CVM probes possible payment to ex-Vale chair

The Securities and Exchange Commission of Brazil (CVM) opened an administrative proceeding Wednesday (8) to examine information published by Valor last Monday that former Vale board chair Daniel Stieler may have reached a legal arrangement to receive financial compensation. Stieler formally resigned Monday as both board member and chairman of the mining company. The CVM proceeding was opened after an investor asked the regulator to investigate whether there had been a possible irregularity in the process involving financial compensation for Stieler. The request cites Article 154 of Brazil’s Corporation Law, which bars company officers and directors from carrying out acts of liberality. Non-compete arrangement Valor found that the compensation would be structured as a “non-compete” legal instrument, commonly used for executives when they leave a company and are barred from working for competitors for a certain period because they hold strategic information from their former employer. In Stieler’s case, because he served as Vale’s board chair for a long period, he holds relevant company information—even more than other Vale board members. Previ to stop nominating Vale chair after 2027 Vale adds reputation to performance reviews Governance specialists heard by Valor said applying a non-compete clause to a board member would be unprecedented. The rule is usually used for officers and other executives involved in a company’s day-to-day operations, but it does not typically apply to board members. One specialist said board members have a duty of loyalty to the company, and resignation does not release them from the obligation to safeguard information. Another specialist said the rationale, although not explicit in the Corporation Law, is that the duty of confidentiality survives the end of the position. The information belongs to the company, not to the board member, and confidential information remains confidential after the mandate ends. The purpose of Article 155 of the Corporation Law is to protect the company, the specialist said. If that duty ended with the mandate, a board member could simply resign to disclose or use the information, the person said. Valor did not have access to the terms of Stieler’s termination agreement, and none of the parties involved in the discussion over the executive’s removal has commented on the matter. Valor contacted Vale, Stieler, board members, and Previ–the pension fund for employees of Banco do Brasil–which requested Stieler’s resignation, but all declined to comment. Previ said it has no details about a possible agreement with Stieler. Vale has not made public any details of Stieler’s termination document so far. Compensation Vale’s board chair earns about R$3.1 million a year, or roughly R$258,000 a month. Some boards at large publicly traded companies in Brazil pay more because they include variable compensation, which is not the case at Vale. At the mining company, board members receive “pro labore” compensation. The investor who filed the request with the CVM argues precisely that there would be no reason for any payment after Stieler left the company on Monday. Valor found that the amount to be paid to Stieler would exceed one year of “pro labore” compensation, but neither Vale nor Stieler confirms or denies the information. The administrative proceeding opened by the CVM is the first step in the review and will analyze the information available. If there are sufficient elements, the investigation could become an administrative sanctioning proceeding, known as a PAS, once a formal accusation is made.