Introduction The financial crisis of 2007–2008, orthe global financial crisis and the 2008 financial crisis, is considered tohave been the worst financial crisis since the Great Depression of the 1930. Thefinancial crises start in December 2007, in which the lost of trust of Americaninvestors in secured mortgage lead to a crises of liquidities which determinatea substantial injection of capital in the financial market from American FederalReserve, Bank of England, and Central Bank of Europe. TED spread index jumps inJuly 2007, it grows for one year and then it grows again in 2008, reaching anew record of 4,65% in October 2008. The crises got worse in 2008 because the exchangestock went in a period of instability and then fall down. In the weeks followeda big number of banks, creditors and insurance companies went bankrupt. The collapse of the FederalHousing Administration (US) is often made responsible for the crisis. But thevulnerability of the financial system was caused by complicated and leveragedfinancial and leveraged contracts and monetary policy, the US monetary policy.

setting a negligible credit price and thus favoring a very high leverage ratioand, according to American economist John Bellamy Foster.    Overview of Petrobas.Petrobras is the biggestoil company in Braziland one of the biggestworld. Created in 1953 under the government of GetúlioVargas. On October 3, Petrobras, abbreviation of PetróleoBrasileiro S.

A., Brazilian oil and gas company  engaged in the exploration, production,refining, and transport of domestic petroleum and petroleum products.Originally was a state-owned monopoly, Petrobras became majority-owned by thestate but competes against other Brazilian companies as well as against foreigncompanies. Petrobras also forms partnerships with domestic and foreigncompanies, and it operates in more than 25 countries around the world. It thebiggest company in Brazil and South America. Its headquarted  in Rio de Janeiro. Petrobras was granted a monopoly over Brazil’simports of crude oil in 1963, and it took over Brazil’s privately ownedrefineries after they were nationalized in 1964. In 1995, as part of a campaignto privatize state-owned industries, the Brazilian government proposed aconstitutional amendment ending Petrobras’s monopoly over exploitation of thecountry’s oil and natural gas.

With the passage of the amendment in 1997, theseindustries were opened to foreign competition for the first time, obligingPetrobras to submit competitive bids to the Agência Nacional do Petróleo (ANP;National Petroleum Agency), the state organ responsible for grantingconcessions to produce oil and gas on Brazilian territory. At the same time,the amendment relieved Petrobras of its old requirement to meet productionquotas, while allowing the company to enter joint ventures with foreign companiesto produce, refine, and distribute oil and natural gas products in Brazil. The Board of Directors approved a neworganizational structure management and governance model.Petrobras decided to do this changesto as a response of the reality of the oil and gas industry, which is leadingthem to prioritize more the profitable activities .The restructuring involvesactivity redistribution, area mergers, and a review of the decision-makingmodel. One of the main objectives is to take  the control and compliance mechanisms. Thechanges are expected to cost reductions worth up to R$1.8 billion per year.

Also planned is a reduction of at least 30 percent in the number of managerialpositions. Petrobras  has about 7500approved management positions, of which 5300 are in non-operational areas. This reformulation modify the structure andmanagement to the vision set forth under their  2015-2019 Business Plan, the ultimate goals ofwhich is  to create value and deleverage.

In addition, it extends the efforts to reinforce the control, compliance, andtransparency mechanisms.The first phase of the restructuringwill result in the reduction of fourteen  positions in senior management. The number ofdepartments will be decreased from seven to six with the merger of theDownstream and Gas & Power areas. The total managerial positions linkeddirectly to the Board of Directors, the president, and the directors,meanwhile, will be reduced to 41, down from 54.

Accountability and complianceSix Statutory Technical Committeeswill be created comprising executive managers who will be tasked with prescreeningand issuing recommendations on problems to be decided by the directors, whowill share responsibility in decision-making. Because of their statutorynature, the committees’ acts will be subject to the oversight of the Securitiesand Exchange Commission (CVM).There will be new integrity, technical expertise,and management analysis criteria for the appointment of executive management.In addition, the Board of Directors will be responsible for approving bothappointments and terminations for these positions. By strengthening commitmentto compliance, our restructuring provides for changes in internal control overhiring and investments. Good and service procurement activities will beconcentrated at the new Human Resource, SMS, and Services Department.Investment project deployment will becentralized at the new Production Development & Technology Department.

Thisnew structure will concentrate project deployment management and technicalskills.Hiring for investment projects, as arule, three departments: the department of the requester, which conceives thebasic technical project; DP, which will develop the project, and the HR,SMS and Services Department, which shall bid and contract goods and services.This redesigned project and service hiring process avoids excessiveconcentration in decision making.Petrobras is trying to increasebusiness profitability, the new model promotes area mergers to improve the useof synergies among them.  A Brief History Of Corporate Governance Corporate Wrongs Over the Recent PastOver the past two decades, the investment world has seen a large number ofscandals relating to companies which are attributed to failure of governance.These have been caused by a combination of number of factors, principally thethree corporate sins.

Company mangers (principally theexecutive directors) lost sense of business or corporate ethics. Earningsbecome the prime measure of a company’s success. Directors were not prepared toshow low profits or losses. This led to the use of unethical practices (likecreative accounting, falsification of books etc. ) to increase or show higherearnings.  Boards were generallyineffective and played into the hands of executive directors, approvingimproper financial statements and condoning unfair corporate decisions.

Mangersawarded themselves huge bonuses and stock options, often at the expense ofother shareholders. Company concentrated on short term gains and showing highercurrent profits, often sacrificing the long term objectives.  Auditors colluded or failed to stop theexecutive directors from using improper accounting policies. In the process theylost their independence which they surrendered for getting higher audit fees. Thedisparity in remunerations between higher and lower level employees grew touncomfortable levels. A culture of greed developed among senior managers. Mostsmall investors lost interest in long term investments and concentrated onshort term gains through share price movements.  Some Major Corporate Tragedies Arising out OfPoor Governance in UK is Barings Bank.

The management of this bank failedcompletely in its internal controls, letting a single employee cause a loss of$1.4 billion in stock trading. When Nick Leeson, its head of settlementsdepartment was made of trading, he was not asked to relinquish the formercharge. This was a fatal internal control failure that allowed his activitiesgo completely unchecked. The bank never questioned the legitimacy of hugepayments authorized by Leeson to Singapore Money Exchange (SIMAX) and OsakaStock Exchange (OSE). The bank with 233 years history and considered one ofBritain’s best merchant banks eventually had to close its operations inSingapore. Polly Peck International  This company went from being a small firm witha market capitalization of just £300,000 to being a constituent of FTSE 100index in less than 10 years with a market value of over £1.7 billion.

Itsprincipal owner, Asil Nader, set up or bought over 200 subsidiary companies invarious parts of the world including interests in Japanese Company Sansui, butmostly in Turkey and Northern Cyprus. A large number of irregular payments toCyprus companies were detected, totaling over £58 million. Asil Nader wasformally charged with 70 counts of fraud when the company collapsed in 1991The world reaction to these corporatewrongs was massive and led to the development of laws and codes for bettercorporate governance.

 Some of theinternational initiatives on governance are: Cadbury Report 1992 (UK) .Following serious financial scandals and collapses and a perceived general lackof confidence in the financial reporting of many UK companies, the FinancialReporting Council, the London Stock Exchange and the Accountancy Professionestablished the Committee on the Financial Aspects of Corporate Governance, inMay 1991. It was chaired by Sir Adrian Cadbury and came out with its landmarkreport in Dec. 1992, recommending a Code of Best Practice with which the boardsof all listed companies should comply. The organization of Economic Cooperation andDevelopment (OECD) published its principles of Corporate Governance in 1999.Prior to its issuance, the document was discussed with the governments ofmembers countries, private sector and relevant international organizations likethe World Bank.

The main principles ordained by the document are :the rights ofshareholders must be protected,  allshareholders should be equitably treated. ,all stakeholders should be allowedto play their role as provided in the law, importance of timely and accuratedisclosures to promote transparency.Accountability and responsibility ofthe board of directors. Basle Committee Guidelines (1999). Thiscommittee issued its guidelines in 1999 related to enhancing corporategovernance in the banking companies. These have been influential in thedevelopment of corporate governance practices in the banks across the world. Itcovers many things, including: compensation issues of directors, there shouldbe appropriate oversight by and on senior management, the importance of thework by both internal and external auditors, and internal checks.

 Smith Report 2003 (UK) . This report coveredthe role and importance of audit committees. It stated that while all directorshave a duty to act in the interest of the company, the audit committee has aparticular role, acting independently from executive directors, to ensure thatthe interests of shareholders are properly protected in relation to thefinancial reporting and internal controls.  Code of Corporate Governance issued by SECP,2002 Pakistan’s regulatory body SEC issued a code of corporate governance in2002 which was subsequently revised in 2005. All stock exchanges were requiredto add the code clauses to their listing requirements. There are six main areasaddressed by this code, i.e. the board of directors, CFO and company secretary,corporate and financial reporting framework, corporate ownership structure,audit committee and compliance with the code of corporate governance.

Emergence of Corporate GovernanceModels. Corporate Governance refers to the way companies are financed andstructured in an economy in terms of entrepreneurial and functionaldecision-making. Over the past forty years or so, three main models ofcorporate governance have been emerged in the world. Most of countries in theworld have one or other of these models. These are: Anglo-American Model (AAM ),Japanese Model (JM), German Model (GM) .

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