Board Independence and Internal Committees in the BRICs

To be successful in global markets, companies from the emerging countries need the approval of foreign investors and other stakeholders. In this regard, Brazil, Russia, India, and China (BRIC) have progressively strengthened their corporate governance rules to help their companies overcome the competitors from the old industrialized countries. Directors’ non-executive qualification, independence, and professional expertise represent basic requirements for effective corporate governance, so they should be carefully considered to guarantee a proper board composition and an adequate establishment of internal committees in listed companies. The paper intends to compare the legislative and regulatory frameworks adopted by the four countries; then it aims at answering to the following research questions by means of an empirical investigation: Have BRIC companies appointed non-executive and independent board members? What do BRIC companies do in order to assure an effective participation of non-executive and independent board members to corporate governance activities? Have BRIC companies established internal committees? The research examines the appointment of non-executive directors and independent directors to the boards of 100 BRIC leading firms, as well as their involvement in internal committees focused on matters requiring motivated and impartial opinions. Although the laws and recommendations seem to favor a general convergence of corporate governance principles among the four BRIC and towards the international best practices, some differences and peculiarities emerge from a firm-level perspective. Indeed, the Indian and the Chinese companies analyzed appear more inclined than the Brazilian and the Russian ones to reassure their international stakeholders about board independence and effective committees.