Abstract of the Student #Thesis: Laerte Ferreira Morgado
Furtado (2015) highlights one of the perennial issues in Brazilian society: the corruption that plagues its institutions. Analyzing several cases of corruption in both the public and private sectors reveals the extensive implications for society, contributing to issues like poverty and ineffective public policies. Corruption permeates all sectors of Brazilian society, from lower to upper classes, affecting individual well-being and economic outcomes. This pervasive issue is frequently mentioned in the news, impacting various areas from healthcare and education to traffic and crime. Understanding the influence of corruption is straightforward, as conversations with Brazilians often reveal its significant effects. Therefore, studying corruption in Brazil is crucial.
While corruption is not unique to Brazil, with cases like Enron in the US illustrating its global presence, this research project focuses on the compliance mechanisms instituted in Petrobrás following the Lava Jato operation, a significant investigation by Brazil's federal police into white-collar crime. The objective is to evaluate, using a case study methodology, the effectiveness of these compliance mechanisms in combating white-collar criminality in this major oil company. This study is critical as corruption in top positions within Brazilian society undermines corporate governance and the interests of shareholders, as corrupt individuals pursue personal agendas.
Reports indicate that corruption affects both the public and private sectors in many countries, including Brazil (International Monetary Fund, 1998). Corruption in Brazil is widespread, affecting all social strata. Any research that proposes mechanisms to reduce this phenomenon is valuable to the country's institutions.
The study will evaluate the quality of Petrobrás' compliance mechanisms to combat white-collar crime, focusing on the company's response to corruption uncovered by the Lava Jato operation.
Background of the Problem
Corruption in Brazil is a persistent issue. According to Power and Taylor (2011), it is a constant concern in the Brazilian political system, with numerous cases of corruption known in both private and public sectors at all levels of government (DW, 2014). Since the country's re-democratization, every presidential administration has been involved in corruption, causing significant harm to Brazilian society (Power & Taylor, 2011). The accountability of those involved in corruption has been minimal and ineffective, with scandals recurring but the corrupt schemes remaining unchanged (Power & Taylor, 2011).
Corruption in Brazil extends beyond the public sector. Bevins (2013) highlights that highly profitable corporations engage in corrupt practices, further harming the Brazilian population. These corporations often pay off public officials to avoid regulation and taxes or exploit consumers, workers, and the public. Such corruption diverts resources from public funds to private pockets, contributing to underdevelopment despite Brazil's status as one of the world's largest economies.
Given this scenario, it is crucial to address the deficiencies in Brazil's anti-corruption system. The legal sector's small penalties and procedural delays often allow corrupt individuals to escape punishment. In response, civil society initiatives like the "Lei da Ficha Limpa" aim to prevent the election of corrupt politicians, and the Public Prosecutor's Office has proposed additional measures to combat corruption.
The new Brazilian anti-corruption law introduces strict liabilities for companies involved in corrupt practices, with significant penalties for non-compliance. These measures aim to enhance corporate governance and deter corruption.
Significance of the Study
Corruption scandals have dominated Brazilian news for nearly a decade, starting with the "Mensalão" case and continuing with the "Petrolão" case, involving collusion between corrupt politicians and Petrobrás executives. These scandals have serious implications for Brazilian society, contributing to social unrest and economic damage. A study by the Federation of Industries of São Paulo (Fiesp) estimated that corruption costs Brazil R$69 billion annually, exacerbating poverty and undermining essential services like education and healthcare.
Corruption in Brazil is deeply rooted, dating back to its colonial history. It affects both public and private sectors, with private sector corruption often overlooked. The misappropriation of resources for corrupt purposes hampers Brazil's development. Combating corruption in private companies is crucial for improving governance and preventing collusion with the public sector.
Petrobrás, a leading Brazilian oil company, exemplifies the challenges of corruption. As a mixed-economy corporation, it is susceptible to political influence, which has led to significant corruption scandals. The company's compliance mechanisms, including a corporate integrity program and a board on management and risk, aim to combat these issues.
Statement of the Problem
The study examines the quality of Petrobrás' compliance mechanisms in combating white-collar crime. This is critical given the extensive corruption uncovered by the Lava Jato operation, involving top executives and politicians. The study will assess whether these mechanisms are effective in addressing the types of corruption identified in the operation.
To define the construct of compliance mechanism quality, two sub-questions are posed: (1) Are the compliance mechanisms effective in combating the types of corruption crimes defined by the Brazilian criminal code? (2) Are the compliance mechanisms effective in addressing the modus operandi of corruption crimes uncovered by Lava Jato? A case study methodology will be used, drawing on a rich array of documents, including legislation, Petrobrás' internal rules, judicial documents, and research papers.
Purpose of the Study
The purpose of this study is to evaluate the quality of the compliance mechanisms instituted by Petrobrás to combat white-collar criminality. Corruption in Brazil diverts resources and undermines both private sector efficiency and public sector integrity. Effective compliance mechanisms are essential to deter corruption and promote better governance.
Corruption is a global issue, with private companies, public sector entities, and other powerful actors engaged in illicit activities. Effective compliance mechanisms can make corruption riskier and costlier for these actors, enhancing corporate governance and public sector effectiveness.
Focusing on Petrobrás provides a detailed understanding of the problem and potential solutions.
Definitions of Terms
Corporate Governance: The management and control of companies, including their rules and relationships among the board of directors, top management, and shareholders (Silveira, 2015).
Corruption: Dishonest or illegal behavior by powerful individuals, such as government officials (Merriam-Webster, 2016).
Crime: An illegal act defined by law as subject to punishment by the judiciary.
Empirical Research: Research using qualitative or quantitative empirical methods.
Inductive Reasoning: Making broad generalizations from specific observations (LiveScience, 2015).
Institution: An organization devoted to a specific purpose.
Institutions: Social structures regulating individual behavior in a society.
Judiciary: The Justice Branch of Public Administration in Brazil.
Law: A formal rule established by a country's Legislative Power.
Public Sector: Brazilian institutions comprising the Executive, Legislative, and Judiciary Powers, their subdivisions, norms, and agents.
Rationalism: The doctrine that reason is a source of knowledge about the external world (Schick & Vaughn, 2010).
Rent-seeking: Using resources to obtain economic gain from others without reciprocating any benefits to society (Investopedia, 2017).
Sarbanes-Oxley Act of 2002: A US law to fight corruption in private corporations.
Stakeholder's Theory of the Firm: The viewpoint that organizations have societal obligations beyond increasing shareholder value (Larcker & Tayan, 2016).
Summary
Corruption in Brazil, affecting both public and private sectors, causes significant harm to society and undermines corporate governance. This study evaluates the quality of Petrobrás' compliance mechanisms against corruption, using a case study methodology with diverse documentary evidence and professional evaluation. The research contributes to understanding and improving anti-corruption measures in Brazil.
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