Overview

Corporate Governance Model

The corporate governance model adopted by Cielo includes principles concerned with ethics, transparency, equity, accountability and corporate responsibility, essential for the sustainability of any business and in line with the best current corporate governance practices.

Cielo incorporated strict corporate governance standards into its values and daily business, voluntarily, which exceed the requirements of law, always ensuring the practice of ethical and sustainable conduct.

As Cielo believes that a solid governance model inspires greater confidence in the market under several aspects, one of the Company’s goals is the continued improvement in pursuit of the most advance governance level, aiming at maintaining a proper balance in the allocation of rights, powers, obligations and responsibilities amongst all the stakeholders, and, a result, maintain a healthy and efficient operation, thus, generating value in the long term.

Cielo adhered to the BM&F Bovespa’s “Novo Mercado” on June 29, 2009, bound to the Market Arbitration Panel, pursuant to the arbitration clause provided for in its Bylaws. It is worth pointing out that the listing in this segment implies to adopt a set of corporate rules, which enhance shareholders’ rights, besides a more transparent and comprehensive disclosure policy.

The Company’s American Depositary Receipts (ADRs), Level 1 have been traded since 2011 at the International OTCQX market, the US market premium segment, which recognizes major international companies of other securities traded in the US OTC market for the quality of their operational businesses, excellent disclosure of information and listing in qualified foreign stock exchanges.


Main Initiatives in Corporate Governance

For Cielo, the governance system optimization is one of the paths to achieve greater efficiency and add value to the Company, keeping the stakeholders’ confidence high.

In this regard, the main initiatives adopted by the Company to ensure a solid governance model are:

  • The Board of Directors shall have three independent members, which is composed by a total of  11 members;
  • The positions of Chairman of the Board of Directors and Chief Executive Officer shall be held by different persons, pursuant to the Company’s Bylaws;
  • A Corporate Governance Department shall be created which will report to the Chief Executive Officer;
  • Yearly carry out a self-evaluation of the Board of Directors, with mechanisms comprising a joint and individual approach, conducted by the Corporate Governance Department, with the participation and direction of the Corporate Governance Committee Coordinator (an independent member of the Board of Directors);
  • Conduct a periodic external evaluation led by external consultant, directed by the Corporate Governance Committee Coordinator and supported by the Corporate Governance Department;
  • A corporate governance electronic portal shall exist to restrict the exchange of information with members of the Board of Directors and Advisory Committees;
  • Establish a fixed schedule of recurring issues to be discussed at the Board of Directors and an annual calendar or ordinary meetings of the Board of Directors, Fiscal Council and Advisory Committees;
  • Implement a “Resolution Proposal” to clearly formalize the Board of Directors’ decision-making process;
  • Determine the time estimated and monitor the time spent to discuss the issues of the agenda at the Board of Directos meetings, aiming at optimizing and ensuring the discussion of strategic issues in referred body;
  • Be committed with diversity at senior management;
  • Provide for governance guidelines of the Company and its aligned subsidiaries by means of corporate documents (Bylaws, Shareholders’ Agreements and Charters);
  • Bi-annually periodically revise policies, rules and procedures;
  • Provide handbook for shareholders’ attendance at meetings;
  • Have a Code of Ethics, continuously improved by means of its employees’ contribution, which includes a set of business practices and procedures and relationship amongst employees, clients and suppliers, besides a specific Code of Ethics defining the guidelines for its suppliers’ professional conduct;
  • Have an Ethics Channel which may be accessed by means of a specific Website or 0800 toll free number, operated by an independent company, which ensures confidentiality, and if desirable, – anonymity to those wishing to inform any deviation of conduct, whose coordination to check records is under the responsibility of the Internal Audit area, which is independent from the Company’s Board of Executive Officers, which reports all the activities related to the verification of denunciations received  until the conclusion of each case, monthly to the Audit Committee and half-yearly to the Board of Directors;
  • Have a “Related Parties Transaction Policy and situations involving conflict of interests”, whose guideline is to ensure that the Company’s controlling shareholders do not take part a priori in decisions in which they can be benefited, composed of a set of rules which includes not only  prevailing laws providing for this issue, but also the best corporate governance practices.

Following carefully, without exceptions, this set of practices confers strength and reliability to Cielo in the long term.


Corporate Governance Department

Cielo’s Corporate Governance Department was created in 2014, an independent body, liable for (i) Cielo promoting the strict compliance with the best governance practices, (ii) ensuring the transparency of information provided to the Company’s governance bodies, (iii) ensuring the observance to the system adopted by the Company in the decision-making process, ensuring the interests and the quality of the Company’s decision-making process, contributing to its best performance and to reduce the risk of business.


Corporate Governance Structure

The Company is managed (i) by the Board of Directors, composed of, at least, seven (7) and, at most, eleven (11) members elected at the General Meeting, with a combined two-(2) year term of office and re-election is authorized; and (ii) by the Board of Executive Officers, composed, of at least, two (2) and, at most, eight (8) members, one (1) Chief Executive Officer, one (1) Investor Relations Officer and up to six (6) Officers without specific designation, elected by the Board of Directors, with two-(2) year term of office, and re-election is authorized. The Executive Officers are authorized to cumulate positions, pursuant to the Board of Directors’ resolution.

The Company’s Bylaws accept the creation of technical and advisory committees, referred to as advisory committees or forums, which are supporting instruments to enhance the quality and efficiency of the Company’s Management bodies, so that to maximize the Company’s value, and accordingly, for shareholders, always observing the principles and the best corporate governance practices.

The installation of Advisory Committees and Forums shall be incumbent upon the Board of Directors and/or the Company’s Board of Executive Officers, where applicable, only the Audit Committee is permanent.

The Company currently has the following committees and forums:

a) Board of Directors’ Advisory Committees: (i) Audit Committee; (ii) Finance Committee; (iii) Corporate Governance Committee; (iv) Personnel Committee; (v) Sustainability Committee.

b) Board of Executive Officers’ Advisory Forums: (i) Issuer Risk Forum; (ii) Disclosure Forum; (iii) Ethics Forum; (iv) Expenditure Forum; (v) Going-Concern Management Forum; (vi) Social Investment Forum; (vii) Prices Forum; (viii) Projects Forum; (ix) Diversity Forum; (x) Risks Forum.

The responsibility, structure and operation of the Advisory Committees are provided for in the charters of each Advisory Committee, which were approved by the Company’s Board of Directors.

Likewise, the responsibility, structure and operation of Forums are provided for in the charters of each Advisory Forum, which were approved by the Company’s Board of Executive Officers.

The Company’s Bylaws provides for eventual installation of a Fiscal Council, an independent surveillance body of the Executive Board and of the Board of Directors, which is not permanent, with duties and powers conferred by law. Since it is not permanent, the Company’s Fiscal Council may be installed by a General meeting upon shareholders’ request, in the assumptions provided for by law.

Currently, the Company has a Fiscal Council installed at the Annual, Extraordinary General Meetings held on April 8, 2016.


“Novo Mercado” – New Market

Cielo’s stocks are listed in the “Novo Mercado” segment destined to the trading of companies’ shares, which voluntarily adopt corporate governance practices additional to those required by Brazilian laws. The listing in this special segment implies to adopt a set of corporate rules, which increase shareholders’ rights, besides the adoption of a more transparent and comprehensive disclosure policy.

Among the voluntary practices assumed by Cielo, we point out:

  • A capital stock solely composed of voting right common shares;
  • 100% tag along, i.e., in case of sale of control, all shareholders are entitled to sell their shares by the same price tendered to controlling shareholder;
  • Need rule of a public tender offer in the event of delisting or termination of agreement with  BM&FBOVESPA, to buyback shares from all shareholders by at least, the economic value;
  • Board of Directors composed of, at least, five members, 20% of them are mandatorily independent board members, with term of office of at most, two years;
  • Rule to maintain, at least, 25% of free float;
  • Disclosure of complete financial information, including quarterly reports with statements of cash flows and consolidated reports reviewed by an independent auditor;
  • Availability of annual financial reports under an internationally accepted standard;
  • Mandatory monthly disclosure of trading with the Company’s securities by its officers, executives and controlling shareholders;
  • Adhesion to the arbitration clause.

Related Party Transaction Policy

We strictly follow our related party transaction policy, which mandates that our controlling shareholders do not participate in decisions they can benefit from. An example was that the resolution on Cielo’s minority interest in Stelo was made solely by independent members of the Board, without participation of members representing Cielo’s controlling shareholders—namely Banco do Brasil and Bradesco—, which also control Stelo. Following the same principle, only independent members and Bradesco representatives voted on the creation of Cateno, after the association between Cielo and Banco do Brasil announced in November 2014.