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notícias Protecting minority shareholders: a major deal

Protecting minority shareholders: a major deal

11-09-2014 | Engage | Daniela da Costa, Michiel van Esch

When a dominant shareholder controls a company’s Board and holds most of the voting rights, it is important to ensure that the interests of minority shareholders are protected. Engagement Specialist Michiel van Esch and Robeco Emerging Markets Portfolio Manager Daniela da Costa encourage Brazilian company Petrobrás to improve its corporate governance.

Use for political aims does not serve investors’ interests

Petrobrás is Brazil’s largest multinational energy corporation. The Brazilian government holds the majority of the voting rights, which are concentrated in one of the company’s share classes. Petrobrás is an attractive company, but several investors have doubts as to whether its Board is acting in the best interest of all shareholders.

"Transparency is important for investors to be able to analyze the company’s risks and opportunities."

For years, the media and investors have reported that Petrobrás subsidizes gasoline prices by selling imported gasoline and diesel below import prices. Domestically produced gasoline and diesel have also been sold below international market prices. Thus, the government appears to be using Petrobás to keep domestic inflation in check, leading to financial losses for the company, which is not in the best interest of its shareholders, including Robeco. In addition, the Chairman of Petrobrás’ Board is also Brazil’s Finance Minister and the Board is dominated by people connected to the government. Petrobrás is an attractive company with growth potential, but also has large capital expenditures that weigh on its balance sheet. We, as investors, need more transparency on the company’s pricing policy to evaluate their cash flows and the impacts of subsidized gasoline prices on the company’s balance sheet. Transparency on the pricing policy would benefit all shareholders with the same relevant information. And a good corporate governance system is more likely to provide such transparency.


In collaboration with other institutional investors from Brazil, the US and Europe, we have taken several initiatives to encourage Petrobrás to further improve its corporate governance. In February of this year, we nominated a second independent candidate for the Board of Directors to represent minority shareholders. At the annual shareholders’ meeting, our proposed candidate was elected to the Board. This was a significant improvement in the company’s corporate governance structure, as it increased the number of Board members representing minority shareholders. This should lead to decisions that take a broader set of views into account. A source of concern, however, was that the representative of the minority shareholders was recently removed from the Audit Committee.

In response, we joined a group of institutional investors in writing a letter to the Board of Petrobrás, in which we expressed our concerns about the recent change to the audit committee. We further stressed the importance of having an independent representative on the audit committee so that it can play an effective role within the company’s overall governance framework. In addition to addressing these issues to the Board, we find it important to understand the company’s circumstances from a regulatory viewpoint. Therefore, we also sent a letter to the Brazilian regulator, the Comissão de Valores Mobiliários (CVM) to request their perspective n on the situation.

A constructive stance

It is important that the interests of all shareholders are served. To us as investors, transparency is important in order to be able to analyze the company’s risks and opportunities. Because Petrobrás is suc an important player in the oil & gas industry, particularly in the emerging markets, we find it important to take a constructive stance. We remain committed to engaging in a constructive dialogue with the company and plan to continue discussing its governance structure in more detail.


Michiel van Esch

Engagement Specialist

RobecoSAM Governance & Active Ownership

"We find it important to take a constructive stance."


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