Story by The Wall Street Journal

Brazil’s stock exchange operator is proposing, with the support of the market regulator, a series of recommendations to improve corporate governance at state-run companies amid a corruption scandal at oil company Petroleo Brasileiro SA.

Brazil has 30 publicly traded companies that are run by the government, eight of which are in the benchmark Ibovespa stocks index, according to a presentation made Thursday at the stock market in São Paulo, which was led by Leonardo Pereira, head of Brazil’s regulator and Edemir Pinto, president of stock market operator BM&FBovespa.

The recommendations, which include more transparency and better internal controls, won’t be obligatory and are aimed at state companies, whether they trade publicly or not. State companies represent one quarter of average daily trading volume, according to the presentation.

The proposals come as Petrobras, as the oil company is known, is bogged down in a kickbacks-and-bribery scandal in which dozens of prominent politicians have been implicated.

“A significant part of the problems could have been mitigated if we had more transparent practices,” Mr. Pereira said.

The selection and hiring of executives at the companies are another focus of the initiative, Mr. Pinto said.

“It doesn’t help to have rules if you don’t work to ensure that the best people are in the administrative bodies of these state companies,” he said.

The regulator and the market operator are studying a series of proposals, and will discuss them with state companies and other market entities on April 22, Mr. Pinto said. The details of the proposals will be made public in late June, said Flavia Mouta,managing director of issuer regulation at the stock exchange.

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