Culture and corporate governance go hand in hand

Conducting business in Latin American countries seems like the next big step for many companies. Countries like Brazil, Peru and Colombia remain very attractive to foreign investors who flood these regions to set up shop in both public and private sectors.

Many businesses fail to take into consideration the cultural aspects of carrying out business in a different country. Whether it is dealing with the government, implementing an effective compliance program, or keeping abreast of new policies, a successful venture depends on how the business interacts with its new environment.

The Association of Corporate Counsel (ACC) held a panel discussion at its annual meeting in Denver earlier this week that addressed the issues foreign businesses face when operating outside of their jurisdiction.

Luis Ortega, a panelist and senior manager at Deloitte’s Forensic and Dispute Services practice in Buenos Aires, says that Brazil remains one of the most difficult places to set up business due to the heavy regulatory environment and the series of steps that can take time to. Lengthy processes may seem discouraging to investors, but it is all part of the region’s culture, Ortega says.

However, there are ways to adapt and push a business opportunity once the corporate secretary gets involved.
‘You have to understand the mindset in some of these countries. There is a lot of bribery and scandal going on,’ says Rodolfo Rivera, another panelist and regional counsel at Fidelity National Financial Title International, providers of title insurance. ‘The fact that there are cultures (in Latin America) that pay high amounts in gifts to officials and others, means general counsels and corporate secretaries have to step up their governance measures.’

Rivera explains that the practice of exchanging gifts is a major concern in Brazil; governance practices and compliance programs should be modified and made stronger to reflect the cultural side of these economies. You have to understand that communication is the key to good governance but if you can’t communicate your governance polices then you won’t have any governance at all,’ he adds.

Rivera notes that corporate secretaries play a critical role in facilitating the dialogue between the various departments. He advises that corporate secretaries should hire cultural consultants who can provide information to the board and employees about the country they are entering.  Also, having a personal connection or acquaintance in the prospective country is important because they can help translate laws and explain them better to the legal department. ‘Try to avoid using the internet for research; it is better to have a local educate you about certain topics. For example, there are ACC members all over the world who you should rely on to provide accurate information.’

Finally, corporate secretaries can provide regular cross-cultural training opportunities to senior managers and employees, which can familiarize them with the new culture and, once understood, this can lead to effective communication.

As Corporate Secretary previously reported, a report released earlier this month by JPMorgan’s Depositary Receipts business calls for companies based in Latin America to continue improving governance practices as the competition for global capital intensifies. The survey showed that investors in North America and Europe remain optimistic about the overall investment opportunities across Latin America.