We are pleased to inform you that the concessionaires H2Olmos and Trasvase Olmos have appointed Fernando Cilloniz Benavides and...
March 27, 2024
Featured in Exame magazine: With new brands and a settlement in the billions, Odebrecht reemerges after Operation Car Wash
DATE: 03/28/2018
Following a corruption scandal, the company changed its structure, the names of its brands and hopes for a fresh start.
By Karin Salomão
Published Mar. 28, 2018, 6:00 a.m.
Exame
São Paulo – Until a few years ago, Odebrecht was virtually unknown to the general public. That was until March 2014, when news of the first phase of Operation Car Wash changed the course of the company and of Brazil.
The company had to sell units, signed billion-dollar settlements, had its heir and then-CEO arrested and even brought down the president of Peru.
Now, the company is determined to show that it has changed, with new policies and even new names for the group’s companies.
The Federal Police operation, which was launched in 2014 and is still ongoing, is investigating a corruption scheme involving major companies and contracts with Petrobras. According to the investigation, Odebrecht was deeply involved in the scandal, and even had an entire department at the company dedicated to paying bribes to politicians and employees at the state-controlled oil company.
One year into the investigations, the group’s then-CEO Marcelo Odebrecht was arrested and, in March 2016, was sentenced to 19 years of prison for corruption, money laundering and criminal conspiracy.
First actions
It was then that the company started to shift its positioning. In December 2016, it signed a leniency agreement with the federal prosecutors of Car Wash. At the time, it was the largest settlement in history ever, which later was surpassed by the one signed by the meatpacker JBS.
Now, in March 2018, the leniency agreement was recognized by the Office of the Federal Controller General and the Office of the General Counsel for the Federal Government. In the document, Odebrecht admits to wrongdoings in contracts with the federal government and undertakes to reimburse around 3.8 billion reais to the public treasury over 20 years.
The 77 executives of the group involved in the scandal, including its heir and former CEO Marcelo Odebrecht, also signed, in 2016, plea-bargain agreements. Of these, 51 executives have left the company and another 26 remain, although no longer holding executive positions or decision-making powers.
The company negotiated deals with Brazil’s Federal Prosecution Office (MPF) and with authorities from other countries, such as the United States and Switzerland. It also published, in December 2016, an official apology in which it “recognizes its participation in wrongdoings involving its business activities.” “Odebrecht has learned a lot from its mistakes. And it is evolving,” said the message.
After the statement, the corporation announced many changes in its structure, including asset divestments, the drafting of compliance policies, changes to its human resources policy and even completely renaming some of its companies.
The process of recovering from an image crisis is long and passes through various phases, said Francine Altheman, processor of crisis management for the journalism program at ESPM. “The first phase was when Odebrecht gave a public apology,” said the professor.
Compliance
“When the company closed the plea bargain and leniency agreements, it began a process to review its business structure and compliance systems,” explained Marcos Lessa, marketing director at the holding company Odebrecht S.A.
One of the changes involved the company’s board of directors. In the past, the holding company Odebrecht S.A. played a much more active role in the day-to-day operations of its subsidiaries. Now, “the actions of the holding company have been limited to its board, with a posture of strategic architect and no direct intervention,” said Lessa.
Another change was the inclusion of a clause requiring that at least 20% of directors be independent, i.e. without any ties to the company.
Since February 2017, the company has been monitored internally by some 20 members from the MPF and from the U.S. Department of Justice. They will investigate, for three years, all contracts, balance sheets, payments to suppliers and documents and have unrestricted access to the company.
In addition to monitoring by governments, Odebrecht expanded its compliance team. In July 2017, the department had 63 employees, compared to 30 in 2015. The budget for the team is 64.8 million reais, compared to 11.3 million reais in 2015, an increase of over 80%.
New name
Before the scandal, Odebrecht was mostly unknown to the general public. The group’s holding, construction and oil and gas companies dealt primarily with other companies, with no contact with the public.
The first time that many people heard the name of the company was in connection with the investigations. This caused a problem for the company, whose name was associated solely with corruption.
One of the strategies used to change this scenario was to change the names of the subsidiaries. Of the seven companies that are still part of the group, four have changed their names or logos. In recent months, Odebrecht Real Estate Developments changed its name to OR, accompanied by a change in the logo; Braskem removed the red color from its logo, which is now blue and yellow; Odebrecht Agroindustrial became Atvos; and Odebrecht Oil & Gas is now called Ocyan.
This is a simple choice, said Insper’s professor of business strategy, Sérgio Lazzarini. “For the general public, it ends up being a new company. Those who read a lot and are informed still know it’s the same company, but they’ll soon forget,” he said.
According to Francine Altheman from ESPM, “Odebrecht had a story before the crisis, but it wasn’t told.” When a company is known positively by the public, its image is less affected by a crisis, explained the professor.
She believes that changing the names of the brands is a strategy focused mainly on the general public, seeking to change their image of the company. “In its relations with other companies, you can’t fool people merely by changing the names of the businesses. But, because they already knew Odebrecht before the scandals, they continue to do business with it,” said Altheman.
The marketing director of Odebrecht S.A. reinforces that each company had the autonomy to decide whether to change its name and that changing the name of the holding company is not being discussed.
Some of the brands were sold to raise cash for the company. In the past few years, the company sold business divisions and interests in projects, such as Odebrecht Ambiental, which raised 2.5 billion reais; Embraport, which was acquired by DP World; the Corredor do Senandes Wind Power Complex; and its interest in RIOgaleão, which operates Tom Jobim International Airport in Rio de Janeiro, which before was owned by Odebrecht Transport.
The company also restructured the debt of some of its subsidiaries, such as Odebrecht Oil & Gas.
People policy
The new people policy is the most recent change. The first major difference between the new policy from the old policy is the size of documents.
Most of the policy was – and still is – based on a book written by the civil engineer Norberto Odebrecht, the company’s founder, which is divided into three volumes of some 200 pages each.
The book, entitled “Survival, Growth and Perpetuity,” contains the Odebrecht Entrepreneurial Technology (TEO). “But the book is not read that frequently. Plus, the previous policy was too long and had a level of detail that was not inviting to readers,” said Daniel Vilar, vice-president of people and organization at Odebrecht S.A.
To encourage people to read the documents more frequently, the new version is much shorter. Instead of 23 points, it now has only eight, divided into 19 pages.
The company also makes an effort to convey the contents of these policies in a simpler manner, through videos or internal training. The first training was on compliance, said the director. To ensure compliance with the policy, the director said that there are internal mechanisms and processes currently in place, without going into details.
However, Vilar emphasized that it was not the previous policies that led to acts of corruption within the company. “The mistakes of the past have nothing to do with the lack of a culture. They happened because the company made bad choices.”
With the many changes that it has made to its structure in recent years, the company wants to convince itself that it no longer will opt to follow its previous path.
3 likes
No comments