CEO ouster has consequences: four Petrobras board members will leave

RIO DE JANEIRO, BRAZIL – Four board members at Brazil’s Petrobras will step down at the end of their terms, the company said on Tuesday night, March 2nd, another sign of turmoil at the helm of the state-run oil producer.

Petrobras disclosed messages from the board members in a securities filing, stating their reasons for effectively resigning just over a week after the country’s president ousted its CEO over pricing policy.

After complaining about high fuel prices, President Jair Bolsonaro appointed Joaquim Silva e Luna, a retired army general who had been running the Itaipu hydroelectric dam on the border with Paraguay, to replace Roberto Castello Branco.

The move revived old concerns over government interference in Petrobras’ fuel pricing policy, which resulted in tens of billions of dollars in losses under previous administrations.

Castello Branco is likely to formally step down at a shareholders’ meeting, whose date has yet to be set. The four board members would also step down at that time.

While the four board members in question were appointed by the government, which holds seven of Petrobras’ 11 board seats, they were seen by the market as staunch opponents of government interference in the publicly traded company.

The government had previously said it wanted all board members but Castello Branco – who as CEO automatically sits on the board of directors – to be reappointed.

Two of the board members said they could not accept reappointment because of personal reasons, while another said his term was being “interrupted unexpectedly” without explanation.

A fourth board member said that he would not continue because of “upper management changes” which he said were not in line with best management practices.

In a separate securities filing on Wednesday morning, Petrobras laid out certain procedures for the shareholders’ meeting that will result in the replacement of Castello Branco.

The meeting will be held 30 days after official notice is published. In the meantime, a committee will examine Silva e Luna’s qualifications in order to advise shareholders about the appropriateness of his appointment.

The Wednesday securities filing came after an article in Brazilian newspaper O Estado de S. Paulo, which said the board of directors meeting was being delayed over concerns about Silva e Luna’s qualifications.

The company denied this, saying that Petrobras does not need to wait for the committee’s evaluation to call the meeting, but does have to contend with unspecified bureaucratic hurdles under Brazilian securities law.