Corporate governance

[G4-34]

Kroton Educacional S.A. is a publicly traded company listed on the BM&FBovespa Novo Mercado. Participation in this segment is voluntary and implies the adoption of a set of good corporate governance practices that go beyond compliance with Brazilian legislation. Company shares are also traded on the New York over-the-counter market. [G4-7]

With the merger between the Kroton group and the Anhanguera group, the shares of the Anhanguera holding company (Anhanguera Educacional Participações S.A.) – which controlled the Anhanguera teaching institutions – were incorporated into Kroton Educacional S.A., with Anhanguera becoming a subsidiary of Kroton. This took place within an absolutely transparent process of corporate governance. The Anhanguera teaching institutions did however maintain their own names, while being incorporated into the Kroton portfolio of units.

Changes took place also in the company's organizational structure. 2014 saw the creation of the Projects, Processes and Integration area, whose main attribution is implementing the integration process between the two companies.

Governance structure

The Kroton Board of Directors, comprising 12 effective members, is responsible for formulating and implanting general policies and directives for the business, including long-term strategies. It also decides on the hiring of independent auditors and oversees the work of company directors. All the board members are elected at the Ordinary General Shareholder Meeting for a unified term of two years, with re-election permitted.

The Executive Board consists of at least four and at most 12 members. They are elected by the Board of Directors for a one-year term, with re-election permitted. Each director may hold up to two positions. The Executive Board is responsible for the day to day running of the business and for the implementation of the general directives established by the Board of Directors. Up to 1/3 of the members of the Executive Board may be members of the Board of Directors.

Four committees provide support for company decision making. Each one of these consists of up to four members elected by the Board of Directors, as follows.

Academic Committee

The body must be familiar with and assess the official Ministry of Education (MEC) ratings issued for the company's higher education courses and institutions. It also monitors the indicators of associated basic level schools and the internal results of the Kroton higher education institutions. When necessary it elaborates reports recommending improvements for the diverse units. The committee was created on May 13, 2013.

Audit Committee

Its main attributions include preventive risk management. The committee must also ensure alignment between financial policies and the strategic guidelines and risk profile of the business. The body reports to the Board of Directors and is responsible for contracting independent audits.

Finance and Human Resources Committee

this committee provides support for the Board of Directors in the approval of strategic planning and oversees the execution of the budget, cash flow and investments made by the company. When requested by the Board of Directors, it also assists in the recruitment and assessment of Kroton administrators, in addition to making recommendations about and approving human resources policies.

Social Responsibility Committee

This committee manages, assesses and monitors the implementation of the Kroton social responsibility programs. It also recommends the creation of new projects that may benefit the community, the company, shareholders and employees. Another attribution is the provision of support for the Executive Board in preparing the guidelines for the social responsibility balance sheet. The committee was created on June 6, 2014.

The Fiscal Council is an independent body comprising at least three and at most five members. Its function is to oversee company management, analyzing financial statements and reporting its conclusions to the shareholders. The council does not sit permanently; it is convened at the request of shareholders who represent at least 2% of the voting shares.