Identify at least ve key conicts between stake- holders' interests and expectations at Petrobras (refer to Table 5.1 as a starting point). Which are the most powerful stakeholders (refer to Table 5.2) Identify at least ve ways in which ownership has inuenced the strategy of Petrobras.

Case example Petrobras and the Lizards Petrobras seeks to contribute positively to Brazilian also diversified into energy distribution, gas and power, society. but it is an oil-company operating in a challenging fertilisers and bio fuck. Employment at Petrobras peaked at environment 86,000 in 2013, more than 90 per cent within Brazil, though Brazil's largest company is unusual in having a Cretaceous the numbers had dedined to just over 60,000 by 2018. period dinosaur named after it - the Petrobrasaurus, In 1997, Petrobras' monopoly in Brazilian oil produc- combining the company's name Petrobras with the Latin for tion was formally ended and foreign companies soon lizard, 'saurus'. It could be said that this giant oil company entered off-shore oil production in particular. That same has been associated with plenty of lizards more recently too. year, the company was partly privatised, with shares The company was established by the Brazilian govern- eventually floated on the New York Stock Exchange. Two ment in 1953. Petrobras was given a monopoly of oil American investment companies, Capital World Investors production in the country, inspired by the slogan'0 petroleo and Fisher Asset Management, are the largest private e nosso" (The oil is ours']. At the time, Brazil produced investors, each holding about 1 per cent of the shares. only 2,700 barrels of oil per day. By 2019, Petrobras was However, the Brazilian government still directly or indir- producing 2.6 million barrels of oil per day, mostly within ectly owns 64 per cent of the voting shares. Brazil but also abroad. The company has been an inter- Petrobras itself identifies 13 sets of stakeholders: national leader in developing techniques for both shale the workforce, civil society organisations, communities, oil production and off-shore production. The company has competitors, consumers, customers, investors, partners, Civil society organizations Workforce Communities Suppliers Competitors Scientific and academic community Consumers Resellers Customers Public authorities Investors Press Partnerspress, public authorities, resellers, the scientific and The downfall of Aldemir Bendine was sho a setback academic community, and suppliers. The company's for Petrobras' strategy at the time. On his appointment annual report comments: 'We undertake activities with as Chief Executive in 2015, Bendine had committed the great capillarity Inetwork connectedness] that put us in company to a new locus on 'shareholder value' and the daily contact with a wide variety of audiences .. We are reduction of debts that had reached $106bn. Petrobras in constant dialog (uc] with these groups' Petrobras is a had become over stretched as the government had major sponsor of the arts in Brasil with its own symphony pressed it to invent in major new production projects, its orchestra among many other activities. The company also cost base had been inflated by political insistence that it porors various sports, not only motor sport but also should favour BranTian suppliers, and government pres Olympians and Paralympicns. Petrobras has tradition some had forced it to keep domestic petrol prices below ally spent 1 per cent of turnover on su international market rates Bending had set out to pursue both internally and in collaboration with leading BranTian universities. The company's research and development a more market-orientated strategy, raising prices, selling assets and cutting the investment budget by more than a centre is the largest group of oil industry researchers in quarter. But it would have to be another Chief Executive. the southern hemisphere Pedro Parente, who would take this strategy forwards The ed industry i of course prone to damaging environ Pedro Parente took on the Periodwas leadership in 2016 mental impacts: Petrobras has been involved in repeated on three conditions in future, the company's manager oil spills, particularly in relation to its off shore drilling would be hired on merit rather than political connections Facilities. However, the company is adive with regard to uetainability baues its projects have helped the Brazilian economic rationality would didate strategy, not polites, and the company would manage petrol pricing, inde- humpbacked whale population recover from about 2,000 pendent of politics. Anew BrasTan law banning political to 9.000, and the company has also funded an important appointments in state enterprises provided support for his sea turtle haven in the Brazilian state of Bahia. Petrobras independent approach. Parente sold for $2 3ibn a major publishes an annual sustainability report with detailed stake in one of Petrobras" key of fields to the Norwegianol data on ol spillages, energy comemption, embaions company Stated He also prepared for the sale of shares in water one, and employee fatalities and injuries. The report the company's vail petrol station network. By early 2018. records spending of about $65m a year on environm nital Parente was able to dedare a turnaround from kisses to social, sports and cultural activities profits before extraordinary expenses (these indude a $3bn settlement on a shareholder Lawsuit in the USA) The lizards Debt was cut by 12 per cent. Not all of Petrobras' behaviours have been so benevolent. However, Parente then ran into trouble. The Brazilian It may be unfair to the species, but some Petrobras prac- economy was only recovering slowly from an economic tices have appeared rather lizard Be. crisis, estimated to be its worst ever, between 2014 and As a major part of the Brazilian economy, Petrolyas 7016. The Financial Times described the economy as has very large contracts to give out, in construction moving 'from zomble to walking dead. Unemployment and many other industries In 2014, a judicial investiga was stil high and inflation was running ahead of wage tion known as Lava Jato (Operation Carwash) was initi growth in 7018, energy prices were rising internationally ated into corruption associated with these contracts. Brazil still imports much of its petrol, so a strong dollar Jobs for Petrobras would be over-charged, and part of exacerbated the pricing pressure. Petrobras responded by the profit would be paid back to the company's execu increasing its diewl prices by 10 per cent. For Brazilian, lives at Petrobras and to politicians from various polit- fuel prices had reached their second highest level ever, ical parties. By the end of 2017, 300 people had been higher than those in the USA. The 600,000 members of the BrasTan Trudoes Asso convicted for their parts in the corruption. Among the many high-profile convictions were the former President ciation went on strike in protest. Truckers blocked roads of Brazil, Lula da Sho, who was sentenced to 12 years in with their trucks and burning tires. Petrobras' workers jail: the Chief Executive of Odebrecht, the biggest engine joined the wrie as well There was ten days of chaos and eering and contracting company in Latin America, who sporadic violence Airports ion out of fuel, factories shut was sentenced to 19 years in jail and the former Chief down, hospitals ran short of medicines and supermarkets Executive of Petrobras itself, Aldemir Bendine, who was could not be supplied. Strike actions only died down after sentenced in 2016 to 1 1 years in jail Brazil's then President dedared a suspension of the price rise for 60 days and the judiciary started levying heavyfines on the trade unions. Discouraged by the reversal of Executive, Branco declared: 'The company's core compe- pricing policy, Petrobras' Chief Executive Pedro Parente tency is in oil exploration and production in large fields in resigned in June 2018. The company's share price fell by ultra-deep waters. The focus should be on the assets of 15 per cent. which Petrobras is the natural owner, those from which it New regimes can get the maximum possible return'. He indicated that earlier plans to sell the petrol station network would be One prominent politician who had declared qualified continued. support for the truckers was Jair Bolsonaro. A former By early 2019, Petrobras' stock price was two thirds army officer, Bolsonaro was a strong Brazilian nationalist higher than it had been at the time of Pedro Parente's and he had generally been a supporter of state-owned resignation in the summer of the previous year. Some enterprises. In the presidential elections of October 2018, things didn't seem to change though. Three non- Bolsonaro emerged triumphant. President Bolsonaro executive board members associated with the previous pledged to promote Christian family values, national pride ruling party in Brazil were replaced by new directors: one and economic liberalism. Bolsonaro's new Economics of them, John Forman, had been recently fined by Brazil's Minister would be the former investment banker and securities regulator for insider trading. Regina de Luca, University of Chicago economist Paulo Guedes, an enthu who had been close to the previous governing party, siast for privatisation and free markets. was dismissed as Director for Security and Corporate At the beginning of 2019, Petrobras got a new Chief Intelligence at Petrobras. In one of Castello Branco's first Executive, Castello Branco. Many had expected President appointments, de Luca was replaced in January 2019 by Bolsonaro to appoint a military officer with a nationalist Carlos Victor Nagem. Although an employee of Petro- commitment to state enterprise. However, Branco was bras, Nagem had been active in conservative politics and another University of Chicago economist, a personal was a personal friend of the country's new President, friend of Paulo Guedes and a believer in privatisation. Jair Bolsonaro. Even before taking up formal office, Branco got involved in Main sources: www.petrobras.com.br/en/society-and-environment/ developing Petrobras' 2019-2023 Business and Manage- sustainability-report/; www.petrobras.com.br/en/about-us/strategic- ment Plan. The Plan declared five company values: respect plan/; Financial Times, 5 March 2018; Nava, 9 January 2019; Reuters, 15 January, 2019. for life, people and environment; ethics and transpar- ency, overcoming (sic) and confidence; market driven; and results oriented. It committed to the divestment of non-core businesses and to partnership with foreign Questions companies where their resources could help in local devel- 1 Identify at least five key conflicts between stake- opments. At the same time, the Plan set ambitious targets holders' interests and expectations at Petrobras (refer for further debt reduction and profitability improvements. to Table 5.1 as a starting point). Which are the most Investment would be cut by roughly a third. The company powerful stakeholders (refer to Table 5.2)? declared its intent to achieve a 'cultural transformation', with a strong emphasis on efficacy, merit, flexibility, and 2 Identify at least five ways in which ownership has value to the business. In his inaugural speech as Chief influenced the strategy of Petrobras.Table 5.2 Sources of power Sources of power Within organisations For external stakeholders Hierarchy (formal power), e.g. autocratic decision Control of strategic resources, e.g. materials, labour, making money Influence (informal power), e.g. charismatic leadership Involvement in strategy implementation, e.g. distribu- . Control of strategic resources, e.g. involvement in key tion outlets, suppliers products Possession of knowledge or skills, e.g. subcontractors, Possession of knowledge and skills, e.g. computer partners specialists Through internal links, e.g. informal relationships Control of the human environment, e.g. negotiating skillsFigure 5.1 The position of stakeholders, governance and ethics Stakeholders Purpose (Chapter 1: Vision, Mission, Values, Objectives) Corporate Social governance responsibility Strategy