IR Home | Institutional | Site Map Português English Espanhol
Quick Access
IR Services

Cemig

Cemig Generation and Transmission

Cemig Distribution

Main Practices

 

 

Level One Corporate Governance
Total transparency
Key ratios written into Bylaws
Main practices
The General Meeting of Stockholders
The Board of Directors
The Audit Committee
The Executive Board
The Audit Board
Governance Practices – Level I
The Sarbanes-Oxley Law
The Consumers’ Council
Declaration of Ethical Principles and Code of Professional Conduct
The Ethics Committee
External Auditors
 


 

We aim for sustainable development of our Company through a balance between the economic, financial, environmental and social aspects of our business. Hence we continually seek to perfect our relationship with stockholders, clients, employees – all our stakeholders – and the general public.

Meanwhile, our corporate management structure enables us to standardize technical, commercial, administrative and financial activities, while also making significant savings through efficient creation of synergy.



Level One Corporate Governance

In 2001 we joined the group of listed companies subscribing to the São Paulo Stock Exchange’s Level One Corporate Governance requirements. This is a guarantee of best practices in our relationship with stockholders and investors. Since Cemig securities are traded on the New York Stock Exchange, we are also subject to SEC Regulations, and the NYSE Listed Companies Manual. In June 2007 we added one more security representing our shares on the NYSE: ADRs for our existing common shares. Our preferred shares have been listed on the Latibex market of the Madrid Stock Exchange since 2002. In June 2007 we grouped previous shares (of nominal value R$0.01) in a 500:1 “reverse split”, so that the nominal price of our traded shares is now R$5.00 (five Reais)

At the end of 2006 we completed adaptation of our most significant internal processes related to preparation of the consolidated financial statements to the requirements of Section 404 of the Sarbanes-Oxley law of the US.



Total transparency

Our policy for relationship with the capital markets is: total transparency – in a quest always to enable stockholders to achieve the most accurate valuation of their investment – for which we use the following:

  • Our Internet site is in three languages (English, Spanish, Portuguese).
  • We hold meetings with investors – roadshows and one-on-ones – all over the world.
  • We participate in investor events, congresses and seminars.
  • We publish a continuous flow of notices on the Internet.
  • We hold phone, video and web conference calls and presentations.
  • We file material announcements, notices to stockholders and other statements with the regulatory bodies of the capital markets in Brazil (the CVM) and the US (SEC).

We publish our results in both Brazilian and US GAAP; and we report the quarterly and annual results in the form of live video webcast conferences, with the Chairman of the Board and all Executive Officers present to answer questions, and simultaneous English translation.



Key ratios written into Bylaws

This annual meeting is to publicize information about our current economic and financial situation, plans and outlook. We also hold several meetings each year with regional analysts’ associations in Brazil.

We have changed our Bylaws to include the targets specified in our Long-Term Strategic Plan, and also our new dividend policy. As a result Cemig’s Bylaws now include the following specific instructions, for the company’s consolidated figures:

a) Debt may not be more than twice Ebitda;

b) Net debt / (Net debt + Stockholders’ equity) is limited to 40%;

c) funds recognized in Current assets may not be more than 5% of Ebitda;

d) funds destined to capital expenditure and acquisition of any assets may not be more than 40% of Ebitda in any business year;

e) investments in distribution, generation and transmission projects must be limited to those that offer real minimum internal rates of return no less than those specified in the Long-term Strategic Plan;

f) the expenses of Cemig Distribuição and of any subsidiary operating in distribution must be limited to the amounts recognized in the processes of tariff adjustments and reviews; and

g) the revenues of Cemig Distribuição and any subsidiary operating in distribution must comply with the amounts recognized in the tariff adjustments and reviews.

 

These targets maybe exceeded due to solely temporary circumstances, if approved by the Board of Directors, up to the following limits (for the consolidated figures):

i) Debt: less than or equal to 2.5 x Ebitda;

ii) Net debt / (Net debt + Stockholders’ equity): limited to 50%;

iii) Current assets: maximum of 10% of Ebitda; and

iv) ( – only in business years 2006 and 2007 – ) funds allocated to Capital expenditure and Acquisitions: maximum 65% and 55% of Ebitda, respectively.

 

Since 2002 we have adopted an Information Disclosure and Use Policy, governing use of inside information, as specified in CVM Instruction 358. This Policy was approved by the Board of Directors, and applied to all managers, controlling stockholders, and members of the Audit Board and any other bodies with technical and consultative functions.

The Stockholders’ Agreement signed between the Brazilian State of Minas Gerais and Southern Electric Brasil Ltda. (“SEB”) in 1997 was annulled by the Brazilian Courts. SEB has lodged appeals, which are currently before the Federal Courts.


Main practices


The General Meeting of Stockholders

Cemig’s Annual (‘Ordinary’) General Meeting of Stockholders was held, concurrently with an Extraordinary General Meeting of Stockholders, on April 29, 2016. 



The Board of Directors

Our Board of Directors has 15 members elected through the multiple vote mechanism, as specified by Article 141 of Law 6404 of December 15, 1976. Cemig’s Board of Directors is a multi-disciplinary body, comprising members with experience and qualification in a wide variety of areas – including engineering, law, and economics – as well as business management: an example of the good practice of having a wide diversity of abilities and experience on the Board.  The members of Cemig’s Board of Directors receive remuneration equal to 30% of that earned by the members of the Executive Board, and do not have any stock options.

The period of office of all the present members of the Board of Directors is two years, from April 29, 2016 – i.e. expiring on the date of the Annual General Meeting of Stockholders to be held in 2018.

The Board of Directors has the following duties and responsibilities, other than those conferred by law:

  • Decision, before signing, on any contract between Cemig and any stockholder or a parent company of such stockholder.
  • Decisions on any: sale of assets, loans or financings; placement of a charge on any of the Company’s property, plant or equipment; guarantees to third parties; or other legal acts or transactions; with value of R$ 17,355,065.94 or more.
  • Authorization for issue of securities in the domestic or external market to raise funds.
  • Approval of the Long-term Strategic Plan, and revisions of it; approval of the Multi-year Strategic Implementation Plan and revisions of it; and approval of the Annual Budget.
  • Setting of the general orientation of Cemig’s business.

Cemig’s Board of Directors met 30 times in 2015, to discuss strategic planning, expansion projects, acquisitions of new assets – and many other subjects.

In 2006 the Board approved creation of committees comprising members of the Board, to carry out prior analysis and discussion of the matters to be decided by the Board.  These are as follows:

  • Board of Directors’ Support Committee.
  • Corporate Governance and Sustainability Committee (altered in 2010).
  • Human Resources Committee.
  • Strategy Committee.
  • Audit, Finance and Risks Committee (altered in 2010).
  • Committee for New Business Development and Corporate Control of Subsidiaries and Affiliates (created in 2010).

 

Independence of board members criteria according to the Code of Best Practices of Corporate Governance, IBGC:

Principle

Once elected, all board members have a responsibility to the organization, regardless of the shareholders, shareholder group, administrator or stakeholder who appointed them to the position.

Board members must perform their duties based on technical knowledge, with emotional and financial detachment and without the influence of any personal or professional relationships. They must create and preserve value for the organization as a whole, within the appropriate legal and ethical guidelines.

Practices

a) The board should use all means available to assess the independence of directors. Ultimately, each board member is responsible for engaging in a systematic reflection on their ability to make an independent judgment on the issues discussed by the board.

b) Board members who are conflicted on a particular matter must refrain from participating in the discussion and the decision on that specific issue.

c) A possible recommendation to cast a specific vote, provided in a shareholders’ agreement, does not exempt board members to vote always in the interest of the organization, in accordance with their duty of loyalty. Board members must examine the shareholders’ voting recommendation critically, and should only follow such recommendation if it is in the organization’s best interests (see 1.5).

d) Board members who identify any improper pressure or feel coerced and cannot maintain their autonomy must resign, if all other efforts to resist such pressure or coercion fail, without prejudice to filing a possible complaint at the general meeting and/or the regulatory agency.

e) Board members should not serve as paid consultants or advisors to the organization.

Source: Code of Best Practices of Corporate Governance, IBGC, 5th Edition.

 

Independence of board members criteria according to the Dow Jones Sustainability Index (DJSI):

Independent directors must fulfill the following criteria in addition to being a non-executive director.

  • The director must not have been employed by the company in an executive capacity within the last five years.
  • The director must not be (and must not be affiliated with a company that is) an adviser or consultant to the company or a member of the company’s senior management.
  • The director must not be affiliated with a significant customer or supplier of the company.
  • The director must have no personal services contract(s) with the company or a member of the company’s senior management.
  • The director must not be affiliated with a not-for-profit entity that receives significant contributions from the company.

Source:  DJSI Sustainability Assessment 2016


The Audit Committee

Our Audit Board (see below) has attributions and duties specified in the Brazilian Corporate Law (Law 6404). In addition to these, in relation to the requirements of the Sarbanes-Oxley Law, to which we are subject due to our shares being registered with the US Securities and Exchange Commission (SEC – the capital markets regulator of the United States), we opted for the exemption allowed by rule 10-3A of the Exchange Act, and the regulations in SEC Release 82–1234, which accepts the activity of the Audit Board as an alternative to the Audit Committee specified by the Sarbanes-Oxley law.



The Executive Board

Our Executive Board is made up of eleven members, whose individual functions are set by the Company’s by-laws. They are elected, and may be dismissed at any time, by the Board of Directors for periods of office of three years. They may also be re-elected. Their principal responsibility is the management of the Company’s business, subject to compliance with the Multi-Year Strategic Plan, the Long-term Strategic Plan, and the Annual Budget.  Their remuneration is decided annually by the Annual General Meeting of Stockholders.  Members are allowed simultaneously also to hold non-remunerated positions in the management of wholly-owned subsidiaries, subsidiaries or affiliates of Cemig, upon decision by the Boards of Directors of those companies. They are also, obligatorily, members, with the same positions, of the Boards of Directors of Cemig GT (Cemig Geração e Transmissão S.A. – Generation and Transmission) and Cemig D (Cemig Distribuição S.A. – Distribution).

The members of the Executive Board (the Company’s Chief Officers) have individual responsibilities established by the Board of Directors and the by-laws. These include:

  • Current management of the company’s business, subject to compliance with the by-laws, the Long-term Strategic Plan, the Multi-year Strategic Implementation Plan and the Annual Budget.
  • Making an annual review of the Long-term Strategic Plan.
  • Decision on any disposal of goods, loans or financings, pledge of the Company’s property, plant or equipment, or guarantees to third parties or other legal acts or transactions, with value of less than R$ 17,355,065.94.

The period of office of the present Chief Officers expires at the first meeting of the Board of Directors held after the Annual General Meeting of 2018.

The Executive Board meets, ordinarily, at least twice a month, and, extraordinarily, whenever called by the CEO or by two Chief Officers, upon minimum prior notice of two days (this period of notice is not required if all the Chief Officers are present).



The Audit Board

We have an Audit Board, created by the by-laws and constituted, by Cemig, to operate permanently.  Their present period of office is until April 2016.  Our Audit Board is a multi-disciplinary body, made up of five members with a variety of areas of experience and qualifications as well as finance, accounting, and business administration. The remuneration of the members of the Audit Board is 20% of the average of the remuneration earned by the members of the Executive Board.  In 2014 the Audit Board held 10 meetings. It has attributions and duties specified in the Brazilian Corporate Law (Law 6404). In addition to these, in relation to the requirements of the Sarbanes-Oxley Law of the United States, to which we are subject due to our shares being registered with the SEC (the Securities and Exchange Commission – the capital markets regulator of the United States), we opted for the exemption which accepts the activity of the Audit Board as an alternative to the Audit Committee.



Governance Practices – Level I

Contract Agreement to Adopt Differentiated Corporate



The Sarbanes-Oxley Law

Our “Cemig-SOX Project” was put in place to certify the system of internal controls related to preparation of the financial statements, and the procedures for disclosing the company’s information and material announcements in accordance with the requirements of the SEC.

This involved intense activity starting in January 2006, with 40 employees from various areas of the company allocated full-time, and support from outside consultants.

Analysis of our consolidated balance sheet and the matrix of risks identified 25 significant processes related to the consolidated financial statements. We initially selected 950 controls, of which 450 were classified as key controls, able to provide a reasonable degree of certainty that the financial statements of the company and its subsidiaries are recorded, processed and disclosed in accordance with the rules, periods and format stipulated by the SEC.

This work led to a review and revision of material processes, and validation of the design of the internal controls related to the consolidated financial statements. We found that in the majority of the processes analyzed the internal control procedures already adopted by the company did show themselves to be efficacious after application of auditing tests, and this enabled the Executive Board to issue a report concluding in favor of the efficacy of the internal controls.



The Consumers’ Council

Cemig’s Consumers’ Council is made up of six sitting members, and six substitute members, appointed by consumer class bodies and consumer defense (Procon) groups.

Its main purpose is to represent the collective interests of consumers and defend them, putting forward suggestions, cooperating in inspections; and bringing forward any accusations or complaints.



Declaration of Ethical Principles and Code of Professional Conduct

Cemig's Declaration of Ethical Principles and Code of Professional Conduct was approved by the Board of Directors aiming to improve the internal corporate governance system, and transparency. It is distributed to all employees, and is available on this site (www.cemig.com.br). It also applies to outsourced workers and service providers.

It is grouped into 11 Main Principles, reflecting ethical conduct and values incorporated into the company's culture, and is available on this site (http://cemig.infoinvest.com.br).

Its main objectives:

§  to orient and discipline all activity by employees, managers, senior management (Board of Directors, Chief Officers) and members of the Audit Board;

§  to be a reference system for assessment of all activities; and

§  to orient Cemig's Ethics Committee in assessing and deciding any possible non-compliance – and also any need for revision to the Code.

The Declaration and the Code are widely disseminated among all Cemig’s employees, and all managers are continuously taking action to multiply and reinforce understanding of and reference to it in their individual areas.

Our hiring and selection process includes a lecture on the Declaration and Code, after which new employees sign a commitment to obey their principles and rules of conduct.

In April 2006 our affiliated company Gasmig published its own Declaration of Principles and Code of Professional Conduct, with inaugural workshops and other activities for its whole workforce.



The Ethics Committee

Cemig's Ethics Committee was founded on August 12, 2004. It has three members (and three substitute members), and is responsible for management (interpretation, publication, application and updating) of the Code of Professional Conduct.

The Ethics Committee deals with any complaints of violation of the ethical principles or standards of conduct. These have to be presented in writing, signed, and sent to the company (Av. Barbacena 1200, 17th Floor, B2 Wing), accompanied by indication of proofs (witnesses, documents, or any other reliable means). The Committee can also be contacted by email or telephone – these details are widely disseminated among the employees.

In December 2006 we put in place an Anonymous Accusation channel, available on the corporate intranet, designed to deal with any accusations of irregularities such as financial fraud, misappropriation of assets, receipt of irregular advantages, or illegal contracting. This is one more step in maximizing transparency, correct behavior and the concept of corporate governance itself at Cemig – its use improves the management of our employees and our business, and reaffirms our ethical principles.



External Auditors

Cemig's external auditors, KPMG (KPMG Auditores Independentes), were selected in tender proceedings approved by the Board of Directors on April 27, 2007 (under Article 17, Sub-clause “i”, of the Bylaws and Law 8666 of June 21, 1993), coordinated by the Chief Financial Officer’s Department, and approved by the Executive Board and Board of Directors. The change of auditors is obligatory under the rotation system ordered by Article 31 of CVM Instruction 308 of May 14, 1999: previously, Deloitte Touche & Tohmatsu Auditores Independentes provided the company with auditing services since November 5, 2003.



 

Last updated on