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The letter was revealed this week, in which two independent members of Ecopetrol’s board, Juan José Echavarría and Luis Alberto Zuleta, tendered their resignations over their rejection of the decision to buy Crownrock’s shares. The two co-directors said the acquisition, aimed at expanding the oil company’s hydraulic fracturing assets in partnership with Oxy in the United States, “is essential to protect the future of Ecopetrol and more of its 250,000 shareholders.”
The letter reveals the technical, financial and environmental reasons why the project could have a beneficial impact and tells of circumstances that raise alarm about the corporate governance of the country’s main business group. After being approved by the majority of the different committees, the President of the Republic, Gustavo Petro, rejected the deal in an “informal meeting” with some members of the board of directors, because it was an investment in hydraulic fracturing.
This complaint by the President led to a majority of Ecopetrol’s co-directors overturning the decision. The above also contradicts public statements by the oil company’s president, Ricardo Roa, who denied that Casa de Nariño had intervened in any way, much less been motivated by the government’s anti-fracking stance. The President’s blatant interference in Ecopetrol’s business decisions is clear, with ideological criteria taking precedence over commercial considerations.
This double resignation clause raises alarms because robustness and respect for corporate governance are essential for Ecopetrol Group and other listed and mixed companies. These governance standards and procedures constitute the institutional framework in which the board of directors can independently and sustainably exercise control, decision-making and oversight functions. For minority shareholders in most state-owned companies, these conditions can increase transparency and provide protection for decision-making.
The shock to Ecopetrol’s governance is not limited to the main corporate headquarters. A few weeks ago, minority shareholders of ISA expressed concerns and demanded more details about the election process of Jorge Carrillo as president of the group. As with the decision regarding Crownrock, the alarm was triggered by the primacy of political criteria over technical and commercial ones. For ordinary citizens, perhaps there is no big problem, because if the majority of Ecopetrol’s shares are held by the government, then it is the head of state who decides on the direction of the business. The corporate governance of hybrid companies, manifested in the form of a board of directors, is designed precisely so that key decisions are not determined by the ideological sway of politicians in power, but respond to the main interests of the company and its development.
These alerts from Ecopetrol and the ISA should help bring the need to strengthen corporate governance of oil companies and all state-controlled companies into the public debate. Experts from different fields such as business schools, consulting firms and other initiatives must participate in this discussion, who have been sharing experiences and reflecting on the importance of better national corporate governance and the challenges it currently faces.
Francisco Miranda Hamburg
framir@portafolio.co
X: @pachomiranda
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