Is Shareholder Primacy a Reality in Brazil? An Analysis of the Duties of Corporate Managers from Multiple Perspectives

I analyze the current prevalence of the concept of shareholder value maximization in Brazil from the normative, case law, and managerial perspectives. On the normative aspect, I show that Brazilian corporate law is much closer to a balanced and socially oriented perspective for the role of managers rather than oriented towards a shareholder-centric view. An analysis of bylaws and mission statements of 150 large listed companies also shows that the vast majority does not point out the maximization of shareholders' wealth as a core element of its identity. Around 60% of mission sentences identify customers as the main constituencies, while only 10% name shareholders as its central raison d'être. On the case law perspective, I review all 731 proceedings judged by CVM (the Brazilian Securities and Exchange Commission) from 2000 until 2014. I do not find cases where managers have been indicted for failing to maximize shareholder returns. In all instances, CVM holds that managers owe loyalty to the company as an entity and that its interests should come ahead of stockholders in case of divergence. I analyze the managerial perspective through a survey with 149 senior executives. The large majority do not agree that their mission is to maximize profits or shareholder value. This view differs somewhat in subgroups. Women have a more socially oriented approach to their role, while managers with a background in economics are more likely side with the shareholder value doctrine. However, I also note signs of moral hypocrisy from managers after observing inconsistent responses on an aggregate level to a set of five cases simulating typical corporate dilemmas. Overall, I show that Brazilian managers have great discretion, ensured by the law, company regulations and current jurisprudence, to make decisions that they deem to be socially responsible and in the best long-term interests of its companies. There is no basis other than management theories or ideological reasons, therefore, for managers to run companies in Brazil solely as money machines focused on maximizing shareholder value