China’s state-owned oil firm faces a series of lawsuits in the US over corruption allegations wipes $1bn off market value
The problems continue to mount for PetroChina, China’s state-owned oil giant, following recent news that a number of senior executives were under investigation for alleged corruption.
It was announced that the company was facing a class action lawsuit in the US over the allegations of corruption. New York-based law firm Pomerantz filed the action on behalf of investor Johan Broux, as well as others who had bought shares in PetroChina over the last year.
It emerged that the Chinese government was investigating three top executives – Chairman Zhou Jiping, CFO Yu Yubo, former CFO Zhou Mingchun, and chairman of parent company China National Petroleum Corp Jiang Jiemin. All four executives resigned after the news of the investigation was announced into alleged corruption and “severe disciplinary violations.”
The lawsuit states that PetroChina’s executives failed to comply with the firm’s own corporate governance guidelines and code of ethics. Pomerantz said: “The company’s financial statements were materially false and misleading as they contained direct references to the [its] Code of Ethics, and statements regarding its compliance with regulations and internal governance policies.”
Although the details of the allegations against the executives are currently not known, there is concern in the international business world that Chinese firms are not taking corporate governance as seriously as their western counterparts.
Scott Lane, CEO of corporate governance consultancy firm the Red Flag Group, recently told Corporate Governance Report of the difficulties investors were seeing with Chinese firms – and in particular state-owned businesses – with regards to good governance. Lane believes that the culture of compliance was relatively undeveloped, and there needed to be a shift in attitudes by China’s policymakers and business leaders.
He said: “It’s behind international standards. It’s often seen as an internal working document. Compliance is seen as this backroom, hidden team that complies with regulations. It’s an internal reporting mechanism. It’s very different to the rest of the world, who use it as a way to show how they can improve the business, attract talent, grow sales by being a strong branded, ethical company that values people and the communities. It’s just nowhere near there in China.”