Mauro Cunha is one of the top corporate governance voices in Latin America, currently serving as a director of Embraer, AES Brasil, Klabin and Hypera. He has also served on the boards of some of the most important companies in Brazil - including Vale, Petrobras, Eletrobras, among others. He has led two of the leading corporate governance institutions in Brazil - Chairman of IBGC and CEO of AMEC. Under his leadership, AMEC launched the Brazilian Stewardship Code. As a fund manager, he worked for several institutions. In this podcast, we talk about governance in Brazil and his experience on the boards of Petrobras and Vale. We cover the Lava Jato corruption scandal and its backlash, and the greenwashing claims against Vale. We also discuss ESG and its backlash in the US, his board assignment with Embraer, and the new geopolitical landscape with US-China tensions and where Brazil fits in this environment. We finally address board education, the role of independent directors and the question of single-issue directors. If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media. You can also contribute as a Patron on the link patreon.com/BoardroomGovernancePod or you can subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com This podcast is sponsored by the American College of Governance Counsel.
0:00 -- Intro.
1:38-- About this podcast's sponsor: The American College of Governance Counsel.
2:34 -- Start of interview.
3:13 -- Mauro's "origin story."
4:11 -- About AMEC, and his time as CEO of the organization (2012-2017). Prior, he was Chairman of IBGC (2008-2010). "My first mission as CEO of AMEC was to become the first independent director at Petrobras" (which he served from 2013 to 2015).
9:02 -- On the differences between shareholder engagement/activism in the U.S. and Brazil.
10:04 -- The corporate governance changes introduced by Novo Mercado (special listings segment created in Brazil in 2000).
11:39 -- About the Petrobras corruption scandal ("Lava Jato" or "Car Wash"). He was the first independent director in Petrobras (2013) and they elected a second independent director in 2014. "1+1 in that situation equals 4." "The board simply did the Government's bidding." "But it's all gone now, there has been a huge backlash. There is no one in jail anymore." "Just like what happened in Italy with the Clean Hands Operation, there is a political wave of acquittals." "There was a class action settlement in the U.S. for $3.5 billion (2016) and PwC settled for $50 million (2018)."
18:58 -- His joining the board of Vale (2021-2023), post Brumadinho dam disaster (2019). "I was elected to the board as part of an activist campaign, led by Capital Group."
23:28 -- On the SEC's action against Vale for greenwashing (settled in 2023 for $55.9 million). "Vale became a lightning rod and it is a rich company in a poor country and in a poor region of a poor country." "One executive of the company used the expression that was Vale is the peacock in the Favela." "[Vale] gets a lot of attention and focus and sometimes not fairly. It does some amazing things in terms of ESG." "Vale is actually an example that responsible mining is not only essential for the energy transition, but it actually can be good for the environment. But there's a lot of bad press around it."
24:40 -- His take on ESG: "ESG should not be driven by rankings, reports and ratings. It must be driven by owners."
28:50 -- On the ESG backlash. "Part of the problem has to do with the architecture of the institutional investors." "The productive way for investors to ensure that companies are doing the right thing is one-on-one engagements that cannot be done wholesale.
It needs to be done in a more retail way. So this increases the value of specialized asset managers that have a smaller portfolio, that may or may not be called activists."
32:11 -- On joining the board of Embraer. The impact of the Pandemic and 'work from home' in Brazil.
34:55 -- On the evolving geopolitical landscape, China/US tensions and where Brazil stands in this picture.
39:17 -- On the role of independent directors, and evolution in Brazil in the last 20 years:
43:44 -- On the question of single issue directors. "I think it's a big mistake for a number of reasons. First, because it's not enough space for all the issues to be on the boards. The other problem is that if you have a specialist on the board, say in cyber security, every time the issue of cyber security comes up, everybody will look at this guy and say, whatever he or she is telling us to do, you're outsourcing your fiduciary duty, which is terrible."
45:45 -- "Brazil today has very different companies. This means that the governance structure for each one of them has to be different. And we have to understand, it's case by case, and we need to build the governance structures that are adequate to each company." "I think when we think about ESG, we're really talking about E&S, and people are forgetting the G. The G is what gets E&S done. E&S without the G is greenwashing."
47:49 -- Book that has greatly influenced his life: Atlas Shrugged by Ayn Rand (2003)
48:00 -- His mentors, and what he learned from them: André Jacurski and Paulo Guedes (founders of Banco Pactual).
48:33 -- Quotes that he thinks of often or lives his life by: "We didn't come this far just to come this far"
48:50 -- The living person he most admires: Bill Gates.
Mauro Cunha is one of the top corporate governance voices in Latin America, currently serving as a director of Embraer, AES Brasil, Klabin and Hypera. He has also served on the boards of some of the most important companies in Brazil - including Vale, Petrobras, Eletrobras, among others.
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This podcast is sponsored by the American College of Governance Counsel.
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You can follow Evan on social media at:
Twitter: @evanepstein
LinkedIn: https://www.linkedin.com/in/epsteinevan/
Substack: https://evanepstein.substack.com/
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Patreon: patreon.com/BoardroomGovernancePod
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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License