Activism failure of state-owned pension funds with board seats in Brazil

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Luiz Philippe Antoun de Almeida ORCID logo, Ricardo Pereira Câmara Leal ORCID logo

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There is no clear positive and significant impact of institutional investor activism in Brazil possibly due to lack of skills, portfolio diversification motivations (Sonza & Granzotto, 2018), and conflicts of interest (Maranho, Leal, & Bortolon, 2020). This article investigates two high profile activism cases to assess these conjectures and address two very large and widely held Brazilian companies, which had good corporate governance indicators and were not state-controlled or closely regulated. The cases involve the two largest Brazilian pension funds, both sponsored by state-owned companies because their size and importance would make a positive outcome more likely. Yet, in both cases, the pensions funds failed in their attempts, even when acting jointly with other foreign and domestic institutional investors. The conclusion suggests that these investors may lack skills to assess the likelihood and consequences of events that occurred soon after their investment and that changed the fundamental nature of their investees. This study places the lack of activism success under the general discussion of the challenge of costly active versus passive portfolio management. Finally, there was no evidence of conflicts of interest and political alignment of these state-related pension funds in these two activism situations.

Keywords: Activism, Institutional Investors, Pension Funds, Emerging Markets, Brazil

Authors’ individual contributions: Conceptualization – R.P.C.L.; Methodology –L.P.A.A. and R.P.C.L.; Investigation – L.P.A.A.; Formal Analysis – L.P.A.A.; Writing – L.P.A.A. and R.P.C.L.; Supervision – R.P.C.L.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: Ricardo P. C. Leal thanks grant 302691/2010-3 from the Brazilian National Scientific and Technological Development Council (CNPq).

JEL Classification: G32, G34

Received: 21.08.2020
Accepted: 21.10.2020
Published online: 23.10.2020

How to cite this paper: de Almeida, L. P. A., & Leal, R. P. C. (2020). Activism failure of state-owned pension funds with board seats in Brazil. Corporate Board: Role, Duties and Composition, 16(3), 52-62.