released on Wednesday, February 24, on the Association’s website (read the full version).

To better understand the proposal, we have consulted local and international investors, company board members, proxy voting agencies, and lawyers in and outside Brazil. “There is no unanimous opinion about it, nor an easy answer to whether the power balance between interested parties would be maintained in case majority voting is adopted,” the statement says.

Although it exists in other countries, particularly in the US, there is no reference to its use in Brazil as the company is currently proposing it. During the debates, Amec’s members and experts highlighted that some questions remain unanswered, such as the consequences of adopting this instrument in Brazil and how it would affect companies that are neither well-prepared for it nor face the same public scrutiny as Vale. “Using it inadvertently could make the election of minority shareholders’ nominees unlikely,” reads the statement.


By becoming a corporation, Vale ended its long-lasting shareholders’ agreement, having now reference shareholders instead of controlling ones, in an innovative move towards the future. “We cannot ignore, however, the characteristics of the country when importing majority voting. Brazil is globally known for having a large share of companies with a controlling shareholder, and the lack of local enforcement instruments makes it hard to prevent possible abuses,” Amec warns.

The document explains that the absence of a controlling shareholder in a corporation does not change the fact that reference shareholders still keep very relevant positions. The reality is quite different in countries such as the US, where capital is much less concentrated. One of Amec’s biggest concerns is that minority shareholders’ nominees could have their names vetoed. “It is important to remember that only reference shareholders can decide on a vote, which can veto the election of minority shareholders’ nominees,” advises the Association.

The need for a comprehensive debate

Amec’s statement declares how important it is to further debate the issue. “Given the importance of Vale in the Brazilian context, it would make a lot more sense if the company or even the stock exchange itself promoted an in-depth discussion over the matter,” it says.

The Board’s meeting minutes, where the use of the instrument was approved, imply that not even the attendees have had the chance to understand the instrument thoroughly. Besides that, Amec sustains that shareholders could have been offered more time in the extraordinary general meeting to debate the “negative voting” proposal when compared to the other topics that admittedly bring advances to the mining company’s governance.