The Brazilian Institute of Corporate Governance (IBGC) analyzed data from 189 companies listed on Brazil’s Bovespa to find out those that best compensate their Boards of Directors (BoD). The data refer to year 2010 (as a few companies have not yet released the numbers for their 2011 fiscal year), and these companies account for 90% of Bovespa’s total market value.
In developed markets (like the US & the UK), nothing has been causing as much outrage as the abysmal difference between the salaries and bonuses distributed to executives of large companies and the real financial situation of these institutions.
Enter Eike Batista’s companies: OGX and MPX…
Eike Batista’s oil company (OGX) has only began to extract oil in January 2012. In 2010, when it was still pre-operational, the company payed a whopping R$5.68 million to each of its directors. Note: the company has pretty much no revenues… hence, it is implied that the outrageous compensation to each of its Directors came either from investors or the Brazilian tax payer (since the company borrows heavily from BNDES and FGTS).
According to Exame magazine, the compensation numbers were so out of line when compared to other companies in the sector that the IBGC excluded this OGX’s data from the sector rank so it does not inflate the overall average for the sector. While oil, gas and biofuel companies in Brazil paid an average of R$ 92,566 to their BoD, OGX distributed 61x more – the biggest difference in the IBGC ranking. State-owned Petrobras, for example, has a lower level of remuneration because of the wage ceiling set by law.
Another Eike Batista company, MPX, appears in the top ten rank of “BoD and advisors hefty compensation”. On average, MPX Directors received R$ 1.95 million in 2010. The comparison gap with the industry average was also high (though not as much as OGX): Brazilian public utility companies paid an average of R$ 189,689 to counselors – about 10 times less than MPX.
Our comment: Is it just us or this outrageous gap (executive compensation to company performance) is just as bad as the large American banks? OGX and MPX were put together with cash-cow (and extremely profitable) banks like Itau and Bradesco…. full rank below (average pay for each Director of the board):
1. Bradesco (R$10,54 million)
2. OGX (R$5,98 million)
3. Banco Cruzeiro do Sul (R$3,82 million)
4. MPX (R$ 1,95million)
5. Ambev (R$1,87 million)
6. Banco Daycoval (R$1,75 million)
7. Suzano (R$1,6 million)
8. Itau (R$1,39 million)
9. Marcopolo (R$1,38 million)
10. Gerdau (R$1,29 million)