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  • El 70% de los fondos de capital privado que operan en la región no invierte en compañías que no se comprometan con Gobierno Corporativo. Lo que más le preocupa a un inversionista que entra a una empresa familiar es el profesionalismo del equipo directivo y que su nombramiento obedezca a razones familiares (83%). El 75% de los fondos encuestados indicó que la mejor estrategia de salida es vender la participación a un inversionista estratégico. El 94% de los fondos considera fundamental contar con representación propia en el Directorio. En materia de regulación legal, un 79% de los encuestados considera que debe darse un esfuerzo para promover los sistemas de aplicabilidad de la ley y los acuerdos corporativos (enforcement); y otro 70% considera además que los gobiernos deben propender por otorgar mayor estabilidad jurídica y tributaria.
  • El 70% de los fondos de capital privado que operan en la región no invierte en compañías que no se comprometan con Gobierno Corporativo. Lo que más le preocupa a un inversionista que entra a una empresa familiar es el profesionalismo del equipo directivo y que su nombramiento obedezca a razones familiares (83%). El 75% de los fondos encuestados indicó que la mejor estrategia de salida es vender la participación a un inversionista estratégico. El 94% de los fondos considera fundamental contar con representación propia en el Directorio. En materia de regulación legal, un 79% de los encuestados considera que debe darse un esfuerzo para promover los sistemas de aplicabilidad de la ley y los acuerdos corporativos (enforcement); y otro 70% considera además que los gobiernos deben propender por otorgar mayor estabilidad jurídica y tributaria.
  • El 70% de los fondos de capital privado que operan en la región no invierte en compañías que no se comprometan con Gobierno Corporativo. Lo que más le preocupa a un inversionista que entra a una empresa familiar es el profesionalismo del equipo directivo y que su nombramiento obedezca a razones familiares (83%). El 75% de los fondos encuestados indicó que la mejor estrategia de salida es vender la participación a un inversionista estratégico. El 94% de los fondos considera fundamental contar con representación propia en el Directorio. En materia de regulación legal, un 79% de los encuestados considera que debe darse un esfuerzo para promover los sistemas de aplicabilidad de la ley y los acuerdos corporativos (enforcement); y otro 70% considera además que los gobiernos deben propender por otorgar mayor estabilidad jurídica y tributaria.
  • The private sector in Latin America is dominated by private, family-owned businesses, which often lack the basic elements of financial transparency, appropriate ownership structures or a board of directors. These are the businesses that make up the landscape of target companies for private equity and venture capital firms, and for many managers, improving corporate governance is a major theme in their investment strategies -- not out of good will, but because it is the key to generating long-term value. As part of its core mandate to support best practices and standards, and in response to expressed demand from Latin American fund managers, LAVCA has developed a Corporate Governance Toolkit for Family-Owned Businesses. The purpose of this web-based, interactive tool is to support business owners and fund managers in assessing weaknesses and charting a path for improvements. The LAVCA Toolkit was created by a team of Latin American corporate governance experts from Colombia, Mexico, Brazil, Chile, Argentina and Peru, with detail reflecting the specific environments in each one of these countries. Funding and technical input were provided by Corporación Andina de Fomento and the Latin American Coordinating Committee of Deloitte, PwC, Ernst & Young, KPMG, BDO International and Grant Thornton. The LAVCA Toolkit will be piloted at a series of technical seminars with fund managers and business owners throughout Latin America in 2009. It is currently available in Spanish language and will be translated into Portuguese and English.
  • El 92% de los fondos encuestados plantea la necesidad que la empresa donde invierten cuente con auditor externo. El 73% de los encuestados considera que es un riesgo de importancia la calidad de información que provea la compañía.
  • Operacionales Estratégicos Gobernabilidad Fuerza de trabajo Transaccionales Propiedad Reputacionales Cadena de suministros Tecnológicos Privacidad y protección de datos Protección a la Propiedad Intelectual Políticos Mercado y competencia De cumplimiento (compliance) Legales Regulatorios Estándares de conducta de negociación Fraude Financieros Mercado Liquidez y crédito Contaduría Reporte financiero Estructura de Capital Moneda o tesoro Impuestos Precios Crédito comercial
  • Investor Ownership structures, minority/majority rights, controls Entrepreneur / Business Owner Importance of governance as a way of creating value Conflicts of interest Succession planning, family issues Board Member Role and responsibilities, selection process Compensation and evaluation models
  • Theory & Context Theoretical content related to the topic discussed (ownership, board, etc.) Most of this content has already been developed, but some editing / adaptation is required The site will also allow for multimedia content (video, audio, ppt presentations, etc.) Evaluation Tools Assessments, quizzes, checklists, surveys Most of this content has already been developed, but some editing / adaptation is required The system will incorporate data-gathering functionality, creating a rich database on CG in privately owned businesses in Latin America Case Studies and Templates Templates for Board evaluation/selection, etc. Case studies focusing on specific topics This content is partially developed but needs significant adaptation Workshop Activities Interactive exercises (i.e., role-playing) that can be downloaded and used at workshop meetings These activities need to be documented, although several of them have been already developed and used in past workshops run by LAVCA External Resources Links to other CG websites “ solutions” providers of specific CG-related topics (also highlighting sponsors)
  • My CG locker The “my CG locker” acts like a personal space, where users can save any content items for future reading, printing, sharing, etc. It also acts as the “user profile”, where they can edit their user type(s) (investor, entrepreneur, board member, etc.) Save | Share | Print This button is similar to the typical social media sharing tools It allows users to act on specific content items by saving to their CG locker, sharing (forwarding link through ShareThis for example) and printing (generate a .pdf version) Rate article By letting users rate articles, we can later add a functionality like “Other similar profiles recommend:” Comment article Allows users to leave comments Admin module to edit / delete comments Benchmarking Some of the Assessment/Evaluation tools will show, as part of the output or results view, a comparisson between the user’s response and other users responses. The system will allow for admin configuration on exactly which group to compare with (by profile type, country, industry, etc.)

Transcript

  • 1. Corporate Governance: A tool to unlock enterprise value at private firms Presented by Cate Ambrose President and Executive Director Latin American Venture Capital Association September 2009
  • 2. Agenda
    • Why is Corporate Governance relevant for Private Equity and Venture Capital fund managers?
    • Why is LAVCA promoting a Corporate Governance Toolkit?
    • What are the key elements of Corporate Governance that can unlock value in privately held companies and how?
    • What is the LAVCA Corporate Governance Toolkit?
  • 3. Results of 2008 fund manager opinion survey Source: 2008 Investor Opinion Survey for Private Capital Fund Managers
  • 4. Almost all surveyed fund managers stated that Corporate Governance is as great a factor to decide an investment as the target company’s financial position Fund Managers prioritize CG in their investment decisions Yet, we don’t see a stampede of business owners calling for help with implementing Corporate Governance frameworks! Source: 2008 Investor Opinion Survey for Private Capital Fund Managers
  • 5. Why private business owners don’t care about CG? 1. Corporate Governance is only relevant to large, public corporations dealing with corruption cases 2. I don’t see the point of having controls, a board, etc. when my partner and I have been running the company for years without them 3. I don’t want to spend limited company resources in the systems and processes needed to implement Corporate Governance 4. I already have a board in place and know all about my company’s financial status, so why care? 5. What is Corporate Governance, anyway?
  • 6. Why is Corporate Governance Relevant to LAVCA? Highly relevant issue for fund managers
    • Private sector dominated by small and family-owned businesses, often lacking basic elements of financial transparency, appropriate ownership and board of directors
    • Improving corporate governance is a major theme within investment strategies -- not out of good will, but because it is the key to generating long-term value
    Unmet demand within our mandate
    • Core mandate to support best practices and standards
    • Strong expressed demand from Latin American fund managers
    Platform for future growth
    • Toolkit as a platform for education on the subject, but also to learn more about the issues that concern most to our region
    • System is being conceived from the beginning as a two-way dialogue between the users and LAVCA, to generate new data, reports and learning materials
  • 7.
    • Ownership
      • Agency conflicts; ownership structures; stockholders rights; minority rights; incentive investment horizons and disalignments between types of owners
    • Controls
      • Control levels, relationship between internal controls and CG, role of internal / external auditors, risk mitigation tools
    • Board of Directors
      • Role and responsibilities of a good BOD; key decisions; how to select the right BOD (profile of members, selection, compensation, evaluation)
    • Conflicts of Interest
      • Examples (and implications to the companies) of conflicts of interest around provider/owner, board voting and other key relationships within the CG scope (including the issues raised by family-owned businesses)
    • Risk Management
      • Evolution and stages of company growth and key risk management tools; succession planning for leadership; employment policies for family-owned businesses
    AREAS OF CORPORATE GOVERNANCE THAT CAN ADD VALUE TO PRIVATE BUSINESSES
  • 8. Ownership Structure and Conflicts of Interest Level of involvemnent and interest Time horizon for investment Family Uninvolved stockholders Active Stockholders Board of Directors Employees Daily / Quarterly Less than 5 years 5 to10 years 10 to20 years More than 20 years Open market investors Venture Capital Private Equity Pension Funds
  • 9. Internal and External Controls Source: 2008 Investor Opinion Survey for Private Capital Fund Managers
  • 10. Board of Directors: Not all boards are created equal…
    • Key Questions
    • Who shoud be in? (Selection)
    • How can they be kept engaged? (Compensation)
    • How can they ensure value-addition?(Evaluatin)
    • How can they be more efficient as a team? (team work dynamics, tools, processes)
    EL CONTEXTO EMOCIONAL DE UN DIRECTORIO
        • Level of Knowledge
        • High
        • Low
        • High
        • Low
        • Level of Committment
    Based on: Thin on top, Bob Garratt REPRESENTATIVE Very-well regarded, VIP-like, but very limited time available PROFESSIONAL Committed and knowledgeable PASSIVE They don’t get it… and don’t WANT to get it! COUNTRY CLUB Lots and lots of goodwill..!!
  • 11. Conflicts of Interest
  • 12. Risk Management and Family Businesses
    • Succession planning
    • Family-member employement policies
    • Family and business relationship and conflicts of interest
    You never actually own a Patek Philippe. You merely take care of it for the next generation.
  • 13. Founder(s)
    • Leadership transition
    • Succession planning
    • Estate planning
    Society of brothers
    • How to keep team together and harmonious
    • Sustainability of family property
    • Succession planning / competition
    Cousin “confederation”
    • Assignment of ownership: dividend policy, debt, earnings levels
    • Stockholder liquidity needs
    • Conflict resolution within family
    • Role and level of involvement of family patriarchs
    • Vision and mision of family patriarchs
    2 nd generation 3 rd generation CORPORATE GOVERNANCE CHALLENGES THROUGHOUT THE FAMILY BUSINESS CYCLE John Ward, Creating Effective Boards for Private Enterprises (Family Enterprise Publishers, 1991).
  • 14. LAVCA CORPORATE GOVERNANCE TOOLKIT
  • 15. LAVCA Corporate Governance Toolkit v1.0
  • 16. Features of the current version of the Toolkit
    • Content
    • Tools, templates
    • External links
    • Resources
    • Checklists
  • 17. Pilot results and initial user feedback
    • The tool would be most useful if adapted to complement an educational or training environment
    • Users like to share their own experiences with the rest, and they mentioned that the interactivity provided by questionnaires is good, but they also expected some “feedback” coming from the system
    • With minimum push from our side, we observed increased interest for the topic and our Toolkit/Training products
    • We continue to receive requests for training from potential partners, including Endeavor, who is interested in using the toolkit as part of a larger training program for their entrepreneurs throughout Latin America
    • Based on the user feedback, LAVCA believes that the Toolkit platform could be enhanced by adding interactive features, a new navigation structure and the ability to collect and compare user data
    Educational support Distribution requests Further opportunities
  • 18. Corporate Governance Toolkit About Resources Contact us My CG locker MAIN TOPICS ABOUT RESOURCES CONTACT US MY CG LOCKER Ownership Controls Conflicts of Interest Risk Management Board Special Cases This Toolkit LAVCA How to / Tutorials External Links CG Primer CG Stats Free Publications Feedback? Saved Items Shared Items Edit my profile Signed as: amuslera | Log off ? New? Register here  Sign in  User Pass OR Register Why you should register? Corporate Governance means different things to different people. The more we know about you, the more valuable the information and tools we can provide. If you want to learn more about what kind of content you will find in this toolkit, please check this short demo Developed by Sponsored by Go CORPORATE GOVERNANCE TOOLKIT Sample screen mockup
  • 19. Corporate Governance Toolkit About Resources Contact us THEORY & CONTEXT Content Item #1 Content Item #2 Content Item #3 EVALUATION TOOLS Content Item #1 Content Item #2 Content Item #3 EXTERNAL RESOURCES Content Item #1 Content Item #2 Content Item #3 WORKSHOP ACTIVITIES Content Item #1 Content Item #2 CASE STUDIES & TEMPLATES Content Item #1 Content Item #2 My CG locker OWNERSHIP CONTROLS RISK MANAGEMENT BOARD SPECIAL CASES CONFLICTS OF INTEREST Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print Save | Share | Print MAIN TOPICS ABOUT RESOURCES CONTACT US MY CG LOCKER Ownership Controls Conflicts of Interest Risk Management Board Special Cases This Toolkit LAVCA How to / Tutorials External Links CG Primer CG Stats Free Publications Feedback? Saved Items Shared Items Edit my profile Signed as: amuslera | Log off ?
    • My CG Locker:
    • Items saved: #xx
    • Items shared: #xx
    Go Sample screen mockup
  • 20. Corporate Governance Toolkit About Resources Contact us My CG locker OWNERSHIP CONTROLS RISK MANAGEMENT BOARD SPECIAL CASES CONFLICTS OF INTEREST
    • My CG Locker:
    • Items saved: #xx
    • Items shared: #xx
    Go MAIN TOPICS ABOUT RESOURCES CONTACT US MY CG LOCKER Ownership Controls Conflicts of Interest Risk Management Board Special Cases This Toolkit LAVCA How to / Tutorials External Links CG Primer CG Stats Free Publications Feedback? Saved Items Shared Items Edit my profile Signed as: amuslera | Log off ? Home > Ownership > Content Item #XX
    • Continue reading
    • Content Item #XX
    • Content Item #XX
    • Tools & Other resources
    • Content Item #XX
    • Content Item #XX
    • Content Item #XX
    • Content Item #XX
    Content Item #XX Title Los temas de propiedadresultanfundamentales en todaslasdiscusiones de gobernabilidadempresarial. Son lasdefiniciones a nivelaccionarial el elementocaracterísticoydiferenciador de GobiernoCorporativo. Para empresascerradasyfamiliares los elementos de propiedadincluyenlasdisposicionesbásicas del funcionamiento de lasasambleas de accionistas, los mecanismosprovistospara un tratoequitativo de todos los accionistas, asícomodisposicionessobreeventualesconflictos de interésque se generan en el planoaccionarial. En estasecciónhablaremos de los derechosbásicospara la protección de accionistas, los elementosfundamentales de lasasambleas de accionistascomoescenario natural de participación de los dueños de la empresa, lasdisposicionesclásicaspara la protección de los intereses de accionistasminoritariosylasnormasgeneralespara la administración de conflictos de interés a nivelaccionarial. Save | Share | Print Sample screen mockup
  • 21. Distribution Model and System Structure System Network B Network A LAVCA PARTNER A
    • Regardless of where the site sits, the DB will be centralized at LAVCA
    • All usage information will be captured and consolidated by LAVCA
    • LAVCA keeps rights of use to create and distribute reports based on aggregate data
    • Ability to manage Partners and End users directly
    • Access to all system data
    • Ability to manage own profile
    • Share data within their network(s)
    • Benchmark within their network(s); limited benchmarking with whole system
    PARTNER B PARTNER N END USER N END USER 2 END USER 1 END USER N END USER 2 END USER 1 END USER N END USER 2 END USER 1 … .
    • Ability to manage a sub-set of end users
    • Full visibility to their own network
    • Limited benchmarking with whole system
  • 22.