Overview

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Corporate Governance Structure

Since 2005 several initiatives have been adopted to ensure the best practices in Corporate Governance, among these worthy of mention: independent Members in the Board of Directors, different executives occupying the Chairman and the CEO positions, a permanent Fiscal Council, a People Committee, Social Entrepreneurial Responsibility and Sustainability Committee, the Manual for Participation in Shareholders’ Meetings, dedicated internal charters for the Board of Directors, Fiscal Council and People Committee, mechanisms for the formal appraisal of the Board of Directors, Chairman of the Board, Executive Officers and the People Committee and the creation of the post of Company Secretary to the Board of Directors. In 2012, the company created the Audit and Risk Management Committee, as well as the Strategic Committee.

Inside Corporate Governance there are specific departments such as: Compliance - created in 2010 to ensure alignment with the guidelines of regulatory bodies for financial products and its scope was expanded in 2016 for Corporate action, with a more strategic coverage and serving all the subsidiaries of Lojas Renner; Legal - this department coordinates and monitors topics related to regulations and laws in force; Loss Prevention - this department has the purpose of ensuring full operation of the Loss Prevention Program, assisting in management and acting in the prevention and reduction of losses caused by unlawful acts and administrative and operating mistakes. These departments jointly oversee the decision making process through the integrated assessment of risks and their respective impacts.

Furthermore, it is also important to mention the Investor Relations department - which establishes the relationship with the stock market and interacts on a daily basis with every company investor and shareholder. The company periodically monitors the performance of businesses and transactions in order to prevent threats that may compromise the good results of business. Risk management processes are integrated into the Corporate Governance system (see chart) and include internal audits and external audits.

In 2015, we celebrated ten years as the first corporation in Brazil, with 100% of its shares traded on the stock exchange, in accordance with the best international practices of corporate governance. Still in 2015, the Company’s Board of Directors approved two important policies: firstly, Related Parties, establishing rules for ensuring that decisions involving related parties and situations with a potential conflict of interests, be adopted in view of the interests of Lojas Renner and its shareholders. Secondly, in relation to Governance, Risks and Conformity in order to improve the organization’s performance through the identification of opportunities for gains and a reduction in the probability and/or impact of losses, establishing greater rigor than compliance with the standard regulatory requirements alone.

In 2016, Renner continued to observe the most advanced practices of Corporate Governance. Among these, it implemented a series of improvements to its Manual for Participation in Shareholder Meetings, a document aligned with international practices for proxy voting.

The Board of Directors’ critical analysis of defense mechanisms in the Company’s Corporate Bylaws

As is common knowledge, in 2005, the Company became the first listed joint stock company to have all its shares traded on the stock exchange. Consequently, from then on, it ceased to be a company with controlling shareholders, adopting the model which is characteristic of major North American corporations in this respect.

In 2005, there were no Brazilian benchmarks to give comfort to the Company and its shareholders as to this new corporate model. The inclusion of a poison pill clause in the Corporate Bylaws such that a shareholder acquiring a 20% or more stake would have to make a public offering of shares (POS), was one of the ways of guaranteeing to remaining shareholders that there would be no significant changes in the company. And in the event that such a contingency occurred, the shareholder would not be harmed since the offer would have to be extended indistinctly to all holders of Renner’s equities at already predetermined terms and prices. In this context, the provisions to articles 39 and 40 of our Corporate Bylaws favor the maintenance this structure.

It is the view of this Body, that the totally dispersed capital stock model contributes greatly to ensuring that the Company continues its constant search to be a benchmark for best corporate governance practice. There are several examples of Renner’s pioneering initiatives in this respect: we were the first Company in Brazil to put out a Manual for Participation in Shareholders’ Meetings, the first to issue a Public Request for a Power of Attorney pursuant to the rules of ICVM 481/09 and, for some years now, no longer requiring signatures on powers of attorney to be notarized/consularized. We also have a large number of independent directors with seats on the Board, a percentage much higher than is mandatory under Novo Mercado Listing Regulations.

Furthermore, it is worth pointing out that the Company is not insensitive to eventual criticisms of this poison pill mechanism and more especially, its trigger of 20% or more of the capital stock, such criticisms being made to the effect that this percentage could be increased as an incentive for those institutional shareholders believing in the Company to increase their stake. However, while this issue, not uncommonly, is the subject of discussions at Board level where due consideration is given to eventual shareholder wishes, the overriding opinion is that it is healthy to maintain a high degree of liquidity through the existing widely held corporate model.

To the present time, the sentiment of this Board is to endeavor to maintain the status quo for reasons already mentioned, protecting minority shareholders and guaranteeing a high degree of share liquidity.

Corporate Governance Practices and Novo Mercado Listing Segment

In 2000, Bovespa implemented three special listing segments known as Levels 1 and 2 of Differentiated Practices of Corporate Governance, and the Novo Mercado (New Market). The purpose was to create a secondary market in securities issued by open capital Brazilian companies that adhere to the best practices of corporate governance. The listing segments are designed for the trading of equities issued by companies that voluntarily undertake to comply with good corporate governance practice and stricter requirements for disclosing information in relation to those already required by Brazilian corporate law. In general, these rules enhance shareholder rights and improve the quality of the information supplied to the shareholders.

Renner’s shares are traded on the Novo Mercado. The Novo Mercado is a special segment of Bovespa’s equity market destined exclusively for companies that meet the minimum requirements and agree to adhere to the differentiated corporate governance rules. The following items summarize the principal points characterizing the Novo Mercado and are applicable to the Company:

  • the capital stock must be held exclusively in common shares;
  • the Company’s free float (shares trading in the market) represent at least 25% of the capital stock (and may not be held by the controlling shareholder);
  • the same conditions applicable to the controlling shareholder, including the same price in the disposal of the Company’s control, irrespective of whether this is in the form of successive sales or otherwise, shall be extended to minority shareholders ("tag-along");
  • establishment of a one-year unified mandate for the entire Board of Directors, which must have at least five members;
  • cash flow statement in the ITRs and in the annual account statements;
  • as from the second fiscal year following adhesion to the New Market rules, disclosure of account statements also in English and according to US GAAP or IFRS standards becomes mandatory;
  • the corporate calendar of events shall be announced annually;
  • the obligation to hold a tender offer at the economic value as a condition for delisting from the Novo Mercado; and
  • adhesion to the Market Arbitration Panel.

Brazilian Capital Markets’ Regulations

The Brazilian capital markets are regulated by the CVM (Brazilian Securities and Exchange Commission), which has general authority over the stock exchanges and the capital markets, as well as by the CMN (National Monetary Council) and by Bacen (Central Bank of Brazil), which have, among other powers, the authority to license brokers, at the same time, regulating foreign investment and foreign exchange transactions. The Brazilian capital markets are governed by Law 6385/76, Law 6404/76 and instructions, resolutions and other normative acts published by the CVM.

According to Law 6404/76, companies may be open capital - an example being Lojas Renner - or closed capital. A company is deemed to be an open capital company when the securities it issues are authorized for trading on the stock exchanges or on the over-the-counter market. All open capital companies are registered with the CVM and must submit periodical information and reports. An open capital company’s securities are eligible for trading on the Brazilian stock exchanges or on the Brazilian over-the-counter market. The shares of a listed company can also be traded privately with certain restrictions.

The over-the-counter market is divided into two categories: (i) the organized over-the-counter market in which trading activities are supervised by self-regulatory entities authorized for this purpose by the CVM; and (ii) the non-organized over-the-counter market in which trading activities are not supervised by self-regulatory entities authorized by the CVM. In either case, transactions on the over-the-counter market consist in direct trading between persons, outside the stock exchange environment, through the intermediary of a financial institution authorized by the CVM. No special licenses are required other than a CVM registration (and, in the case of organized over-the-counter markets, registration on the specific market itself) for a listed company’s securities to be traded on the over-the-counter market with the proviso that all business conducted on these markets must be reported to the CVM by the respective intermediating institutions.

Bovespa may suspend trading in a particular security in anticipation of the announcement of a material fact. Trading may also be suspended on the initiative of Bovespa or the CVM for, among other reasons, if there is suspicion that a company has provided inappropriate information with respect to the material fact. Suspension may also be declared where inappropriate replies have been given to any eventual investigation by the CVM or the stock exchange.

Law 6385/76, Law 6404/76 and the regulations issued by the CVM provide for undertakings among others, in respect to the disclosure of information, restrictions on trading based on insider information and price manipulation, as well as protection for minority shareholders.

Trading on the Brazilian stock exchanges by non-residents is subject to certain restrictions according to the Brazilian legislation on foreign investments.

Disclosure of eventual and periodic information

The Joint Stock Companies Law, the regulations published by the CVM and the Novo Mercado Listing Regulations require that a listed company shall supply the CVM and Bovespa with certain information on a periodical basis. This information will include annual and quarterly information and quarterly management discussion and analysis reports as well as the report of the independent auditors. These rules also make it mandatory for Renner to file shareholders agreements and convening notices for general meetings together with the minutes of these meetings with the CVM.

In addition to the disclosure requirements of the corporate legislation and the CVM, Renner must also comply with the following requisites for disclosure:

  • within six months following authorization to trade on the Novo Mercado, the Company must file with the regulator consolidated financial statements at the end of each quarter (except the last) and for each fiscal year. This data must also include a cash flow statement which should indicate at least the changes that have occurred in the cash and cash equivalents balance, separated into operational, financial and investment flows;
  • as from the publication of the financial statements for the second fiscal year following the authorization for its securities to be traded on the Novo Mercado, Renner shall within a maximum of four months following the termination of the fiscal year: (i) publish its financial and consolidated statements in accordance with the international U.S. GAAP or IAS GAAP principles in Reais or US Dollars. These shall be disclosed in full in the English language together with the management discussion and analysis, explanatory notes informing, among other issues, the net income and net shareholders’ equity recorded at the end of the fiscal year, according to accounting principles used in Brazil and the proposal for allocation of earnings, and the independent auditor’s opinion; or (ii) publish in the English language, the full financial statements, management discussion and analysis and the explanatory notes, prepared in accordance with the Joint Stock Companies Law, together with an additional explanatory note which shows the reconciliation of the earnings for the fiscal year and shareholders’ equity according to generally accepted accounting principles in Brazil and according to U.S. GAAP or IAS GAAP international standards, as the case may be, substantiating the principal differences between the applied accounting criteria, and the opinion of the independent auditors; and
  • within a maximum of fifteen days following the term established by the legislation for publishing the quarterly information, the Company shall: (i) present in full, the quarterly information translated into the English language; or (ii) present the financial and consolidated statements in accordance with U.S. GAAP or IAS GAAP international standards together with a report from the independent auditors.

A Benchmark in Corporate Governance

In 1967, Renner opened its capital. The Bovespa is the principal market for trading the Company’s shares, negotiation of which began in 1972. At an Extraordinary General Meeting held on May 25 2005, the following resolutions were approved, among others: (i) conversion of all company preferred shares to common shares, (ii) the reverse stock split of our shares in the proportion of 253 old shares to 1 new unit of capital; and (iii) the amendment to the Company’s Bylaws to adjust them to Bovespa’s requirements for a Novo Mercado listing.

Renner is a benchmark in corporate governance:

  • The Company is the first one in Brazil with a free float of 100% in common shares;
  • A listing on Bovespa’s Novo Mercado;
  • Board of Directors with 7, of its seven 8 members, independent directors of the Company;
  • Different executives occupying the Chairman and the CEO positions;
  • Permanent Fiscal Council;
  • Board Administration and Management Committees;
  • Alignment of interests of management with those of the shareholders - stock options plan and restricted shares and participation in the results;
  • Mechanisms for encouraging diffused shareholding (details in Frequently Asked Questions);
  • Mechanism for protecting shareholders in the event of a takeover (details in Frequently Asked Questions).
  • Board of Directors and Committees Portals;
  • Board and Committees Secretaries;
  • Formal Appraisal of the Board of Directors and Executive Officers;
  • Anti-corruption, Related Party Transactions and Governance, Risks and Compliance Policies.

Data Security

How does Lojas Renner S.A. address data security issues?

Data security is one of the pillars of Lojas Renner S.A. and part of the fundamental commitments in the Code of Conduct. The Company has a strong focus on mitigating cyber risks and protecting sensitive information. In this context, Renner has a formal Data Security Policy, a structured Data Security department, and a multidisciplinary Data Security Committee.

How does Lojas Renner S.A. protect itself from cyber attacks?

One of the risks that has challenged companies most is that of attacks and intrusion by hackers (or crackers).

Renner has several processes for defending itself and involving three principal macro operational structures supported by specialized partner companies: (i) SOC - Security Operation Center focused on the protection at the Internet perimeter level, event correlation and incident response; (ii) Ethical Hacking with repeated penetration testing in the corporate environment; and (iii) Brand Protection, that monitors Lojas Renner S.A.’s leading brands on the Internet.

How does Lojas Renner S.A. protect customer data?

The risk of data leakage is undoubtedly a relevant challenge faced by companies, especially large retailers.

Lojas Renner S.A. places a strong focus on protecting customer data. Since 2012, the Company has , recertified annually with the PCI DSS (Payment Card Industry Data Security Standard), a data security standard for organizations that handle branded credit and debit cards (Visa, Master and others) . Renner has also been using data protection techniques for databases and active DLP (Data Loss Prevention) tools to monitor and prevent the leakage of sensitive data.

The Company is currently focused comply with "LGPD" (the Brazilian General Law for Data Protection), which will come into force in Brazil in February 2020.

How does Lojas Renner S.A. manage identities and accesses?

Another challenge is Identity and Access Management (IAM), also known as the "Triple A" of data security: authentication, authorization, and accounting. Risks related to weaknesses in internal controls in this respect are commonly detected by internal and external audits in organizations of all sizes.

Lojas Renner S.A. and partner companies have an employee identity and access management platform covering the most relevant systems and the access accounts. The platform is based on RBAC (Role-Based Access Control) concepts, Single Sign-On, and complementary processes.

How does Lojas Renner S.A. address the "security awareness" of people?

Market research indicates that most security incidents are caused by internal staff or third parties who have authorized access to sensitive information.

Lojas Renner S.A. believes that its employees and staff from partner companies form the most important link in our ecosystem’s information protection network. Our People corporate value ("hiring, developing and retaining the best people") underscores this point. In this context, we have a corporate program run jointly with the Human Resources department and focused on education and security awareness.

The program includes induction lectures on data security for new employees, an online data security course, educational campaigns on topics such as precautions with passwords, phishing, information classification, among other initiatives.