A Compromise Solution

Oct 1, 2001

After four years of debate, Brazil's Congress finally approved a minority investor rights law that seeks to balance the interests of all shareholders in publicly traded companies.

To the surprise of almost everyone, the Brazilian Senate approved in September long-delayed legislation strengthening minority investor rights and increasing the powers of the country's toothless securities regulator. The law consumed four years of often furious debate and investors believe it signals a fundamental change in Brazil's capital markets. The bosses of Brazil's major companies, who had benefited from the previous arrangement, are less happy. They claim the law gives investors a free ride, particularly holders of non-voting stock who gain board representation with the new law. The law is a compromise solution that ended years of argument between corporate Brazil and investors over how to accommodate the rights and interests of all shareholders. Although most people say they expect the new law will deal with some of the obstacles blocking development of the local equity markets, like most compromises, the legislation does not satisfy everyone. ...

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