Petrobras (PETR4) elects board with two names rejected by committees: 'Governance setback, but something is already expected'

Petrobras (PETR4) elects board with two names rejected by committees: ‘Governance setback, but something is already expected’

Petrobras (PETR3; PETR4) held last Friday (19) an extraordinary general meeting in which eight names of its Board of Directors were approved. Among the elected are two candidates previously rejected by the internal committees.

a compliance Of the state-owned company, along with the People’s Committees (COPE) and the Eligibility (CELEG) committees, they argued that Ricardo Soriano, head of the Attorney General’s Office of the National Treasury, and Jonathas Assunsao, Executive Secretary of the Civil House Ministry, could have a conflict of interest when assuming positions due to their positions other general.

According to JPMorgan, the approval of the names was a “setback for Petrobras’ governance.” “The election of rejected names is not prohibited by internal rules. Committees and the board of directors make recommendations to the company, but the general assembly has sovereignty. Approval, however, is an imbalance in the governance process of the state-owned company,” the bank’s analysts defended.

Goldman Sachs said the decision created “noise about the shares,” but it kept its buy recommendation because of the dividend and because it considers holding shares attractive.

Bradesco BBI notes that “although the choice of two names questioned by the company’s internal committee may be bad for corporate governance, we do not anticipate significant changes to the company’s policies and strategies, based on recent channel verifications.”

Analysis houses continue with positive recommendations for assets. JPMorgan has a recommendation overweight (above average market exposure) for Petrobras common stock. Both Goldman Sachs and BBI have a buy recommendation – the first with a target price of R$35.10 for common shares and R$31.90 for preferred shares, and the second with a target price of R$53.

Petrobras loses credibility and acts suspiciously

According to Priscilla Lima Aguiar Fernandes, partner at Vilela, Miranda and Aguiar Fernandes, the federal government’s insistence on two names ineligible for board membership reduces Petrobras’ credibility in the market, “because there is a clear refusal to comply with corporate governance rules and a clear reduction in the expected transparency of the company.”

André de Almeida, CEO and founder of Almeida Advogados, follows the same line. Both names are executive branch officials, so the committee saw a potential conflict of interest. Petrobras suffers from a legal personality disorder. Sometimes you want to be a private company, respecting the minority of shareholders and distributing profits, and sometimes operating as a public company,” he explained.

According to the specialist, this behavior generates friction between market expectations and what is being implemented in the company. “What happened is consistent with the company’s past and reinforces confusion. The lawyer, who was one of the founders of the class action lawsuit brought by minority shareholders against Petrobras in 2014, commented at the time, at that time, compensation for damages related to the corruption scheme was sought. Lava Jato operation revealed , claiming that the devaluation of the securities, caused by the discovery of schemes in the company, harmed the shareholders.

Although a portion of the minority shareholders say they would object to the decision, Almeida says the assembly is unanimous and little can be done to alter the election of the two names.

In addition to Soriano and Asuncao, the union also signed four other names among its eight nominees. They are: Cayo Pais de Andrade, who has already been appointed on a temporary basis and the current president of the company. Gileno Gurjão Barreto, President of Serpro and who holds the Presidency of the Council; Ida Cagni, Chairman of Banco do Brasil (BBAS3) and Addison Antonio Costa Brito Garcia, Chairman of Banco de Brasília.

Minority shareholders, in turn, re-elected José João Abdullah Filho, one of B3’s largest long-term investors, and Marcelo Gasparino da Silva, who is also Chairman of the Board of Eternit (ETER3) and member of the Board of Directors of Vale (VALE3).

At 1 p.m. (Brazil time) Monday (22), Petrobras’ common shares were up 0.85% to R$35.61, while PN shares were up 0.76% to R$31.97, after opening in the fall.

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