The Board of Administrators or the Flesh is Weak? The dilemma of BRF S.A.

Abstract

Objective and method: This teaching case pictures the Corporate Governance (CG) problems of BRF S.A. triggered by the Brazilian Federal Police’s Operation Weak Flesh. The goal is to encourage discussions on the effectiveness of boards of administrators as CG mechanisms and in the stock investment decision process. The case can be applied in graduate courses, especially in subjects whose contents are related to the Capital Market, Finance, Corporate Strategy and CG, besides undergraduate courses in related subjects. The data on the origin and historical evolution of the company, as well as about the characteristics involved in the case, were obtained from websites, magazine articles and the company website. The information that was collected and transcribed was not adapted. The script and events actually happened. The investor’s situation is fictitious. Results and contributions: The case proposes the exercise of decision making, based on two viewpoints: from the company’s perspective, the Board of Administrators is analyzed as an internal CG mechanism. And from the shareholder’s viewpoint, an investor who trusted that company with his capital reserves. The case permits analyzing the effectiveness of the board of administrators as an internal governance mechanism, the information asymmetry, conflicts of interest and the property structure.