Governance structure
The Gerdau Group's corporate governance structure is based on a Board of Directors, an Executive Committee — which is assisted by a Strategy Committee and Excellence Committees and coordinates the work of the Officers — and a Board of Auditors.
The Board of Directors is comprised of eight members whose primary responsibility is to develop the Gerdau Group corporate strategy. This includes defining the direction of the business, acceptable levels of risk and growth policies. The Board has three independent members who, through their external insights and experience, help lead the decision-making process.
Board meetings are held at least four times a year. The Group's Executive Officers are invited to present and discuss strategic issues relevant to their areas of operation to provide the independent Board members with a better understanding of the Group's operations and market conditions.
Business management is the responsibility of the Officers, through an Executive Committee that coordinates the daily business operations and acts as a liaison between operations and the Board of Directors. There are five business operations, defined according to product line and/or geographical location of the units: Gerdau Long Steel (Brazil), Gerdau Specialty Steel (Brazil), Gerdau Açominas - Ouro Branco (Brazil), Gerdau Ameristeel (Canada and the United States) and Gerdau South America (Argentina, Chile and Uruguay).
Each of the nine Executive Committee members — a president and eight vice presidents — is responsible for specific processes and/or business operations. The processes are: sales and marketing, industrial, logistics and transportation, raw materials, procurement, operational planning, human resources and organizational development, finance and investor relations, accounting and audit, legal, management technology, planning and strategic management, business development, information technology, and corporate communications.
To assist the Board of Directors in the planning of the Group's strategy, the Strategy Committee includes Executive Committee members and the officers in charge of the main operations. The Excellence Committees provide support to the business operations and functional processes by encouraging debate and exchanging best practices.
The Board of Auditors was created five years ago at the two publicly traded companies in Brazil and includes representatives elected by minority shareholders. Among other responsibilities, they are in charge of monitoring the actions of the Board of Directors and controlling the accounting operations of both companies.
The corporate governance structure at the Gerdau Group follows the model below:
Gerdau companies
"Gerdau Group" refers to all the companies that form the Gerdau economic group and that are controlled by the same shareholders.
The two publicly traded companies controlled by the Group in Brazil — Gerdau S.A. and Metalúrgica Gerdau S.A. — are part of the level 1 corporate governance program of the São Paulo Stock Exchange (Bovespa). This program establishes a set of standards for trading in capital markets, such as the level of transparency in the disclosure of information and the number of shares in the hands of minority shareholders.
Gerdau Açominas S.A. is a non-public company that is responsible for the Group's steelmaking operations in Brazil. However, it is committed to upholding the same reporting standards as those of the publicly traded companies. Gerdau Açominas S.A. has a six-member Board of Directors. One of these members is appointed by the Açominas employee stockholding association (Clube de Participação Acionária dos Empregados da Açominas — CEA). The Board members hold quarterly meetings. The management of Gerdau Açominas is carried out through an Executive Committee that coordinates three business operations: Gerdau Long Steel, Gerdau Specialty Steel and Gerdau Açominas - Ouro Branco.
In North America, the Gerdau Ameristeel Corporation was created in October 2002 through a merger between the Gerdau Group's operations in the region and those of Co-Steel. The Gerdau Ameristeel Board of Directors is comprised of nine members, five of them independent. The Board holds quarterly meetings. Gerdau Ameristeel created committees focused on specific areas: audit, human resources, corporate governance, safety, health and the environment. Business management is under the responsibility of an Executive Committee that operates based on industrial process and/or geographic region.
In Argentina, Chile and Uruguay, governance is the responsibility of Operating Committees, which report to the Gerdau Executive Committee.
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| Board of Directors. From left to right: Oscar de Paula Bernardes Neto, Board Member; Germano H. Gerdau Johannpeter, Vice Chairman; Jorge Gerdau Johannpeter, Chairman; Klaus Gerdau Johannpeter, Vice Chairman; André de Lara Resende, Board Member; Carlos J. Petry, Vice Chairman; Frederico C. Gerdau Johannpeter, Vice Chairman; Affonso Celso Pastore, Board Member |
Shareholders' meetings
Once a year, the general shareholders' meeting brings together the shareholders of the Group's companies to analyze and approve financial statements and management reports, decide on the allocation of net income, confirm or supplement the distribution of dividends or interest on capital stock, and elect Board of Directors and Board of Auditors members.
Additional shareholders' meetings may be scheduled to deal with specific topics not covered in the general meetings and which require approval by shareholders.
At Gerdau Ameristeel, the structure is similar to that described above with an annual shareholder meeting and special shareholder meetings. However, these meetings have specific agendas and are adapted to the business and legal systems of North America.
Relationship with independent auditors
The policy ruling the hiring of independent auditors for services not related to external audits is based on the following: auditors should not audit their own work, carry out management functions on behalf of the client, or promote the client's interests. These guidelines are followed by Gerdau's publicly traded companies for the hiring of independent auditors and services not related to external audits, in accordance with security and exchange commission regulations.
Risk management
The Gerdau Group is developing actions to improve risk management practices in its operations. Integrated risk management is an initiative that fosters best corporate governance practices, formalizes risk planning and defines the responsibilities of areas such as process management, internal audit and other relevant areas. The implementation of an integrated system translates into safer monitoring of potential risks and existing controls in each business process.
The integrated Risk Management project, which is overseen by the Board of Auditors, is based on internationally recognized methodologies that comply with the United States Sarbanes-Oxley Act. This law improves the disclosure of information and the commitment of management to internal controls and must be followed by foreign companies listed on United States stock exchanges. Both Gerdau S.A. and Gerdau Ameristeel must comply with the legal requirements, including those issued by the United States Securities and Exchange Commission (SEC), the regulating government body for the capital markets in the United States. For foreign companies with stocks traded in the North American market, the deadline for compliance with the provisions of the Sarbanes-Oxley Act is July 15, 2006. At the Gerdau Group, the process will be completed in 2005.
These initiatives will ensure the development of the Group's corporate governance and risk management processes, improve safety for the operations and increase the quality of information disclosure and financial reports to the capital markets. They will also ensure that international requirements are met.
Operational and administrative restructuring
Since December 2004, the Gerdau Group has been working to restructure its companies in Brazil and other South American countries. The importance of this work is underscored by the plan to increase the Group's presence in South America (see Investments section). Through restructuring, we hope to obtain greater strategic advantages and improve the operating and management efficiency in South America. For that, efforts will be focused on the specialization of different units and business operations. This will be a decisive step in the development of alternatives for the future growth of the Gerdau Group.
On December 3, 2004, the Board of Directors at Gerdau S.A. authorized the implementation of corporate restructuring measures for the Group's companies in Brazil and other Latin American countries in continuation of a process that began two years earlier with the merger between Gerdau S.A. and Aço Minas Gerais S.A. - Açominas. This restructuring resulted in the creation of Gerdau Açominas S.A. in Brazil.
On December 29, the first step in the restructuring process was taken when the dormant holding of Gerdau Participações S.A. was capitalized with the shares of Gerdau Açominas S.A. and a portion of the shares of Gerdau Internacional Empreendimentos Ltda. held by Gerdau S.A., representing 91.5% and 22.8%, respectively of the capital stock for those companies. The shares transferred to Gerdau Participações S.A. correspond to the direct or indirect participating interest of Gerdau Internacional Empreendimentos Ltda. in the capital stock of Gerdau Chile Inversiones Ltda., Gerdau Laisa S.A. and Sipar Aceros S.A.
With the support of independent consultants, management is currently finalizing studies to establish the definitive shareholding structure. The restructuring involves the creation of distinct companies, one for each business operation, involving the operations in Brazil and other South American countries. The new companies will have different operational focuses, such as: long steel, specialty steel, slabs, blooms and billets and distribution services. The new companies will be created after the conclusion of studies and approval by the Board of Directors and shareholders of the companies involved.
The shareholders of publicly traded companies in Brazil and abroad will not be affected by the restructuring. Shareholders will keep their current position and their rights and values will be preserved.
Currently, the structure of the companies that are part of The Gerdau Group¹ is as follows²:
1. Metalúrgica Gerdau stands for all the operations included in its consolidated financial statements.
2. Minus minority interests.
Board of Directors
Chairman
Jorge Gerdau Johannpeter
Vice Chairmen
Germano H. Gerdau Johannpeter
Klaus Gerdau Johannpeter
Frederico C. Gerdau Johannpeter
Carlos J. Petry
Board Members
Affonso Celso Pastore
André de Lara Resende
Oscar de Paula Bernardes Neto
Secretary General
Expedito Luz
Gerdau Executive Committee
President
Jorge Gerdau Johannpeter
Vice Presidents
Frederico C. Gerdau Johannpeter
Senior Vice President
Carlos J. Petry
Senior Vice President
André B. Gerdau Johannpeter
Claudio Gerdau Johannpeter
Domingos Somma
Filipe Affonso Ferreira
Osvaldo B. Schirmer
Ricardo Gehrke
Secretary General
Expedito Luz
Board of Auditors
Metalúrgica Gerdau S.A.
Carlos Roberto Schroder
Domingos Matias Urroz Lopes
Mário Magalhães de Sousa
Substitutes
Pedro Floriano Hoerde
Ruben Rohde
Valmir Pedro Rossi
Gerdau S.A.
José Antônio Cruz de Módena
Peter Wilm Rosenfeld
José Bernardo de Medeiros Neto
Substitutes
Rudolfo Teodoro Tanscheit
Tranquilo Paravizi
BRAZIL
GERDAU AÇOMINAS S.A.
Board of Directors
Chairman
Jorge Gerdau Johannpeter
Vice Chairmen
Germano H. Gerdau Johannpeter
Klaus Gerdau Johannpeter
Frederico C. Gerdau Johannpeter
Carlos J. Petry
Board Member
Marco Antônio Pepino
Substitutes
Claudio Gerdau Johannpeter
Expedito Luz
Osvaldo B. Schirmer
Ruy Lopes Filho
Guilherme Rocha Murgel de Rezende
Secretary General
Expedito Luz
Officers
President
Jorge Gerdau Johannpeter
Vice Presidents
Frederico C. Gerdau Johannpeter
Senior Vice President
André B. Gerdau Johannpeter
Claudio Gerdau Johannpeter
Osvaldo B. Schirmer
Business Operations
Gerdau Long Steel Brazil
Ricardo Gehrke
Executive Vice President
Business Operations
Gerdau Açominas – Ouro Branco
Luiz André Rico Vicente
Executive Vice President
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Business Operations
Gerdau Specialty Steel
Cláudio Mattos Zambrano
Executive Director
Executive Officers
Alfredo Huallem
André Felipe G. Reinaux
André Pires de Oliveira Dias
Cláudio Mattos Zambrano
Dirceu Tarcisio Togni
Érico Teodoro Sommer
Expedito Luz
Fladimir B. Lopes Gauto
Francesco S. Merlini
Francisco Deppermann Fortes
Geraldo Toffanello
Gerson Marcos Venzon
Guilherme C. Gerdau Johannpeter
Heitor L. B. Bergamini
João A. de Lima
João Carlos Salin Gonçalves
Joaquim de Souza Gomes
Joaquim G. Bauer
José Maurício Werneck Guimarães da Silva
Julio Carlos Lhamby Prato
Luiz Alberto Morsoletto (in memoriam)
Luiz Augusto Polacchini
Manoel Vitor Mendonça Filho
Moacir Curi Meneguzzi
Nestor Mundstock
Omar de Oliveira Fantoni
Paulo Ricardo Tomazelli
Paulo Roberto Perlott Ramos
Ruy Lopes Filho
Sirleu José Protti
Tadeu Petterle
CANADA AND THE UNITED STATES
GERDAU AMERISTEEL CORP.
Board of Directors
Chairman
Jorge Gerdau Johannpeter
Board Members
Arthur Scace
André B. Gerdau Johannpeter
Frederico C. Gerdau Johannpeter
Joseph J. Heffernan
J. Spencer Lanthier
Kenneth W. Harrigan
Michael D. Sopko
Phillip E. Casey
Officers
President and CEO
Phillip E. Casey
Vice President and COO
André B. Gerdau Johannpeter
Vice Presidents
Andre Beaudry
Anthony S. Read
Arlan Piepho
Carl Czarnik
Donald R. Shumake
Edward C. Woodrow
Glen A. Beeby
Gregory Bott
James S. Rogers
Jerry Goodwald
J. Neal McCullohs
Mark Quiring
Matthew C. Yeatman
Michael Christy
Michael Mueller
Paulo Fernando Bins de Vasconcellos
Robert L. Bullard
Robert Thompson
Roger Paiva
Tom J. Landa - CFO
Wilburn G. Manuel
William E. Rider
Yuan Wang
CHILE
GERDAU AZA S.A.
Hermann Von Mühlenbrock S.
General Manager
URUGUAY
GERDAU LAISA S.A.
José Pedro Sintas García
Executive Director
Equity Investment
ARGENTINA
SIPAR ACEROS S.A.
Amaury Cordeiro de Oliveira
Executive Director
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