Brazilian CEOs Head for Exits as Economy Takes Toll at the Top

  • At least 40 top Brazil-based companies replaced CEO in 2 years
  • Turnover can signal economic recovery: Korn Ferry’s Virchaux

It’s not just your imagination. Chief executive officers at Brazil’s most-prominent companies really are stepping down in droves. 

While reasons vary, intense pressure from the worst economic crisis in more than a century combined with tougher governance requirements in a country torn by corruption scandals, is contributing to the changes at the top. At least 40 of the 110 Brazil-based companies with an enterprise value of $1 billion or more installed a new CEO in the past two years, from telecommunications giant Oi SA to aircraft maker Embraer SA, according to Bloomberg data.

In a country that has undergone a jolting change in government, with an impeachment trial and a wide-ranging corruption investigation, board members have become more careful about making sure they’re representing shareholders’ interests, said Adeodato Volpi Netto, head of capital markets at Eleven Financial Research.

“Periods of crisis tend to drive up the exit of C-levels,” Volpi Netto said in a phone interview. “This was intensified this year by a series of events in which you have a serious conflict between the interest of the company and the ones of shareholders and boards.”

While many of the transitions have been orderly and planned, some have been surprises. A few of the most notable changes this year:

  • Natura Cosmeticos SA CEO Roberto Oliveira de Lima resigned abruptly in October, a day before the maker of beauty products reported earnings that missed analysts’ estimates.
  • Amos Genish, the CEO who’d been credited with guiding Telefonica Brasil SA through the recession, announced plans to leave at the end of the year for personal reasons.
  • Estacio Participacoes SA, the Brazilian for-profit education provider, has been through five CEOs this year alone amid the tumult of a bidding war over the company.
  • Oi, mired in bankruptcy proceedings, lost CEO Bayard Gontijo in June after a clash with investors over how to settle with debtholders.
  • Last week, Itau Unibanco Holding SA, Latin America’s largest lender by market value, picked Candido Bracher to replace Roberto Setubal as CEO in April.

Then there’s Embraer. In June, the company said Frederico Curado would step down as CEO for personal reasons. Fifty days later, its shares dropped the most since the aftermath of the Sept. 11 terrorist attacks after a surprise second-quarter loss that included a provision related to a probe under the U.S. Foreign Corrupt Practices Act.

In October the company, which admitted to being involved in a conspiracy to violate U.S. anti-bribery laws, agreed to pay $205 million to settle the probes.

While Embraer emphatically denied any connection between Curado’s exit and the probe, investors’ perception is that Brazilian companies and executives are taking preventive measures to protect themselves against potential conflicts of interest, Volpi Netto said.

Embraer declined to comment on Curado’s exit.

While investors tend to react negatively to a change in command at first, executive turnover actually can be a sign that the economy is on the verge of recovery, Korn Ferry International’s president for South America, Dominique Virchaux, said in an interview.

The executive search company saw an increase in its activities in Brazil and Argentina in August and September, Virchaux said. The requirements for the job are changing, which may explain some of the turnover, he said.

“In the last five years, a successful CEO was about to manage within an environment that was rather restricted, protective, limiting risk and limiting investment,” he said. “Now most of the organizations in Brazil, when they look at what they will do in the next five years, they will have to invest, they will have to take risk, they will have to move fast. The qualities you need to do that are very different.”

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