Corporate Governance

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“BUSINESS
MAY BE
FLEETING, BUT
VALUES LAST
FOREVER”

A family business with professional management, Algar Telecom is constantly improving its governance practices, the basis for its growth and longevity.

We believe that business may be fleeting, but principles and values last forever. As a result, our transparent attitude and ethical conduct since the organization of the Algar Group, over 85 years ago, are reflected clearly in our Corporate Governance practices. In fact, our operations received three major national awards in 2014: The Best Managed Company (Telecom industry), granted by Época 360º magazine jointly with Fundação Dom Cabral; The Most Conscious Company in the Governance category (Telecom industry), from IstoÉ magazine and The Best Annual Report in the Public Company category – with net revenue up to R$3 billion, from ABRASCA [Associação Brasileira das Companhias Abertas, or Brazilian Association of Public Companies].

An unlisted public company since 2007, we adopt practices that go beyond those adopted by listed companies in many cases. Our management model has tools to ensure safe decision-making, as well as to identify, assess, monitor and manage corporate risks. To that end, we use the most modern and sophisticated systems, controls, policies and management indicators.

We belong to a family business with professional management, and our ever-improving governance practices form the basis for the Company’s growth and longevity. We have clear, sound guidelines serving as a basis for our long-term perspective. Our commitment to Corporate Governance and adoption of best practices has made the Algar Group a benchmark; as a result, it is among the 14 Latin American companies accredited by the Latin American Companies Circle of Corporate Governance, an initiative of the Organization for Economic Cooperation and Development (OECD) and the International Finance Corporation (IFC/World Bank).

GOVERNANCE STRUCTURE

Our corporate governance structure was designed to create processes and make the Company increasingly solid and sustainable, by serving the long-term interests not only of shareholders and managers, but also of all stakeholders.

SHAREHOLDING STRUCTURE

In January 2014, Algar Tech, our Integrated ICT Solutions and BPO subsidiary, acquired Asyst, a service desk company with operations in Brazil, Chile and Argentina, to strengthen both its managed ICT services portfolio and its position in Latin America. That was a major step toward expanding our business internationally, a process we started in 2013. That acquisition added 170 large and medium-sized clients operating in Brazil and other countries to Algar Tech’s client base, as well as over 2.6 thousand new associates, based in São Paulo, Argentina and Chile, to our workforce. CADE (Conselho Administrativo de Defesa Econômica, or Administrative Council for Economic Defense, the Brazilian competition regulator) has approved the transaction.

BOARD OF DIRECTORS

Algar Telecom’s Board of Directors stands out because it is composed mostly of independent members. Currently, seven of the eleven Board members are no Company executives and have no business ties with it. No single person may hold both an Officer and a Director position. All Board activities and responsibilities are outlined in our Internal Rules and Regulations, based on the Brazilian Corporations Act, our Bylaws and IBCG’s (Instituto Brasileiro de Governança Corporativa, or Brazilian Corporate Governance Institute) Code of Best Corporate Governance Practices.

The Board meets six times a year, according to an annual topic-based schedule, and at such other times as may be necessary.

Members of the Board of Directors*

ADVISORY COMMITTEES

Algar Telecom’s Board of Directors is supported by three advisory non-decision-making committees: Audit and Risk Management; Corporate Governance and Human Talents. The committees are formed by Board members and independent experts. The members are appointed annually by the Board. The Committees’ activities and responsibilities, as well as their relationships with the Board of Directors, the Board of Executive Officers and other corporate bodies, are set forth in our Internal Rules and Regulations approved by the Board of Directors and based on the recommendations of IBCG’s Code of Best Corporate Governance Practices.

Audit and Risk Management

This Committee is meant to ensure the quality, integrity, transparency and credibility of the Company’s Financial Statements. It also ensures the effectiveness of internal and independent audit processes, and internal controls, as well as compliance with the applicable legislation. Finally, it ensures that corporate and operational risks are managed appropriately. The Committee meets four times a year.

Eliane Garcia Melgaço
Committee Chair and member of the Board of Directors
Gilberto Loureiro
Independent Accounting Expert
Rubens Della Volpe
Independent Risk Management Expert
Sérgio Alair Barroso
Member of the Board of Directors

Human Talents

Its mission is to support the execution of a policy that values and promotes the development of Human Talents, in keeping with the best people management practices. It monitors organizational development, leadership training and development (specifically through UniAlgar, the Algar Group’s corporate university), the compensation policy and the organizational climate.

Eliane Garcia Melgaço
Committee Chair and member of the Board of Directors
Silvio José Genesini Júnior
Member of the Board of Directors
Celia M. Ferraz
Independent Expert
Cícero Domingos Penha
The Algar Group’s VP-Human Talents

Corporate Governance

The Corporate Governance Committee ensures that the best Corporate Governance practices–which strengthen Algar Telecom’s vision of the future and enhance its long-term prospects–are effectively adopted and improved continuously.

Eliane Garcia Melgaço
Committee Chair and member of the Board of Directors
Walter Fontana Filho
Member of the Board of Directors
Helio Marcos Machado Graciosa
Member of the Board of Directors
Luiz Alexandre Garcia
Member of the Board of Directors
Alexandrino Garcia Neto
Member of the Board of Directors

INTERNAL AND INDEPENDENT AUDIT

We have an internal audit team and an independent audit team. Both audit teams report directly to the Board of Directors through the Audit and Risk Management Committee and to Algar in functional terms. The internal audit team assesses controls and checks for compliance with internal standards, policies and values. It follows an annual plan and schedule set jointly with the Board of Directors. Independent auditors express an opinion on the Group’s financial statements based on audit conducted in accordance with Brazilian and international standards. Algar Telecom has been audited by EY (Ernest & Young) since 2014, in line with the practice of changing independent auditors every five years.

STATUTORY AUDIT COMMITTEE

The Company created the Statutory Audit Committee, a non-permanent body elected by the Annual General Meeting, in 1997 to ensure even greater transparency and quality for our results. It is composed of three effective members and their respective alternates, each serving a one-year term of office that ends at the first Annual General Meeting following that at which he/she is elected. The Statutory Audit Committee has the powers provided for by Law. In 2014, it met four times.

Members of the Statutory Audit Committee*

Geraldo Batista Caetano
Gilberto Saramago Gatti
Dilson Dalpiaz Dias

* on 12.31.2014

BOARD OF EXECUTIVE OFFICERS

OTHER GOVERNANCE PRACTICES AND BODIES

Board of Users

The Board of Users is an advisory body comprised of clients. It guides, examines and assesses our service quality, and suggests improvements. It has existed since 1999, four years before ANATEL (Agência Nacional de Telecomunicações, or Brazilian National Telecommunications Agency) determined the creation of Boards of Users through the Regulation for Boards of Users of Fixed Switched Telephone Services.

Associates’ Committee

It is composed of professionals from different Company departments. The Committee promotes interaction and rapport among associates, the Human Talents department and the Board of Executive Officers, and plays an active role in collective bargaining processes.

Code of Conduct

Introduced in 1996, the Code of Conduct is meant to ensure the highest level of integrity and corporate ethics by serving as a reference for all associates and partners in the different interactions involving their activities, as well as internal and external relationships. It was last updated in December 2014. In its 3rd edition, the following items were included: (i) the introduction of the Integrity Channel to report behaviors in conflict with the Code; (ii) the creation of the Integrity and Compliance Committee; (iii) anti-corruption rules; (iv) digital conduct rules; and (v) the obligation for all Algar Group associates to sign the Instrument of Commitment to the Code.