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4.1 Corporate Governance Structure and Good Practices
The diagram below features the organizational structure and the official committees and councils responsible for supervising, implementing, and auditing Copel's economic, environmental, social, and related policies:
In 2006, Copel made strides towards improving its Corporate Governance practices with a view to growing and generating value to the Company's shareholders and other stakeholders. In previous years, Copel had already implemented the Policy of Disclosure of Material Information and the Policy of Negotiation of Own Initiative Actions and instituted the Permanent Committee for Disclosure of Material Acts and Facts. In addition, the Company has adopted the Good Practices Code of the Brazilian Institute of Corporate Governance - IBGC as a guideline, which shall be gradually implemented by 2007, and has also made widely public the procedures for improving its practices by means of managerial seminars and of a new intranet page about corporate governance.
4.1.1 General Shareholder's Meeting
The General Shareholders' Meeting is the forum where shareholders have the power to decide all business regarding the object of the Company and make resolutions considered appropriate to its defense and development.
The General Shareholder's Ordinary Meeting takes place in the first quarter of each year, however shareholders can meet, whenever they see it necessary, in any given date, in General Shareholder's Extraordinary Meetings.
4.1.2 Board of Directors
The members of the Company's Board of Directors are elected for two-year terms, and may be reelected. One of its members is a Company employee, appointed by the other employees. Among chief officers, only the Chief Executive Officer is a member of the Board of Directors, acting as chairman of the Board. Out of the nine members of the current Board of Directors, five are considered independent. The only technical requirement for the formation of the Board of Directors is that one of its members must be a financial expert, pursuant to the Sarbanes-Oxley Act, so he or she can be the Chairman of the Audit Committee, a permanent and advisory body, which reports directly to the Board. Therefore, with regards to economic, environmental, and social opportunities, there is no specific standard or requirement. However, the administration of the Company analyses these aspects in its decisions, as well as the more relevant issues, depending on the matter or amount involved, are submitted to the deliberation of the Board of Directors.
4.1.3 Audit Committee
The Audit Committee is composed of three independent members who are also members of the Board of Directors, pursuant to the Sarbanes-Oxley Act, and who hold two-year terms. Among its duties, set forth in its charter, the Committee is responsible for reviewing and supervising the internal control and risk management procedures, ensuring the quality and efficiency of such procedures. In the performance of its duties, the Committee must report to the Company's management offices any potential violation of legal and regulatory rules which may place the continuity of the business of Copel or of its wholly-owned subsidiaries at risk.
The Committee evaluates aspects such as efficiency in the use of resources and in setting controls that protect the Company against potential losses in light of the risks of the respective activities; the issue of reports on the suitability of reporting and decision-making procedures; and compliance of the Company's operations and business with the law, regulations, and respective policies.
4.1.4 Fiscal Council
The members of the Fiscal Council are also elected at a general shareholders' meeting. It is a permanent body composed of five members and five alternates, who hold one-year terms. Its role and powers are set forth by Copel's by-laws, by its own charter, and by the Corporate Law. Its main duty is to review and issue opinions on the Company's quarterly and annual financial statements. Under special circumstances, however, it may gather to address other issues within their powers. The members of this Council, or at least one of them, participate in general shareholders' meetings, in Board of Directors' meetings, and in Audit Committee's meetings that relate to issues pertaining to their field.
The Company is promoting a deeper involvement of the Fiscal Council and Board of Directors in the decision making process, which will improve its governance level.
4.1.5 Board of Officers
The six members of the Board of Officers are elected by the Board of Directors for three-year terms. They are responsible for executive duties within the Company, and are exclusively charged with representing it. Their individual powers, duties, and responsibilities are set forth by the Company's by-laws, and their conduct is regulated by an internal charter. The compensation of executive officers is not tied by the Company to the achievement of financial and non-financial goals.
4.1.6 Code of Conduct
In 2003, Copel instituted its Code of Conduct, based on its corporate values and culture. This tool has been consolidated dynamically, in a way that reflects the integrity of its procedures on all its relations, both internally with the workforce, or with all other stakeholders. This document has been published and made available, in full, at the Company's website (www.Copel.com). Its articles and sections have been discussed with the stakeholders, including employees, suppliers, clients, and consumers. The Code shall be extended to other stakeholders by the end of the implementation cycle of Standard AA 1000, scheduled for 2007.
In light of the Universal Declaration of Human Rights and the International Labor Organization's conventions about basic human rights, Copel's Code of Conduct deems unacceptable any kind of harassment, particularly those of moral and sexual nature, and any kind of discrimination. Copel's support and defense of human rights are further attested by the inclusion of the ten principles of the
Global Compact in the Company's Code of Conduct. These rights are also ensured by means of labor practices, in Copel's relations with suppliers, with the community within which it operates, and with all stakeholders. Bribery, corruption, or attempted misleading are also deemed unacceptable under the Code of Conduct for employees and managers, for own benefit or for the benefit of the Company; unethical practices are described in detail. Copel's goal for 2006, to discuss the Code of Conduct with 100% of its employees emphasizing human rights, was accomplished, culminating with the distribution of the ethical kit containing the Code of Conduct and a folder teaching how to use the Confidential Reporting Channel. Furthermore, 35% of the workforce received training in the Code of Conduct, totalizing 16,308 hours of training.
4.1.7 Ethical Orientation Council
Simultaneously to the implementation of the Code of Conduct, an Ethical Orientation Council was set up. Its goal is to discuss and to guide Copel's actions and to review any cases submitted to it, proposing appropriate penalties in order to ensure that the Company is permanently in compliance with sound moral principles in the conduct of business, striving to make public and to effectively enforce the Code of Conduct among Copel's workforce. The Council is composed of 9 members, 8 of which are Company employees, from different categories, and is led by a representative of civil society, thus guaranteeing greater transparency and participation of the stakeholders.
4.1.8 Confidential Reporting Channel
Copel has established a policy to receive confidential reports on violations of the Code of Conduct, of legal provisions, and of internal rules concerning accounting, internal controls, or applicable audit issues. Accordingly, the Company has set up a Confidential Reporting Channel, under the responsibility of the Audit Committee and of the Board of Directors.
Reports are received and registered by the Ombudsman Office and later addressed by Internal Audit, in an ethical, legal, and confidential manner. The adopted policy complies with the Company's corporate governance procedure improvements and with the requirements of the Sarbanes-Oxley Act for the Audit Committee, encouraging the responsible and confidential use by stakeholders and ensuring non-retaliation. During the year of 2006, a total of 37 utilizations were registered. Access to the Channel can be made by phone 0800 643 5665 or through P.O. Box 5505 - Curitiba PR.
4.1.9 Permanent Committee for Disclosure of Material Acts and Facts
The Committee for the Disclosure of Material Acts and Facts was set up pursuant to Brazilian Securities and Exchange Commission - CVM Instruction no. 358/02, with the goal of preserving Copel's image and the credibility among investors, analysts, and market participants in general, in addition to promoting the disclosure and distribution of information in a proactive, transparent, complete, and equitable manner, in compliance with the applicable legal and regulatory requirements. The Committee must be composed of at least tow representatives of the Chief Financial and Investor Relations Office, tow representatives of the Chief Executive Office, one representative of the Juridical Office, and one coordinator. Each representative must have a substitute in case of absence. Currently the Committee has 8 members, and 8 substitutes. Its main duty is to assist the Chief Financial and Investor Relations Officer in enforcing Copel's Disclosure Policy. Its members are charged with reviewing and approving the information to be disclosed to the capital markets by any means.
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