Petrobras governance shake-up: Compliance for 'the little people'?

Petrobras has approved a restructuring of its governance and compliance division for the first time since the workers' party returned to power when President Luiz Inácio Lula da Silva took office in January, nearly a decade after the start of the so-called Lava Jato investigation into corruption at Brazil's state-run oil & gas giant. 

The restructuring creates a disciplinary accountability executive management office and another area to oversee strategic information and monitor integrity systems.

An additional area will be created to deal with complaints related to violence at work. The department, which will be headed by a woman, will deal with reports of moral and sexual harassment and discrimination.

The Instituto Empresa, an association of investors promoting corporate governance, is skeptical about the measures announced by the state-run firm.

"This is 'governance for the little people,' meaning they will only monitor the behavior of lower levels of the company," Eduardo Silva, president of the institute, told BNamericas, recalling that the Lava Jato corruption scheme involved Petrobras' top management at the time.

Meanwhile, the securities regulator is investigating the appointment of two Petrobras board members by the federal government despite the fact that the candidates had been rejected by the company's governance officials.

"It doesn't make sense to create these bodies for 'appearance' when there are actual decisions that already have the marks of nonconformity and are at odds with the best interests of minority shareholders," said Silva. 

On the other hand, Sidney Lima, an analyst at Ouro Preto Investimentos, believes the restructuring will increase transparency and confidence in the business, protecting the interests of investors.

"The restructuring may be a response by Petrobras to overcome the impact of Lava Jato, seeking to dispel remaining concerns and demonstrate commitment to avoiding future irregularities," he told BNamericas. 

Lima believes the measure could also be related to Petrobras adapting to a potentially tougher political environment. 

"And the restructuring may be an attempt to show ethical and transparent operation, optimizing the perception of non-interference by the State," he added.

Roberto Gonzalez, an independent advisor and governance specialist, sees the restructuring of Petrobras as a move by the federal government to avoid repeating bad practices from the past. He sees it as a good sign not only for Petrobras but also for capital markets and other state-owned companies. 

"It may be that the federal government is signaling to the market that it supports good corporate governance practices, potentially following the same path in other public companies," he told BNamericas. 

The current director of governance and compliance at Petrobras, Mário Spinelli, a career auditor with the federal office of controller general CGU, issued the following public statement: "This will be another important step in this management's focus on genuine attention to people and adds to other improvements we have already announced, such as in the processes for handling complaints and welcoming victims of harassment. I believe that the work of this area further strengthens Petrobras as a company that seeks to respect human rights and pursue diversity and equity among the members of its workforce." 

DUE DILIGENCE 

Daniele Nunes, a partner at law firm Leal Cotrim Advogados, says the new restructuring shows that Petrobras wants to devote more attention to holding employees and third parties accountable for irregularities. 

She recalls that, after Lava Jato, Petrobras implemented new controls such as conducting due diligence on the compliance of its suppliers. It recently included requirements related to combating human rights violations.

"This forces suppliers to have their own compliance controls under penalty of having their degree of risk considered high, being prevented from participating in most of Petrobras' tenders," she told BNamericas.  

Nunes pondered what Petrobras must bear in mind when evaluating a supplier's compliance program while trying not to make the business transaction unfeasible. 

"This is the other side of compliance; that is, the risk of Petrobras becoming too bureaucratic and imposing excessive demands to the point of preventing Petrobras from closing the most advantageous deal – which is its duty as a public firm," she said.