Viewpoints on Energy, Geopolitics, and Civilization
Matt Levine / Bloomberg: Citgo
Isn't Sure Who Its Boss Is
John Bolton: Very productive meeting this afternoon with members of the CITGO executive team, Jan. 30
The refiner's decision to ignore Nicolás Maduro
and go along with Juan Guaidó's new board is pretty spectacular.
How's it going at Citgo Petroleum Corp., the U.S. subsidiary of Venezuelan state-owned oil company, Petróleos de Venezuela SA.
Because of the U.S. sanctions, Citgo's U.S. management is ignoring directives from oil executives tied to Mr. Maduro's regime, a person familiar with the matter said. Valued by PdVSA at over $9 billion, Citgo directly employs over 3,000 people in the U.S. but is a major source of critical dollar revenue for Venezuela.
Juan Guaidó, the U.S.-backed lawmaker trying to oust Venezuelan President Nicolás Maduro, plans to name a new board of directors for Citgo, and Citgo already plans to go along with it:
A Citgo spokesman said in a statement: “We are aware that there may be new members elected to the Citgo Petroleum Corp. board of directors. In corporate governance, as with all matters, we will follow the laws of the United States.”
This outcome is not exactly surprising — we talked about it last week — but it is still some pretty extraordinary corporate governance. If I just announced one day that I was appointing a new board of directors for Facebook Inc., Facebook's existing board of directors and chief executive officer and controlling shareholder would probably all come out and say “wait, what, no, you can't appoint a new board of directors, you're just some guy, you don't even own any of our stock.” But if Facebook's employees then said “nah we're good with Levine's board, wave ‘em in,” and a Facebook spokesman came out and announced “we're aware of the new board members and, welcome, they are now our board,” that would be super, super, super weird. (Should I try this?) I don't think it would work , exactly, though it is an interesting exercise to figure out how it wouldn't work. (“Oh Mark Zuckerberg would go to court and get a ruling saying his board is still the board,” sure, yes, that is easy, but you need the employees to actually do the work; do you have to send the cops in to make the employees swear allegiance to the old board?)
That is not all that is going on at Citgo — in particular, it seems like the U.S. legal system will generally accept the legal fiction that PdVSA, Citgo's sole shareholder, is controlled by Guaidó rather than by the people in Venezuela who actually control it — but it is part of it. Citgo can just throw off its bosses and board and shareholder, and replace them with a new board, in part because the employees who go to the refineries every day and actually do the work have decided that they're going to ignore their old bosses and throw their lot in with the new board.
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Matt Levine is a Bloomberg Opinion columnist covering finance. Petroleumworld reprint this article in the interest of our readers.
Editor's Note: This article was originally published by Bloomberg, on Feb. 8, 2019. All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld.
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