Less than a year ago, the Superintendency of Securities and Insurance (SVS) issued General Standard No. 385 with the aim of publicly traded companies disclosing to the market the practices they have adopted in matters of corporate governance. Such practices are basically composed of a set of procedures and policies whose adoption has to be evaluated by the board of these companies and then reviewed and validated by third parties before March 31 of each year. Regardless of its limitations and imperfections, this rule emphasizes the importance of the governance of a company and that it obviously imports not only its owners, but also those who work in it or provide it with goods, services and financing.
What the company does is coordinate the multiple parties involved in its business model. And those who negotiate with it evaluate how articulated, harmonious and sustainable is that coordination because the creation of value depends precisely on it. The question is how to measure or evaluate that capacity that is so important for the company that makes and sells beverages, fertilizers, is in the banking or investment advisory business and is large, medium or small. And this is something that requires, among other things, understanding its risks, how it solves its agency problems and how it generates value to its clients. A more complex and strategic task but certainly an indispensable input to make better decisions.
At a global level, investors and financiers have been evaluating the behavior of companies regarding the environment, their relationship with communities and, of course, business ethics and how much they care about their corporate reputation. A recent study by an international consultancy concluded that 41% of respondents would rule out an investment alternative if it does not reveal “non-financial information.” And in other cases they stop investing in a particular company if it lowers their standards of transparency and / or has a controversial behavior.
Clearly the numbers on an Excel worksheet do not give all the answers or exhaust the questions. An analysis that integrates and combines the effects of multiple variables is what allows to see the forest without getting lost among the trees. And this applies to investing in shares or bonds of a company, to select or evaluate an investment adviser, to find partners or to finance or to professionalize a family business. Key is then professional quality help.
Juan Pablo Bórquez Y.
BY I BórquezYunge Advisors