Petrobras - Corporate Governance and Corruption Evaluation

✒ Petrobras Company Proﬁle
Perﬁl da companhia Petróleo Brasileiro S.A.

Petrobras Company Profile
“Integrated growth, profitability and social/environmental responsibility”
Current Profile
⚑✒
We are an energy company
operating in an integrated
manner in the oil, gas and
energy industry
💦
World leaders in
technology for exploration
and production in deep
and ultra-deep waters
Guided by three corporate
directives: integrated growth,
profitability and social and
environmental responsibility
✒

Mission
⚑☁
Providing products suited to
the needs of its clients and
contributing to the
development of Brazil and the
countries where it operates.
◑
To act in the oil and gas
industry in an ethical, safe and
proﬁtable way, with social and
environmental responsibility.

Vision
✓
2030 Vision
To be one of the ﬁve largest integrated energy
companies in the world and the preferred one by its
stakeholders.

Performance of the Company
Petrobras has seen increases in both market share and productivity
Record Production
Our average production in Brazil was 2.034 million
barrels of oil per day (bpd) and 67.8 million cubic
meters of gas per day (m3/d). Our best annual result ever
achieved.
💦
New and Completed Projects
4 new oil and gas production systems; 6 new delivery
points of natural gas; 2 completed thermal power
plants; entry into production of 3 internationally held oil
fields.
⚑
Growth of up to 21% in sales of gasoline, LPG, jet fuel
and fuel oil.
⏷
Efficiency Gains
We have implemented measures to improve the
efficiency of our extraction and production processes.
The total savings accrued through our Program for
Operation Cost Maximisation (Procop) was US $8.5bn.
📈
Sales Growth
✒

👥 Board of Directors
Conselho Administrativo

image
9
Corporate Governance
Petrobras is committed to good corporate governance practices
The Board of Directors is our guidance
body and senior management. Its
responsibilities include:
👥
• Setting strategic goals and guidelines; approving the strategic plan, the multi-annual
plans and annual programs of expenditures and investments; supervising the
management of officers and establishing their assignments; and evaluating
performance results.
• The members of the Board of Directors are elected at the Annual General Meeting,
being assured employees the right to appoint one member, separately, by direct vote of
their peers.
• We currently have ten members, seven of whom are appointed by the Federal
Government (including the Chairman of the Board), one by the minority holders of
common shares, one by the holders of preferred shares, excluding the controlling
shareholder, and one by the employees. The Chairman of the Board of Directors and
President of Petrobras are not held by the same person.
• In November 2014, our Board of Directors approved the establishment of a
Governance, Risk and Compliance Office, with three-year term, which began in January
2015 and is renewable. The mission of the new officer is to ensure procedural
compliance and mitigate risks on our business, such as fraud and corruption, ensuring
adherence to laws, standards and regulations, including the rules of the Securities and
Exchange Commission (CVM) and the Securities and Exchange Commission (SEC).

Organisational Structure
The government plays a pivotal role in the management of the organisation
As required by law, the Brazilian Federal
Government is our controlling
shareholder. This means:
• The Federal Government holds the majority of our voting shares.
• The Federal Government holds the power to elect a majority of
members of our Board of Directors and, through it, our
management.
• The Federal Government has an influence on the strategic
direction of our business and has license to enact macroeconomic
and social policies through us.
• We can carry out activities that prioritise the Federal Government’s
policies, instead of our own economic and business objectives.
• We cooperate with the Federal Government to ensure that supply
and crude oil and oil product prices meet domestic consumption
requirements.
• We can perform sales on terms that may adversely affect our
operating results and financial condition.
👥

Timeline: What Happened, and When?
O que aconteceu, e quando?

The Scandal
2014
March 2014
Arrest of Paulo Roberto Costa in
connection to a money laundering
scheme that took place under his
watch as Petrobras’ chief of
reﬁning from 2004 - 2012.
Construction companies that
won contracts from Costa’s
division overpriced the value of
their projects by 3% and diverted
these funds into slush funds for
political parties..
April 2014:
Brazil’s Supreme Court authorises
a request for congressional inquiry
into alleged corruption at
Petrobras.
September 2014:
After striking a plea bargain with
authorities, Costa names
parliamentarians and other
oﬃcials as being involved in the
corruption.

The Scandal
October 2015:
Petrobras’ external auditor refuses
to sign off on the quarterly results.
November 2015:
Petrobras receives a subpoena
from US SEC asking for documents
relating to their investigation.
Police raid Petrobras offices and
offices of some contractors. Police
arrest 24 executives from Brazil’s
six largest construction firms.
January 28, 2015:
Petrobras admits it is unable to
calculate how much was stolen
from the corruption scandal.
Police identified R$3.7b of
suspicious payments.
2015

The Scandal
February 4, 2015
Maria das Gracas Foster (CEO) and
ﬁve other Petrobras executives
resign.
February 5, 2015
“Operation Carwash” listed 279
pending proceedings, 150 people
and 232 companies under
investigation, 18 criminal charges
having been ﬁled against 86
individuals and involving reported
embezzlement of R$2.1 billion
(approximately US$752.6 million).
TODAY
FEB 9

Why Did it Happen?
Por que isso aconteceu ?

The Complex Intricacies of the Scandal
Improper Accounting Practices
Concealed the fraudulent payments from the market
and made the company appear more attractive to
investors
Bid Rigging
“The Cartel” made up Brazil’s biggest construction
ﬁrms: Camargo Correa, OAS, UTC, Odebrecht, Mendes
Junior, Engevix, Queiroz Galvao, Iesa and Galvao
Engenharia
Lucrative Rewards
Petrobras Executives approved bids in return for
money
The Cover Up
“Endemic” and “institutionalised” involved capitalising
the overpayments and bribes as assets
💼
📖
🔗

Governance Failure
Weak Oversight Mechanisms
• Through majority voting shares, the Government has
direct influence in the company’s choice of
management and operations
Procurement Law
• Law No. 9,478 (August 6 1997) determines contracts
for the acquisition of goods and services must be
preceded by a simplified tender process
Government Influence
• CEO ignored warnings: executive were able to
interfere directly in procurement processes
• Lack of protection for whistleblowers
Political Appointments
• Jobs used in exchange for political favours and
patronage
👥
⏳🌎

➢ Moving Forward
Avançar com a nossa empresa

Mission Statement
➢
Leadership through clarity and knowledge.
❞ ❞

Values
Re-ordering of priorities to emphasise ethics and transparency
➢
Proud of being
Petrobras
◴🎤
Ethics and transparency in
everything that we do
Results and readiness for
change
Sustainable development
📈
Stakeholder integration

Audit Committee
👥
👥
Exploration
and Production
Financial Gas & Energy
Engineering,
Technology and
Materials
Corporate and
Services
Governance, Risk
and Compliance
Board of Directors
👥 👥General Ombudsman Internal Auditing
Executive Board
President
👥
👥👥
👥 Legal Department
Institutional Communications
Cabinet of the President
General Secretariat
Petrobras Organisation Structure

Proposed Board of Directors
A revised structure is necessary to prevent future governance failures
Chief Internal Audit Officer
• Independent corporate executive
• Responsible for:
• Internal audit
• Quality management
• Report of critical findings
Independent Directors - New Requirement
• Recommended by Appointment and Remuneration
Committee
• Must not have been a Related Party for the last 24
months
Chief Knowledge Officer
• Continuous disclosure responsibility
• Information Directive
• Requirement to inform Board - Accountabilities
Chief Transparency Officer
• Whistleblower responsibility
• Chief risk responsibility
• Finding and reporting abnormal behaviour
Board of
Directors
👥
👥
👥👥
👥
➢

Policies
There are ﬁve key policy areas Petrobras is looking to amend
⏳
Transparency and Knowledge Policy
💼
🎤
Audit
Appointment and Remuneration
Whistleblower Policy
Government Participation

Policies
Transparency and Knowledge Policy
Content
• Duties
• Related Party Transactions
• Transparency
• Disclosure Obligations (OECD)
• Whistleblower Policy (See later slides)
Applicable Parties
• Holistic Approach
• Directors
• EmployeesContractors
• Stakeholders
• Suppliers
• Resellers
Transparency
➢

Policies
Audit
Audit
Internal
• Responsible to Board of Directors
• Monitors Executive Board and Internal Operations
• Chief Internal Audit Oﬃcer member of Board of Directors
• External
• All reports of internal Auditor are reviewed by External
Auditor
• Cannot have been a Related Party within previous 24
months
➢

Policies
Appointment and Remuneration
• Independent Directors – New Requirement
• Recommended by Appointment and Remuneration
Committee
• Must not have been a Related Party for the last 24
months
• Merit Selection
A&R
➢

Policies
Whistleblower
Whistleblower Policy
• Reporting Responsibility
• No Retaliation
• Reporting Procedure (Knowledge Officer)
• Transparency Officer
• Acting in Good Faith
• Confidentiality
• Extractive Industries Transparency Index (EITI) and ‘Publish
What You Pay’ Campaign
• Anti-Corruption Policy
• Register of Corporate Interests
• Conflict of Interests Policy
• Gifts Policy - Maximum SSS
• Record-Keeping
➢

Policies
Government Participation
• Shares placed in Statutory Body
• Independence from elected government
• Petrobras no longer used to further government ambition/policies
• Still receive dividends
• Independent committee manages Government stake & directorships
• Exit/Sell-Down
• Lobby government to divest shares so no longer have controlling interest
• Increase price and dividends if privately held → continued revenue
stream
• More likely to contribute to
• Corporate Shared Value
• Macroeconomic goals not to be pursued at the cost of Corporate
Strategic goals
• Sustainable Development
Government
➢

Presented to you by:
ROBERT AU
DANNA DIAZ
LENNARD IOSIF
MARISA PENSKY
HUNTER SANTAMARIA
JEDD WATMORE
AU
DIAZ
IOSIF
PENSKY
WATMORE
SANTAMARIA

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