1 Business philosophy 28 Ultrapar Annual Report 2007
2 Corporate governance With its shares listed on the São Paulo Stock Exchange BOVESPA, and the New York Stock Exchange NYSE, Ultrapar follows corporate governance standards according to the laws of Brazil and the United States. In 2007, Ultrapar obtained Sarbanes-Oxley certification, which attests to the efficiency of the company s internal controls of financial information, confirming its commitment to quality in the management of processes, risks and controls, as well as ensuring high quality standards in our financial statements. Corporate governance Ultrapar is listed under Level 1 of Corporate Governance at BOVESPA and at the beginning of 2008 took another step towards constantly improving its corporate governance, by deciding to join Level 2 Corporate Governance. Notwithstanding the levels with which it has complied, Ultrapar has corporate governance practices that exceed the requirements of both Levels 1 and 2 of BOVESPA, notably by granting 100% tag along rights to all shareholders, both ordinary and preferred. In the US market, the shares of Ultrapar are traded in the form of Level 3 American Depository Receipts (ADRs), which implies that its financial statements comply with Generally Accepted Accounting Principles in the United States US GAAP and that its corporate governance practices comply with those required by the regulatory bodies in the US capital markets. Another advance in terms of corporate governance is the company s success in complying with the Sarbanes-Oxley Act, also known as SOX, which regulates mechanisms for control and transparency in the management of companies traded on stock exchanges in the United States. In June 2007, the company obtained SOX certification, attesting to the efficiency of its internal control mechanisms with regard to information and its commitment to quality and transparency in the disclosure of information to the market. The separation of the roles of Chairman of the Board of Directors and, which took place 29
3 Business philosophy at the beginning of 2007, has been effected with great success. Paulo G. A. Cunha is now dedicated exclusively to the role of Chairman of the Board, while Pedro Wongtschowski took over the role of Chief Executive Officer, with the responsibility of continuing to conduct the businesses of Ultrapar as to maintain the company s sustainable growth. The process of renewal of the Executive Board of Ultrapar began in 2005, with a new taking over at Ultragaz and the nomination of a new for Ultracargo. Another important step in the renewal of the Executive Board was the nomination of João Benjamim Parolin, who was formerly commercial director of Oxiteno, as the of Oxiteno. In March 2007, André Covre was nominated as Chief Financial and Investor Relations Officer. In March 2008, Leocádio de Almeida Antunes Filho, of Ipiranga, became a member of Ultrapar s Executive Board. In recognition by the market for the quality of its corporate governance, Ultrapar was elected one of the top 5 companies with the best corporate governance practices in Brazil, in a research carried out by IR Global Rankings Latin America. Ultrapar has also received the title Most Shareholder-friendly Company in a research carried out by Institutional Investor Magazine, a well-known publication in international financial markets, among fund managers and investment research analysts. In the same research, our executives obtained recognition by the capital markets, being elected as best CFO and runner-up in the position of best CEO in the Oil & Chemicals segment. Additionally, Ultrapar participates in the Latin American Corporate Governance Roundtable s Companies Circle, which aims to develop corporate governance in Latin America, and which is coordinated by the Organization for Economic Cooperation and Development OECD, in partnership with the International Finance Corporation IFC and BOVESPA. Tag along rights and alignment of interests Improving corporate governance is a constant concern at Ultrapar. At the beginning of 2000, the company granted 100% tag along rights to all shareholders, ordinary and preferred, guaranteeing equal treatment for all shareholders in the event of the sale of the shareholding control of the company, a right which was also given to the former shareholders of Ipiranga, with the exchange offer. For the market as a whole, this same right only became mandatory at the end of 2001, with the approval of the new Brazilian Corporate Law yet limiting it to 80% of the offer value agreed with the controlling shareholders, and only to holders of common shares. Following the principles of alignment with and commitment to the interests of shareholders, in 2001 a system was introduced in all the company s business units for measuring profitability using the EVA tool, to which the company s executives variable remuneration 30 Ultrapar Annual Report 2007
4 Corporate governance Ultrapar constantly seeks to improve its corporate governance, being the first Brazilian company to grant 100% tag along rights to all shareholders, back in Recently, the company took another step forward in the constant development of its corporate governance, deciding to join Level 2, moving in BOVESPA s differentiated levels of corporate governance. is linked. This system was also implemented in the businesses acquired from Ipiranga. Under this system, a significant part of the executives remuneration is linked to the achievement of EVA growth targets, which are established based on shareholders expectations. Representative of preferred shareholders on the Board of Directors In 2002 Ultrapar provided additional benefits to its preferred shareholders, giving them the right to elect a representative in the Board of Directors. This was the way adopted to highlight the role of these shareholders in adding value to the Company. where the company operates). It also aims to assure that the daily concerns with efficiency, competitiveness and profitability also include ethical behavior. Board of Directors The Board of Directors is composed by seven members 1, four of which are independent. One of the independent board members has the role of representing the preferred shareholders. The minimum quorum is three members, one of which must be the Chairman or Vice-Chairman of the Board. During 2007 the board met thirteen times, nine of these meetings being dedicated mainly to strategic company matters. Code of Ethics Ultrapar s Code of Ethics was initially adopted in 2004, reflecting practices that already existed in the company. The Code fulfils various objectives, such as limiting subjectivity in the interpretation of ethical principles and the formalization and institutionalization of a reference for the professional conduct of employees, including dealing with real or apparent conflicts of interest and compliance with anti-trust laws, thus becoming a standard to be followed in internal and external relationships with interested public audiences (shareholders, clients, employers, unions, partners, suppliers, service providers, competitors, society, government and communities Executive Board Consisting of professionals with significant experience in Ultrapar s fields of operation, the Executive Board carries out the integrated management of the businesses in accordance with the guidelines defined by the Board of Directors. In order to achieve total alignment of interests between the management and shareholders, Ultrapar adopts the philosophy of converting the company s executives into shareholders, encouraging them to act as co-owners. To this end the company uses a stock ownership program 1 Altered to 8 members at the extraordinary shareholders meeting on April 28,
5 Business philosophy VOTING CAPITAL / TOTAL CAPITAL Ultra S.A. 66% 24% Others 34% 12% Free Float (Market) 0% 64% Ultrapar Participações S.A. Ipiranga Oxiteno Ultracargo Ultragaz SHAREHOLDER BREAKDOWN Common preferred shares % shares % Total % Ultra S.A. 32,646,694 66% 12 0% 32,646,706 24% Others 16,783,203 34% - 0% 16,783,203 12% Free float - 0% 86,666, % 86,666,090 64% Total 49,429, % 86,666, % 136,095, % under which the executives have the benefit of preferred shares held in treasury and all of the rights inherent in them. Ownership of the shares is retained by the company for a determined period and once it elapses, ownership of the shares is then transferred to the executive. Fiscal Council In compliance with Brazilian legislation and the Sarbanes-Oxley Act, Ultrapar maintains a permanent Fiscal Council, reporting to shareholders, which also acts as an audit committee. The Fiscal Council is composed of five members. In 2007 the Fiscal Council met thirteen times. In order to obtain SOX certification in June 2007, the Fiscal Council carried out intensive work together with Ultrapar s internal Audit Department, which supervised the work for the certification of controls under the Sarbanes-Oxley Act. Investor Relations In line with its philosophy of maintaining a transparent and interactive relationship with investors and shareholders, always supplying the market with quality and precision information in 2007 some 250 meetings were held with capital market institutions, approximately 50% more than in 2006, including participation in events with investors and analysts, both in Brazil and abroad. Additionally, Ultrapar s website provides a permanent and constantly updated channel for the publication of information and results. 32 Ultrapar Annual Report 2007
6 Corporate governance Management BOARD OF DIRECTORS Chairman Paulo Guilherme Aguiar Cunha Vice-Chairman Lucio de Castro Andrade Filho Board members Ana Maria Levy Villela Igel Nildemar Secches Olavo Egydio Monteiro de Carvalho Paulo Vieira Belotti Renato Ochman FISCAL COUNCIL President Flavio César Maia Luz Members John Michael Streithorst Mário Probst Raul Murgel Braga Wolfgang Eberhard Rohrbach Administrative Director and Controller José Manuel Alves Borges EXECUTIVE BOARD Oxiteno João Benjamin Parolin Administrative Director and Comptroller Américo Genzini Filho Industrial Director Flávio do Couto Bezerra Cavalcanti Commercial Director Rubens Marcilio Júnior EXECUTIVE BOARD Ultracargo Eduardo de Toledo Market Director Ricardo Isaac Catran Director of Administration and Control João Marcos Cazula EXECUTIVE BOARD Ultrapar Pedro Wongtschowski Chief Financial and Investor Relations Officer André Covre of Ultragaz Pedro Jorge Filho of Oxiteno João Benjamin Parolin of Ultracargo Eduardo de Toledo of Ipiranga (since May 14, 2008) Leocádio de Almeida Antunes Filho EXECUTIVE BOARD Ultragaz Pedro Jorge Filho Administrative Director and Marketing Cynthia May Hobbs Pinho Director of Market Relations Wagner Dias do Patrocínio Director of Operations Oswaldo Francesconi Filho Market Director Paulo José Marques Soares Plínio Laerte Brás Leandro Del Corona EXECUTIVE BOARD Ipiranga Leocádio de Almeida Antunes Filho Marketing Director Ricardo Carvalho Maia Director of Operations José Augusto Dutra Nogueira financial board Chief Financial and Investor Relations Officer André Covre Director of Treasury and Information Technology Marcello De Simone Accounting Director Roberto Kutschat Neto 33
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