Question: Evaluate corporate governanc
comentada em 07/03/2020 17:01

Don't worry too much about governance. This kind of fined-grain analysis is of little relevance in a sufficiently diversified portfolio and, as you said, there's an abundance of "good" stocks for one to pick from. So, given the benefits of diversification, there's no good reason anyone shouldn't invest in as many stocks as she sees fit.

Companies with consistent good results (and by that i mean 15 or more years) but are a time-bomb because of bad governance are so far and few that shouldn't be a major concern in a diversified portfolio. How often that happens, anyway?

You do not need to stipulate a maximum number of companies to be part of your portfolio. By choosing as many good companies as possible, you will have great diversification and make governance analysis less important.

If the portfolio is well diversified, with good companies, probably few companies will present governance problems. In investments, we work with probabilities and not with certainties.

That's a good question, but I still don't have clear answers or time to do a proper research. All I know is the brazillian regulation about this theme is inspired in american regulation, specially the Sox law, made after a problem of non-trustful sheets from companies. The article below tells a bit of the story

Histórico da Governança Corporativa nos Estados Unidos da América

 

This texts from Investor's relationship of a company says  the american regulation is more strict and rigid with a few examples (saying "here in Brazil we don't have to do all this stuff law tells us to do in the US, so our corporate governance is not the same in both countries")

Práticas de Governança NYSE e Brasil | Fibria RI

http://ri.ambev.com.br/conteudo_pt.asp?idioma=0&conta=28&tipo=43354

 

Comparing CG around the world (Volunteer models vs. regulated models, Volunteer disclosure in Brazil (and of brazillian companies in NYSE))
(PDF) Corporate Governance Rules in Six Stock Exchanges: A Comparative Study

https://mpra.ub.uni-muenchen.de/2225/1/MPRA_paper_2225.pdf
http://www.anpad.org.br/diversos/down_zips/58/CON1183.pdf

NÍVEL DE DISCLOSURE: ANÁLISE DAS EMPRESAS BRASILEIRAS LISTADAS NA NEW YORK STOCK EXCHANGE | Guia | Contabilometria


Of course, we know, law is not all, most of the corporate governance criteria we have here to brazillian stocks exclude companies that are not violating corporate governance laws, but still do not have the best practices. I could not read the papers below, but seems like they apporach the volunteer practices. It would be nice to share the articles, maybe some of us can read, summarize, sum up and post conclusions here

 

United States Corporate Governance – Getting The Deal Through – GTDT

Determining Factors of the Level of Disclosure of Information on Business Combinations with the Entry into Force of the Accounting Standard CPC 15

Determining Factors of the Level of Disclosure of Information on Business Combinations with the Entry into Force of the Accounting Standard CPC 15
https://www.virtusinterpress.org/IMG/pdf/Maha_Khemakhem_Jardak_Hamadi_Matoussi_paper.pdf
Disclosure quality and stock returns in the UK
| Emerald Insight
 
Now, like the others said, diversification in good/profitable companies will help

Good Governance is not a guarantee (nothing is)

Does Good Governance Make Great Stocks?
 

"(...) The most convenient assessment of a company's corporate governance quality is probably obtained via the Corporate Governance Quotient (CGQ) data from Institutional Shareholder Services, a RiskMetrics Group subsidiary. Those subscriptions aren't free, but you can get some information on Yahoo! Finance and other free news sources. Also, ISS makes its top 10 governance quotient rankings for several indexes available online.




But the ratings don't always make much intuitive sense. For instance, General Motors is currently ranked second in the Russell 3000, despite its trip into bankruptcy protection. ISS also gave Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) low marks for its lack of board independence and once campaigned for Coca-Cola's (NYSE:KO) removal of Warren Buffett from its board.

So, good governance obviously doesn't guarantee success, and success doesn't guarantee a good governance rating. Furthermore, great companies sometimes won't fit the ISS mold. The metric clearly has some validity, though, and while you'll need more than the CGQ data to make an intelligent investment decision, owning shares of healthy companies with strong shareholder protections has clear advantages. Institutional investors and the corporations themselves listen to the ratings agencies, so it won't hurt you to do the same".

Does Good Governance Make Great Stocks? | The Motley Fool

 

Saving this article 4 later when I will use a pc that allows me to acess paid pdf Disclosure requirements and stock exchange listing choice in an international context - ScienceDirect

There are so many great companies, ancient ones in fact, that I truly believe that you don’t have to worry about it.

Actually, my designed portfolio abroad has almost 90 stocks and 20 REITs.

I will be probably dead before I get to buy all of them.

tks all! I will consider what you said in my studies and after that, start my journey in this big market