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Analysis

PEMEX Corporate Governance

Wed, 01/25/2012 - 09:35

Pemex is state-owned, and therefore the Mexican government is able to choose who will hold crucial positions in Pemex’s management team, as well as in the Board of Directors. Pemex’s CEO is appointed by the Mexican President, while the country’s Energy Minister, currently Jordy Herrera Flores, sits in permanence as Chairman of Pemex’s Board of Directors. Mexico’s Finance Minister is also a member of the Pemex board. In addition to the six government representatives, five board members represent the Pemex labour union. As for other executive management positions, not only does the Mexican President appoint Pemex’s CEO - he also chooses the heads of the four Pemex subsidiaries.

The individuals in the four recently created positions of independent, professional members of the Board of Directors are nominated by the Mexican President to the Senate, which has to review and approve the proposed candidates. The requirements for becoming a professional board member are to be Mexican by birth, to have a professional degree in an energy industry-related area and have excelled in his or her profession. Professional board members also cannot have had any professional, work or business relationship with Pemex during the two years before the nomination. The four professional board members have voting rights within the Board of Directors and any important decisions of the board need the approval of at least three of the independent members. They also chair the seven strategic committees that serve the Board of Directors, like the strategy and investment, procurement, transparency and accountability committees. Some committees have to include at least three professional board members, such as the environment and sustainability committee as well as the audit and performance evaluation committee. The goal of introducing independent board members was to increase the transparency in the NOC’s decision-making.

Rogelio Gasca Neri, one of the four independent members of the Pemex board, does not believe that the changes in corporate governance have made a vast amount of dierence since their implementation. “I have not contributed to a significant decision since joining the board in 2009,” he says. “Most of the important decisions are discussed at a governmental level, and then ratified by the committees. As independent board members we are on the margins of the debate, letting our opinions be heard, but not necessarily being listened to.”