Latin American Capital Markets

CORPORATE GOVERNANCE AND CAPITAL MARKET DEVELOPMENT 455Company Responses to Resolution 275Colombian listed companies presented their codes to shareholders at their 2002 annualgeneral meetings, and many have made them publicly available on the company'swebsite, through the media, and directly to pension funds. A number of companiesappear to have opted for technical compliance.These companies view Resolution 275as little more than a box-ticking exercise and recite their existing charter provisionsand practices with appropriate cross reference to the resolution. Investors now havea clearer and more concise statement of the policies and practices of such companies,but the companies themselves have made no dramatic improvements in policiesor practices.Other companies seem to have embraced Resolution 275 as an opportunityto improve their governance practices and, just as importantly, to communicate theircommitment to good governance to current and future investors. In a number ofcases, company management (sometimes with the help of outside consultants) draftedcodes organized more or less along the lines of the OECD Principles, with specificshareholder protections and transparency requirements that went beyond the requirementsof current Colombian law and listing rules. Although the codes that havebeen made available to the public so far exhibit a diversity of style and content, someof them clearly represent a new contract between the company and its investors inkey areas of corporate governance.The code adopted by Inversura, an insurance holding company, is illustrativeof the use of a Resolution 275 code by a Colombian company as a voluntary contractualand privately enforceable mechanism of corporate governance. 25 The Inversuracode is organized largely along the lines of the OECD Principles (with separatechapters for shareholder rights and equitable treatment, the role and organization ofthe board, and stakeholders), with an additional chapter covering ethical treatmentof clients, suppliers, and government officials.In its code, Inversura's management binds the company to a number of importantshareholder protections and board practices. Cumulative voting is authorized,and the company is prohibited from issuing multiple voting or nonvoting equity. Atleast four of the 10 board directors must be independent of management and controllers.Theboard is required to have audit, compensation, and governance commit-25 Inversura is not a public company; it devised its code in anticipation of its eventual entry into the public securitiesmarkets. Its code is certainly among the most shareholder friendly and board professional among Colombian companies,although others have taken similar approaches.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub