Virtue is its Own Reward

Sep 1, 2004

Brazilian companies have realized that short-changing their shareholders can be counter-productive. Investors, market regulators and companies are beginning to stamp out abuse.

Tagging along for corporate governance.

You don't have to look far for signs of shoddy practice in Brazil's capital markets. The latest blip on analysts' radar screens is a proposed rights offering by Net Serviços, the troubled cable TV operator controlled by Organizações Globo. Telmex, the Mexican telecoms giant, recently bought 34% of Net's voting stock for $130 million.

No date has been set for the offer, under which owners of voting, or ordinary shares (ONs), would be able to buy new shares at a discount to the price offered to owners of preferred, non-voting shares (PNs). If the issue does indeed go ahead, it is likely to precede a change of control. Current legislation prevents foreigners from owning more than 49% of the voting stock of Brazilian cable operators, but a bill in the Senate would relax this limit. Were a change in...

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