The Superintendence of Companies, Securities and Insurance of Ecuador issued the “Ecuadorian Standards for Good Corporate Governance”, with the objective of strengthening transparency, credibility and veracity in the handling of information on the part of the Boards of Directors, Directors, Shareholders, Consumers and other stakeholders interested in business management. The regulations have been prepared taking as a reference good global practices of Corporate Governance, adapting them to the reality of business in Ecuador and Latin America.  The regulations have been designed to be applied in Large Economic Groups, Family and Multinational Companies of all sizes, and the Public Sector.

As companies evolve and enter into processes of growth and internationalization, operations become complex, businesses diversify and risks increase. Therefore, the best way to ensure success and growth is in the continuous professionalization of both the operational management and the Corporate Governance of an entity.

Benefits of implementing Good Corporate Governance structures

It is undeniable that companies with solid corporate governance structures deliver better financial results.  Below are some direct and tangible benefits of incorporating Good Corporate Governance standards:

  • Allows access to financing – The generation of confidence in the markets, makes investors prefer to deposit their assets in companies that have solid Corporate Governance structures. International investors attach great importance to the structure of the Board of Directors and its Committees. In total, 9 out of 10 support that half of the boards are independent.
  • Create value – Companies with Good Governance codes have efficient administrations, with better use of resources and fair labor policies; this results in greater competitiveness and financial performance.
    A good structure of Corporate Governance increases the profitability of the companies and their value within the market, makes possible the processes of growth and internationalization of the operations.
  • Manage risks – Because they seek to balance the interests of the company and its shareholders, in favor of sustainable growth in the long term. Boards of Directors adapt business objectives based on business needs, inherent risks and the markets in which they operate.
    Companies acquire solid management structures, with agile and effective decision-making processes, are prepared for any economic eventuality and allow control over risk management.
  • Creating synergies – Corporate Governance seeks the sustainable growth of companies and their presence in the market in the long term, which attracts the interest not only of investors, but also of the rest of the stakeholders. The fact that the company has a clear and strong purpose, and that it is a desired place to work, increases its value in terms of reputation with suppliers, customers/consumers, employees, financial institutions, control bodies and general civil society.
    This allows to generate interesting synergies, in better conditions and for a longer period of time, guaranteeing the stability of the company and its projection in the market.
  • Strengthening the national economy – It is the responsibility of the entire business fabric of a country to generate wealth and opportunities, and to contribute to the development of a better and fairer society. Good Corporate Governance practices increase the levels of transparency of companies by revealing their true potential and contribution to the national economy.

Below are the “Ecuadorian Standards for Good Corporate Governance”:

  • Conceptual Framework – Which includes Concepts of Corporate Governance, Principles, Scope of Application, Degree of Compliance
  • Shareholders’ Rights and Equal Treatment – Communication Mechanisms, Dispute Resolution, Dividend Distribution Policy and Share Premiums
  • The General Meeting or Shareholders’ Meeting – Powers, Regulations, Calls, Definition of Proxy Vote, Conflict of Interest, Other Rights
  • The Board – Function, Fiduciary Duties, Responsibilities, Size, Composition, Board Structure, Classes of Directors, Board Relationships
  • Family Governance – Family Assembly, Council and Protocol
  • Control Architecture – Board Responsibility, Risk Management Policy, Internal and External Control System
  • Transparency and Financial and Non-Financial Information – Disclosure Policy, Information to Third Parties, Related Party Transactions, Corporate Governance Report, Non-Competition Duty of Directors.
  • Measures to fight corporate corruption

The Coronavirus crisis is posing important challenges for all companies and in this context information is essential. Through our management we collaborate with clients in generating timely information for decision making. In Auxadi, we are experts in providing value added services in accounting, finance, tax compliance, payroll management, leveraging our management in a world class technological platform, being a strategic partner of your business.  If you need to expand what is stated here, do not hesitate to contact us.

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Gustavo Verdezoto

Gustavo Verdezoto Guzmán
Country Manager – Ecuador

All information contained in this publication is up to date on 2020. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.