Vale CEO Steps Down Temporarily After Failing to Avoid Disaster
(Bloomberg) -- Fabio Schvartsman stepped down temporarily as chief executive officer of Vale SA as the world's largest iron ore producer comes under increased government scrutiny for failing to prevent a second deadly burst of one of its hundreds of tailings dams in Brazil.
“Even totally assured of my righteous ways and having fulfilled my duty, I request the board to accept my temporary leave in the benefit of the company's continued operations,” Schvartsman said in the letter to the board. He will be replaced by Eduardo Bartolomeo, an executive director, as the interim CEO.
Schvartsman, 65, took the company's reins in May 2017 from Murilo Ferreira, who had steered it through turbulent times of lower commodities prices and the November 2015 burst of another dam co-owned by Vale near the municipality of Mariana, in the state of Minas Gerais. That accident killed 19 people, a large number of animals and contaminated waterways in Brazil's worst-ever environmental catastrophe. The executive started his tenure at Vale with the motto: “Mariana never again.”
But when a dam operated solely by Vale burst on Jan. 25, also in Minas Gerais, investors immediately started questioning how Schvartsman failed to prevent exactly the same type of disaster, little more than three years after the first. Vale's shares have tumbled 17 percent from the day before the breach. Angry protesters defaced the walls of the company's headquarters in Rio de Janeiro, writing “murderers” in big red letters.
Directors Peter Poppinga, Lucio Cavalli and Silmar Magalhaes have also left the company temporarily. Federal police and prosecutors yesterday asked them to step down in the aftermath of the disaster that left more than 180 dead and another 120 still missing.
To read more: Brazil Makes Vale Arrests as Cabinet Meets on Fatal Dam Break
Management Changes
The new government of Jair Bolsonaro also demanded explanations and punishment. Vice President Hamilton Mourao didn't rule out changes in the company's management, saying they needed to be discussed by its board. The government doesn't control Vale's board, but holds a golden share since the company was privatized in 1997.
Schvartsman led Vale through a period of record output, soaring profits and large dividend payments. In December, the company's board had his tenure extended for two more years, until mid-2021. Before heading Vale, he served as CEO of paper maker Klabin SA and chief financial officer of Ultrapar Participacoes.
To contact the reporters on this story: Walter Brandimarte in Rio de Janeiro at wbrandimarte@bloomberg.net;Mario Sergio Lima in Brasilia Newsroom at mlima11@bloomberg.net
To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Walter Brandimarte, Joe Richter
©2019 Bloomberg L.P.
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