Mining company to cut list to three by July’s end, with CEO appointment expected in August

07/10/2024

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Vale’s board wants to turn the page and is looking for an executive who can lead the company’s growth process — Foto: Leo Pinheiro/Valor

An initial shortlist of 15 potential candidates for Vale’s CEO position was made public Tuesday amidst the mining company’s troubled succession process, which has been dragging on since 2023. The names—most of them revealed by O Globo Columnist Lauro Jardim—include executives from major Brazilian companies, including Embraer, Gerdau, Klabin, and Engie. Only two are from the mining sector, two are foreigners, and only one is a woman, engineer Ana Zambelli, who has a long history in the oil and gas sector.

Valor found that this first selection, prepared by Russell Reynolds consultancy, has displeased Previ, the pension fund of Banco do Brasil’s employees, as it lacks a name closer to the government.

In the selection process, the head-hunting consultancy indicates some executives who are regarded as top priorities for the position and suggests candidates who are willing to participate in a second stage of the process. The idea is that three names would be selected by the end of the month and the selection would be completed by the end of August, according to people familiar with the matter. Valor did not have access to the scores each of these top candidates received.

Some of the company’s shareholders interviewed by Valor expressed dissatisfaction with the list prepared by the consultancy.

Names such as Cristiano Teixeira (Klabin), Gustavo Werneck (Gerdau), and Francisco Gomes Neto (Embraer) were well received by shareholders given their successful track record in their respective companies. Other names, such as Pedro Parente (EB Capital) and Antonio Maciel Neto (CAOA), are said not to represent the invigorating “new blood” that the company wants to bring in to grow again, according to sources. When contacted, none of the executives on the list returned the calls. The foreign executives cited, Pablo Di Si (Volkswagen) and Antonio Filosa (Jeep), would face resistance from shareholders. Mr. Filosa said he has not been contacted.

The selection carried out by the head-hunting consultancy focused on names linked to the industrial sector, according to one candidate who spoke with Valor. The list does not include executives linked to the financial market.

Some shareholders argue that Vale’s succession process should be accelerated to end the crisis opened by the expected change in command. However, the difficulty in finding an executive who could start immediately is highlighted as the main hindrance in the process.

Executives included in the list who spoke on condition of anonymity confirmed that immediate availability may be a problem but it could be negotiated. Some cite problems related to the environmental disasters caused by Vale’s dam bursts in Mariana (2015) and Brumadinho (2019), in Minas Gerais, although the company represents an important challenge in a seasoned executive’s career.

Behind the scenes, Previ, a key shareholder since Vale’s 1997 privatization, has been seen as the Brazilian president’s point of contact for the CEO succession process from the start of the Lula administration. This process has been marked by several government attempts to intervene in the company.

Sources close to Previ denied that there is any type of pressure to change or add names to the first list of candidates provided by Russel Reynolds. Valor found that the list was submitted on Monday (8) to the people and compensation committee, coordinated by Previ’s CEO João Fukunaga, who holds one of the pension fund’s two seats on Vale’s board of directors. Previ’s other board member is the company’s chairman, Daniel Stieler. The board met on Tuesday (9) and the list was discussed. Messrs. Fukunaga and Stieler did not immediately respond to Valor’s request for comments.

Some names close to the government that have been mentioned as possible candidates include Paulo Caffarelli, former Banco do Brasil CEO, and, more recently, Bruno Dantas, president of the Federal Court of Accounts (TCU). The first name cited was former Minister of Finance Guido Mantega, but this potential nomination wasn’t well received by the market. The discussions about the mining company’s succession divided the board. Other names mentioned during the succession process included Vale’s former CEO Murilo Ferreira, who was ahead of the mining company during the Rousseff administration, and Aldemir Bendine. Their names were not on Russell Reynolds’s initial list. Mr. Dantas did not immediately respond to Valor’s request for comments.

Vale’s CEO succession process has a defined governance protocol, and the company has announced a timeline for Eduardo Bartolomeo, the current CEO, to be replaced by December. However, the negative impact of this prolonged process on the company has prompted shareholders and managers to work towards expediting the CEO transition. Officially, these expedited dates are not part of the company’s publicly disclosed timeline.

Russell Reynolds’s first list will be narrowed down to reduce the number of candidates to three names. According to sources, there is an agreement under which the final list should include an internal candidate, who could be Chief Financial Officer Gustavo Pimenta. Then, there would be two other candidates to be appointed and the name of the new CEO would emerge from this list of three.

Valor found that in the first list, the consultancy made a selection by including candidates according to technical criteria. However, the final decision on whoever would move on to the next stage of selection will be up to Vale’s board of directors, currently comprised of 11 members, after two independent directors resigned. José Luciano Penido resigned in March when a letter signed by him criticizing the succession process became public. He made a recanting statement a month later and an internal investigation by Vale indicated that the succession process complied with governance. Last week, Canadian board member Vera Marie Inkster also resigned.

The board was reduced to six independent members, which is below the rules set by the company’s bylaws. Vale should call an Extraordinary General Meeting (AGE), on a date yet to be set, to reconstitute the board.

In a note released on Tuesday (9) night, the mining company informed that Russell Reynolds continues to provide the company with advisory services to select the new CEO. “The actions by Vale’s board of directors continue to be carried out as per communication to the market on May 1, 2024. Vale’s CEO succession process is carried out in compliance with the company’s bylaws and corporate policies, as well as the board of directors’ internal regulations and current legislation.” The company adds that Vale’s board of directors has not reached any conclusion to date regarding the list of candidates and reaffirms that it will keep the market posted on any relevant developments regarding the selection of the new CEO.

Vale’s management is pursuing an executive with a profile capable of taking the company back to growth after the problems that followed dam collapses in recent years. The company faces environmental licensing problems, especially in Pará, where its main reserves are located, in Carajás. According to sources close to the company, there is a mix of competencies to be observed in choosing the new CEO. That includes, for example, a required international experience in previous positions held by the executive. Another point pursued is that the executive has good communication skills and a focus on institutional relationships with stakeholders.

*Por Mônica Scaramuzzo, Francisco Góes, Stella Fontes, Kariny Leal — São Paulo, Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/