Appeallate Court reestablishes the mandatory disclosure of executive compensation

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The legal battle between the Brazilian Securities and Exchange Commission – CVM – and the Brazilian Institute of Financial Executives – Ibef – has come to an end. On May 23, the Regional Federal Appellate Court of the 2nd region (TRF 2) unanimously reversed the lower court decision that for eight year has protected the companies that did not disclose correctly the compensation paid to their executives. Amec participated in the aforementioned process as amicus curiae.
Amec reinforced that, by establishing that listed companies shall disclose the maximum, average and minimum compensation paid to their executives, the Instruction 480 does not violate the privacy or confidentiality of financial data. On the contrary, the reporting of financial data to the market is an obligation assumed by any company that raises public funds, as set forth in the Corporate Law. In Amec’s opinion, it is crucial that investors are informed of the minimum, average and maximum compensation to be able to evaluate how companies financially encourage their executives and to identify potential distortions – an unfeasible task when one only has access to global compensation values. APIMEC – the Association of Investment Analysts and Professionals of the Capital Market – and the CFA Society worked together with Amec as amicus curiae, represented by the attorneys Walter Albertoni, Eduardo Boccuzzi and Renato Vetere.
According to the notice published by the CVM, three judges voted in favor and none against, the action had the favorable support of the Federal Public Prosecutor’s Office and all arguments were accepted. “It was also taken into consideration that, when a company opts to be listed to perform any corporate activity, it must comply with the legislation and with all related regulations, especially focused on a more transparent disclosure system, considering the interests of investors at large. With regard to the violence issue also brought by Ibef, the Court understood that this is a concern that affects all Brazilians and that, based on the experience related to the disclosure of civil servants’ compensation data, no increase in the risks facing these professionals has been noticed,” the regulator said.