Petrobras minority shareholders are trying to gain two seats in the board of directors on Wednesday. They have little heft in the body’s decision process, since the government has seven seats and the tenth belongs to the employees’ representative. But minority holders, less than being in command, want to insert subjects in the agenda of meetings and, maybe, have the discussions reaching the public opinion. 

A group of foreign funds nominated José Monforte, who has already been a board member of several companies, and the reelection of Mauro Cunha, president of Amec, association that represents minority shareholders. Both names had the support of proxy advisory firms Glass Lewis and Institutional Shareholder Services.

These companies issue opinions on the subjects of discussion in shareholder meetings and orient the vote of foreign investors who don’t follow closely the companies in which they invest. Usually, they vote with the management. This year they saw the need for more independent directors at Petrobras, since the company has recently been posting weak results. As ISS says, the pricing policy adopted runs against the interest of minority holders.

Last year, after two years of attempts, minority holders finally managed to get a seat in the state-controlled oil company’s board.

Soon to complete one year as director, Mr. Cunha appealed to the Securities and Exchange Commission of Brazil (CVM) to have Petrobras releasing to the market two separate votes he made in the last board meeting. The company released, in a summarized way, one of them, in which Mr. Cunha exposed his reasons not to approve the company’s 2013 financial statements. He mentioned the little time he had to analyze the information and accounting issues.

The fact that the director raised the debate led Glass Lewis to recommend shareholders to abstain from voting on 2013’s financial statements, fact that it says is not usual in its reports about Brazilian companies. In the Glass Lewis assessment, because of Mr. Cunha’s objection, shareholders should look at the earnings more carefully. But in the absence of the qualified opinion of an auditor, Glass Lewis doesn’t believe that shareholders have enough information to vote on the issue.

The second vote of Mr. Cunha questioned Petrobras’s pricing policy and, according to the process to which Valor had access, was not released by the company, which considered the information to be strategic. Mr. Cunha revealed that a price increase was planned for February and didn’t materialize. He requested the release of votes for judging necessary that shareholders were aware of the information before the general meeting. It’s making this type of matter public, governance specialists say, that minority shareholders may gain representativeness in the board.

Once more the process of electing minority representatives is being led by foreign funds. Controlled by the government, Petrobras has in its board ministers, the Brazilian Development Bank president and business leaders, who sometimes end up constraining the articulation of Brazilian investors. Aberdeen, Amundi, APG, British Columbia and Hermes, among others, nominated Messrs. Cunha and Monforte. Glass Lewis said the mobilization of foreign investors for the election process in Brazil is not a common fact. It stressed the experience of Mr. Cunha and opined that Mr. Monforte will be able to better represent minority shareholders in the company’s board than his competitor, Jorge Gerdau, one of the oldest Petrobras directors.