Braskem was created by following the most modern practices of Corporate Governance , based on principles that favor transparency and respect for all shareholders, establishing the conditions for the development and maintenance of a long-term relationship with its investors.
This commitment is ratified by the Articles of Incorporation of the Company , which provide, for example, in case of alienation of control, the extension of the right of sale to all minority shareholders, under the same conditions offered to the controlling shareholders - 100% tag along. According to the Articles of Corporation, the operation of a standing Audit Board is also assured, in which the minority shareholders have the right to elect a member and his respective substitute.
Since the beginning of 2003, Braskem participates in Corporate Governance Level 1 on the São Paulo Stock Exchange, B3, where its preferred shares are negotiated under the code BRKM5. The Company shares are also listed on the New York Stock Exchange and in the Latibex, a section for Latin American companies on the Madrid Stock Exchange.
The Company also meets some requirements of Level 2 and Novo Mercado (special listing segments of B3 companies), such as:
- Disclosure of financial statements in English, according to international standards (IFRS).
- Board of Directors with at least five members, unified term of up to two years, allowing for re-election, and at least 20% of independent directors* (as per BM&FBovespa's definition).
- 100% tag along for all shares in the event of change in controlling interest.
At the time of its creation, Braskem signed a Public Commitment , widely publicized by the media, to the principles and values that govern its operation. This emphasizes the commitment to sustainable development , to the economic and social growth of the Country, by means of technological development, to the increase in competitiveness of the productive chain of petrochemicals and plastics, to the generation of foreign investment and to the offering of products that contribute to improving the quality of life of the population.
Braskem is committed to practicing transparent and responsible management. Such practices are also present in the Braskem´s Code of Conduct and in its Policies for the Disclosure of Information to the Market and for the Negotiation of Stocks .
*"Independent director" means a member of the board of directors that: (i) has no ties to the Company, other than an equity interest; (ii) is not a Controlling Shareholder, spouse or close family member (to the second degree) of a Controlling Shareholder, and neither has, nor has had in the three (3) previous years, any ties to any company or entity related to a Controlling Shareholder (excluding persons with ties to public education or government research entities); (iii) in the three (3) previous years has not been an employee or officer of the Company, or of the Controlling Shareholder or of a subsidiary of the Company; (iv) is not a direct or indirect provider, supplier or buyer of goods and/or services, to an extent that would imply loss of independence; (v) is not an employee or senior manager of any company or entity that is offering or requesting services and/or products to and from the Company to an extent that would imply loss of independence; (vi) is not a spouse or close family member (to the second degree) of any senior manager of the Company; and (vii) is not entitled to any payment by the Company other than the consideration earned as director (excluding cash distributions received in the capacity of an equity holder).
Integrated Policy of Quality, Health, Safety and Environment
Braskem believes that sustainable development, valuing human beings and ethical behavior are essential to reach higher levels of business excellence. To transform these beliefs into attitudes, and by basing itself on the principles of Quality and Health, Safety and Environment, it agrees to the following commitments:
- To meet the expectations of the clients;
- To assure cooperation and partnership with suppliers;
- To promote people´s development;
- To maintain a constructive relationship with the communities where it operates;
- To continuously improve procedures, products and services, stimulating innovation and meeting legal and voluntary standards;
To act preventively:
- In people´s health and quality of life;
- In the security of people, procedures, information and assets;
- In the environmental aspects and in the rational use of natural resources;
- In the quality of the products and services.
This policy represents the commitment of all those involved with the Company and its implementation aggregates value to the business.
System of Integrated Management
Braskem´s procedures of working meet the requirements of the ISO 9001 and ISO 14001 standards, in a demonstration of how it has been reaching its objectives of growing while maintaining its commitment to the quality of products and services, good relationship with the community and respect for the environment.
The companies that make up Braskem were pioneers in establishing in Brazil, a System of Environmental Management based on the international standard ISO 14001, soon after its international approval in 1966. Today, all its industrial plants are certified. Additionally, Braskem is currently implementing health, safety and environmental standards based on OSHAS 18001 , standards issued by the U.S. Occupational Safety and Health Administration. In December, 2006, the Basic Petrochemical Unit obtained this certification, granted only to companies that show excellence in employee health and safety management system.
In conformity with the federal and state laws and regulations, Braskem rigorously meets the requirement of obtaining environmental licenses for its industrial units. The accompaniment and the guarantee of fulfillment of applicable legislation are done systematically in all the units, including, in addition, the performance of audits in partner companies. All the legislation of Health, Safety and Environment applicable to Braskem´s procedures, activities, products and services is being monitored.
The companies that originated Braskem have always tried to go beyond meeting legal requirements. In this way, they have voluntarily followed initiatives in harmony with sustainable development and socio-environmental responsibility, which is consistent with the Public Commitment assumed by the Company at its beginning and with the principles of Health, Safety and Environment approved by the Administrative Council in February of 2003. Among the voluntary initiatives assumed or ratified are to be noted:
Responsible Operation Program
Braskem has signed the Responsible Operation Program since 1992, when it was introduced in Brazil by the Brazilian Association of the Chemical Industry - ABIQUIM, and adopts policies and procedures that bear witness to the commitment in running its business in harmony with the interests of society, principally in that which refers to the effects of its activities upon the aspects of Health, Safety and Environment.
In the year 2000, Braskem joined the clean technologies program, run in partnership with the Poly-technical School of the Federal University of Bahia - UFBa, the Federation of Industries of the State of Bahia - FIEB and the Center of Environmental Resources - CRA, contributing to the development of actions for the application of clean technologies in the industry. The main projects underway deal with the conservation and re-use of water and the optimization of energy consumption.
Braskem was the first Brazilian company in the industrial area to sign the International Declaration of Cleaner Production, of the United Nations Program for the Environment (PNUMA). The institutions signing it promise to implement ever better policies of production from the environmental point of view. The inclusion of the Company was signed on March 30, 2004.
Furthermore, the challenge of aligning efforts, projects and strategies for the Companies Health, Safety and Environmental areas (collectively SSMA, for their acronym in Portuguese), which strengthens the standardization of procedures across all of the Company's Units, has led Braskem to consolidate its practices and strategies in these areas, integrating them under an ambitious program called SEMPRE (Always) Excellence in SSMA. SEMPRE is supported by 16 (sixteen) Strategic Elements (SE's) that will guide the entire organization towards its goal of ranking among the ten largest petrochemical companies worldwide and becoming recognized as a reference in SSMA, in turn creating value for shareholders, clients, suppliers, staff and society in general.
The consolidation of SEMPRE Excellence in SSMA, focused on preventing losses of any type and the establishment of the respective SE's, is the product of a joint effort organized through task forces and involving many members.
The Strategic Elements of SEMPRE Excellence in SSMA consist of a set of practices that involve conforming to the Quality, Health, Safety and Environment Policy and the principles of SSMA within the Integrated Management System, which comprise 16 Strategic Elements in the SSMA area, as follows:
EE-01 Commitment and Leadership
EE-02 Organizational Synergy
EE-03 Identification and Analysis of Risks and Impacts
EE-04 Standards and Procedures
EE-05 Information on Products and Processes
EE-06 Behavioral Development
EE-07 Management of Competencies and Abilities
EE-08 Management of Service Providers
EE-09 Effective Communication and Consultation
EE-10 Implementation and Commissioning of Installations and Processes
EE-11 Integrity of Installations and Equipment
EE-12 Product Management
EE-13 Change Management
EE-14 Emergency Preparation and Services
EE-15 Treatment of Misuse and Losses
EE-16 Health, Safety and Environmental (SSMA) Verification
These 16 SE's consolidate 26 Guidelines, 96 Requirements and more than 1,000 aspects, which guide Braskem towards its goal of Excellence in SSMA.
Comparison of Braskem's Corporate Governance practices and NYSE's rules applicable to U.S. companies.
On November 4, 2003, the U.S. Securities and Exchange Commission (the "SEC") approved the final corporate governance rules established by the New York Stock Exchange, Inc. (the "NYSE") . According to these rules, foreign private issuers that are listed on the NYSE, such as Braskem S.A. ("Braskem"), are subject to a more limited set of requirements regarding corporate governance requirements than those imposed on U.S. domestic issuers. As a foreign private issuer, Braskem must comply with the following four requirements imposed by the NYSE:
- Braskem must satisfy the audit committee requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act");
- Braskem's Chief Executive Officer must promptly notify the NYSE in writing if any executive officer of Braskem becomes aware of any material non-compliance with any of the applicable NYSE corporate governance rules;
- Braskem must provide a brief description of any significant ways in which Braskem's corporate governance practices differ from those required to be followed by U.S. domestic issuers under the NYSE corporate governance rules; and
- Braskem must submit an executed written affirmation annually to the NYSE and an interim written affirmation to the NYSE each time a change occurs to Braskem's board of directors or any committees of Braskem's board of directors that are subject to Section 303A, in each case in the form specified by the NYSE.
The significant differences between Braskem's corporate governance practices and the NYSE's corporate governance standards are mainly due to the differences between the U.S. and Brazilian legal systems. Braskem must comply with the corporate governance standards set forth under Brazilian Law No. 6,404/76, as amended ("Brazilian Corporation Law"), the rules of the Comissão de Valores Mobiliários ( Brazilian Securities and Exchange Commission, or the "CVM" ), the rules of the B3 - Bolsa de Valores Mercadorias e Futuros (Securities, Commodities and Futures Exchange, or the "B3"), as well as those set forth in Braskem's bylaws .
The significant differences between Braskem's corporate governance practices and the NYSE's corporate governance standards are set forth below.
In general, the NYSE corporate governance standards require listed companies to have a majority of independent directors and set forth the principles by which a listed company can determine whether a director is independent. However, under the NYSE corporate governance standards, a listed company (whether U.S or foreign) of which more than 50% of the voting power is held by another company (a "controlled company"), need not comply with the following NYSE corporate governance standards:
- A controlled company need not have a majority of independent directors.
- A controlled company need not have a nominating/corporate governance committee composed of independent directors with a charter that complies with the NYSE corporate governance rules; and
- A controlled company need not have a compensation committee composed of independent directors with a charter that complies with the NYSE corporate governance rules.
Because a majority of the voting power of Braskem's capital stock is directly controlled by Odebrecht S.A., Braskem is a controlled company, and would therefore not be required to have a majority of independent directors if it were a U.S. domestic issuer.
Although Brazilian Corporation Law and Braskem's by-laws establish rules in relation to certain qualification requirements of its directors, neither Brazilian Corporation Law nor Braskem's by-laws require that Braskem have a majority of independent directors nor require Braskem's board of directors or management to test the independence of Braskem's directors before such directors are appointed.
The NYSE corporate governance standards require non-management directors of a listed company to meet at regularly scheduled executive sessions without management.
According to the Brazilian Corporation Law, up to 1/3 of the members of Braskem's board of directors can be elected to management positions. The remaining non-management directors are not expressly empowered to serve as a check on Braskem's management, and there is no requirement that those directors meet regularly without management. Notwithstanding the foregoing, Braskem's board of directors consists entirely of non-management directors and, therefore, Braskem believes it would be in compliance with this NYSE corporate governance standard.
Nominating/Corporate Governance and Compensation Committees
The NYSE corporate governance standards require that a listed company have a nomination/corporate governance committee and a compensation committee, each composed entirely of independent directors and each with a written charter that addresses certain duties. However, as a controlled company, Braskem would not be required to comply with these requirements if it were a U.S. domestic company.
Braskem is not required under Brazilian law to have, and accordingly does not have, a nominating/corporate governance committee. Currently, all of Braskem's directors are nominated by certain of its shareholders, including Odebrecht S.A., pursuant to shareholders agreements and Braskem's Bylaws. Braskem is not required under Brazilian law to have a compensation committee. However, Braskem has a personnel and organization committee, which is a subcommittee of its board of directors which is responsible for, among other things, analyzing proposals and making recommendations to Braskem's board of directors with respect to the total compensation paid to Braskem's management, including Braskem's chief executive officer. This committee, however, does not evaluate the performance of the chief executive officer in light of corporate goals and objectives. Under Brazilian Corporation Law, Braskem's shareholders establish the aggregate compensation of its directors and executive officers, including benefits and allowances, at a general shareholder's meeting based on the recommendation of Braskem's board of directors.
Audit Committee and Audit Committee Additional Requirements
The NYSE corporate governance standards require that a listed company have an audit committee with a written charter that addresses certain specified duties and that is composed of at least three members, all of whom satisfy the independence requirements of Rule 10A-3 under the Exchange Act and Section 303A.02 of the NYSE's Listed Company Manual.
As a foreign private issuer that qualifies for the general exemption from the listing standards relating to audit committees set forth in Section 10A-3(c)(3) under the Exchange Act, Braskem is not subject to the independence requirements of the NYSE corporate governance standards.
Braskem qualifies for this general exemption for the following reasons:
- Braskem is a foreign private issuer that has a fiscal council, which is a board of auditors (or similar body) established and selected pursuant to and as expressly permitted under Brazilian law;
- Brazilian law requires Braskem's fiscal council to be separate from its board of directors;
- members of Braskem's fiscal council are not elected by Braskem's management, and none of its executive officers is a member of its fiscal council;
- Brazilian law provides standards for the independence of Braskem's fiscal council from its management;
- Braskem's fiscal council, in accordance with its charter, makes recommendations to Braskem's board of directors regarding the appointment, retention and oversight of the work of any registered public accounting firm engaged (including, the intermediation of disagreements between Braskem's management and its independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for Braskem, as Brazilian law requires that Braskem's board of directors appoint, retain and oversee the work of its independent public accountants;
- Braskem's fiscal council (1) has implemented procedures for receiving, retaining and addressing complaints regarding accounting, internal control and auditing matters, including the submission of confidential, anonymous complaints from employees regarding questionable accounting or auditing, and (2) has authority to engage independent counsel and other advisors as it determines necessary to carry out its duties; and
- Braskem compensates its independent auditors and any outside advisors hired by its fiscal council and provides funding for ordinary administrative expenses incurred by its fiscal council in the course of its duties.
Braskem does not believe that its reliance on this general exemption will materially adversely affect the ability of its fiscal council to act independently and to satisfy the other requirements of the listing standards relating to audit committees contained in Rule 10A-3 under the Exchange Act.
Shareholder Approval of Equity Compensation Plans
The NYSE corporate governance standards require that shareholders of a listed company must be given the opportunity to vote on all equity compensation plans and material revisions thereto, subject to certain exceptions.
Under Brazilian Corporation Law, shareholder pre-approval is required for the adoption and revision of any equity compensation plans. Braskem does not currently have and does not currently expect to implement any equity compensation plans.
Corporate Governance Guidelines
The NYSE corporate governance standards require that a listed company must adopt and disclose corporate governance guidelines that address certain minimum specified standards which include: director qualification standards; director responsibilities; director access to management and independent advisors; director compensation; director orientation and continuing education; management succession; and annual performance evaluation of the board of directors.
Braskem has adopted B3's corporate governance rules for Level 1 companies and must also comply with certain corporate governance standards set forth under Brazilian Corporation Law. The Level 1 rules do not require Braskem to adopt and disclose corporate governance guidelines covering the matters set forth in the NYSE's corporate governance standards. However, certain provisions of Brazilian Corporation Law that are applicable to Braskem address certain aspects of director qualifications standards and director responsibilities.
Code of Business Conduct and Ethics
The NYSE corporate governance standards require that a listed company must adopt and disclose a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or officers. Each code of business conduct and ethics should address the following matters: conflicts of interest; corporate opportunities; confidentiality; fair dealing; protection and proper use of company assets; compliance with laws, rules and regulations (including insider trading laws); and encouraging the reporting of any illegal or unethical behavior.
Although the adoption of a code of ethics is not required by Brazilian law, Braskem has adopted a code of ethics applicable to its directors, officers and employees, which addresses each of the items listed above. Braskem's code of ethics is available on Braskem's website at www.braskem.com . No waivers of the provisions of the code of ethics are permitted, except that the restrictions on outside activities do not apply to Braskem's directors and members of its fiscal council.