Resources Policy 72 (2021) 102022

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Resources Policy
journal homepage: http://www.elsevier.com/locate/resourpol

What misguides environmental risk perceptions in corporations?

Explaining the failure of Vale to prevent the two largest mining disasters
in Brazil
Beatriz Macchione Saes a, b, *, Roldan Muradian a
a
Faculty of Economics, Universidade Federal Fluminense, Prof. Marcos Valdemar de Freitas Reis St., s/n, Bloco F, São Domingos, Niterói, RJ, Brazil
b
School of Politics, Economics and Business, Universidade Federal de São Paulo, Oleska Winogradow St., n◦ 100, Jd. das Flores, Osasco, SP, Brazil

A R T I C L E I N F O A B S T R A C T

Keywords: Corporate misperceptions of environmental risks are relatively frequent and can have catastrophic consequences,
Environmental risk as in the case of the two recent tailings dam breaks in Brazil of the mining company Vale. By analysing Vale’s
Mining documents and testimonies of investors, managers and engineers in the period between the two accidents
Risk perception
(2015–2019), we investigated why Vale disregarded potentially disastrous operational risks after the largest
Shareholder value
Disasters
tailings spill in the history of mining in Brazil. The results reveal that the sources of risk considered important at
Vale were those that could potentially affect the company’s short-term financial performance. Overall, these
findings indicate that the focus on shareholder value can generate strong biases in the perception and assessment
of environmental risks, which can not only cause massive social and environmental impacts, but also, para­
doxically, the destruction of shareholder value in the long run.

1. Introduction
Large-scale mining disasters involve far less complex technologies
and systemic interactions than nuclear accidents or chemical catastro­
phes, but still stand out for their large impacts. During the last two de­
cades, in the midst of an increasing global demand for metals and
declining iron grades, there was an upward trend in tailings dam fail­
ures, with an important level of growth of catastrophic disasters related
to large spills from tailings dams. Within this time period, there were
more than fifty mining dam failures in the world, and three of them
caused more than 100 deaths (Rico et al., 2008; Bowker and Chambers,
2015; Wise, 2019). Still, while “normal accidents” related to high-risk
technologies are expected to occur sometimes for unforeseeable rea­
sons, dam failures and other “earthbound disasters” tend to be caused by
more prosaic mistakes, often avoidable with more appropriate ap­
proaches towards risk management (Perrow, 1999; Dekker, 2011).
Preventable management and organization failures are indeed found to
be the main sources of mining and dams disasters, though how they
relate to the broader legal context and managerial decisions are more
controversial issues (Hynes and Prasad, 1997; Duffaut, 2013; Huber
et al., 2016; Komljenovic et al., 2017; Armstrong et al., 2019; Kemp,
2020).
The case of Vale’s tailings dam failure in 2019 deserves special
attention because it occurred only about three years after the largest
mining accident in the history of Brazil. In the first accident, in
November 2015, an upstream tailings dam collapsed in the city of
Mariana (Minas Gerais, Brazil), releasing about 33 million cubic meters
of tailings down the valley, which killed 19 people. This event is
considered one of the largest accidents in the history of mining when
evaluated by the volume of wastes released and the geographical
extension of the environmental damage (Carmo et al., 2017; Roche
et al., 2017; Sánchez et al., 2018). The dam was owned by the mining
company Samarco, a joint venture between Vale and the
Australian-based company BHP Billiton. In the second disaster, in
January 2019, just about 150 km away from Mariana, 11.7 million cubic
meters of iron mining tailings flooded the installations and offices of
Vale and other rural proprieties in the city of Brumadinho (Minas Gerais,
Brazil), causing the death of 270 people (Vale, 2019a). Given the scale of
this second disaster, Parliamentary Commission of Inquiries (PCIs) were
conducted during 2019, aiming to investigate the causes of it. It is worth
noting that attempts to initiate a PCI after the first accident (in Mariana)
were not successful.

* Corresponding author. School of Politics, Economics and Business, Universidade Federal de São Paulo, Oleska Winogradow St., n◦ 100, Jd. das Flores, Osasco, SP,
Brazil.
E-mail addresses: beatriz.saes@unifesp.br (B.M. Saes), roldanmuradian@gmail.com (R. Muradian).

https://doi.org/10.1016/j.resourpol.2021.102022
Received 27 July 2020; Received in revised form 14 February 2021; Accepted 15 February 2021
Available online 3 March 2021
0301-4207/© 2021 Elsevier Ltd. All rights reserved.
B.M. Saes and R. Muradian
Previous studies aiming to interpret these two tailings dam failures
have looked at the mechanisms to exert the power to impose risks on
particular social groups and to socialize private costs (see for example
Mansur et al., 2016; Wanderley et al., 2016; Milanez et al., 2016; 2019;
Demajorovic et al., 2019). However, we have chosen not to undertake
our analysis using traditional political ecology considerations. We argue
that Vale’s most recent failure (in Brumadinho) calls for paying atten­
tion to another challenging issue: Vale’s underestimation of operational
risks, reflected in the lack of appropriate measures to prevent the second
accident, dramatically harmed the company itself. Besides the accoun­
ted loss of US$ 1.683 billion by the company in 2019 (after a net income
of US$ 6.860 billion in 2018), the Brazilian state prosecutors charged
Vale’s Chief Executive Officer (CEO) and other 15 main executives and
engineers with homicide for the collapse of the dam (Vale, 2020a,
2020b). Therefore, in addition to causing outrageous
socio-environmental impacts, the disaster also resulted in a large-scale
self-inflicted damage to both the company and the managers. Our hy­
pothesis is that the organizational failure of Vale in the case of Bruma­
dinho was the result of risk perception biases that were reinforced by the
transformation of corporate governance that took place during the
period 2015–2019. Such managerial strategic change narrowed the
focus of the company on shareholders’ short-term interests, which made
the firm to overlook serious operational risks.
In order to understand how and why Vale disregarded operational
risks after the largest disaster in the history of mining in Brazil, we
attempt to characterize and interpret: i) how risks were perceived by
managers and geotechnical experts of Vale after the disaster in Mariana;
and ii) how these perceptions were influenced by Vale’s governance
changes in the period considered. The paper is organized as follows: In
the next section we review the literature about the relationship between
risk perceptions within organizations and the incidence of socio-
environmental disasters (Section 2). Section 3 describes the methodo­
logical approach to examine documents from Vale and the materials
provided by the PCIs about the causes of the Brumadinho tailings dam’s
failure. Section 4 describes risk perceptions revealed by content analysis
of Vale’s corporate documents, as well as by communications and tes­
timonies of managers and engineers. In Section 5, we discuss how risk
perceptions within corporations that are driven by shareholders’ short-
term interests can affect risk assessment and hinder the prevention of
disasters. Finally, we end the article with a conclusive section (Section
6).
2. Risk perception in disaster research
The literature on the social determinants of risk perceptions has
identified cultural features (Douglas and Wildavsky, 1982),
socio-political institutions (Clarke, 1989; Tierney, 1999) and cognitive
and heuristic factors (Slovic, 1987) as explanatory elements. It is now
well accepted that understanding major industrial disasters requires
going beyond purely technical approaches to risk analysis, because the
perception and assessment of risk within organizations are conditioned
by multiple socio-cultural aspects, such as personal beliefs, organiza­
tional constraints and worldviews (Aven and Renn, 2009; Renn and
Benghaus, 2013; Kemp et al., 2016).
Bias in risk perception within corporations seems to be rather a
common feature of major industrial disasters. Pioneering studies in
disaster research showed that organizational failures leading up to di­
sasters might not be necessarily followed by changes in beliefs about the
safety of operations (Turner, 1978; Vaughan, 1996; Perrow, 1999). In­
consistencies between risk perceptions and system safety are well
known, even though those inconsistencies might be visible only after
accidents (Antonsen, 2009; Guldenmund, 2000; Strauch, 2015).
Some scholars propose that biases in risk perception and assessment
can be overcome with due attention and appropriate managerial ap­
proaches. The category “High Reliability Organization” (HRO) has been
created to refer to organizations that foster a culture of prevention and
2
Resources Policy 72 (2021) 102022
surveillance, based on continuous training programs and redundancy
processes, such as double-checks and parallel systems, which are aimed
at correcting failures and biases in risk management (La Porte, 1996;
Cooper, 2000). Recent contributions on HRO theory emphasize that
organizations should always be open to doubts and be attentive to
failures rather than to success, in order to detect symptoms of organi­
zational malfunctions (Weick et al., 2008). HROs, by making visible
risks that are located within blind spots of the organization, are expected
to be able to overcome possible imperfections in risk assessment.
In contrast to the HRO approach, critical perspectives are more
pessimistic about the possibility of overcoming biases. They stress the
variety of constraints for adopting safer procedures in corporations, due
to the inherent complexity of risk judgments. Such judgments may vary
significantly among organizations, due to different economic, cultural
and social contexts (Douglas and Wildavsky, 1982; Ravasi and Schultz,
2006; Alvesson, 2012). Corporations tend to import external discourses
shaped by power and ideologies to establish internal shared meanings
and symbolism (Phillips et al., 2008). Ideology can be defined as a set of
beliefs that corresponds to the world-view and interests of a social group
or class (Mannheim, 1954). The ideology of “shareholder value” has
become prominent in the governance of corporations. It is founded on
the principle that maximizing shareholder value is beneficial to corpo­
rations but also to the economy, and therefore society as a whole (Laz­
onick and Sullivan, 2000). The adoption of the maximization of
shareholder value as the ultimate goal of corporations is grounded on
the belief that the (neoclassical) market is the most efficient mechanism
for allocating scarce resources (Jensen and Meckling, 1976). Based on
this assumed superiority of market mechanisms, Milton Friedman
(1970) made the famous statement that “the social responsibility of
business is to increase its profits”.
While managers are trained in business schools to act within the
premise of this belief system and therefore to adopt the rate of return on
corporate stock as the best measure of corporate performance, there
might be a trade-off between safety and economic goals in profit-
oriented organizations, at least in the short term. This may create con­
flicts between different organizational sectors and committees,
hampering the capacity of organizations to prevent disasters (Perrow,
1994; Sagan, 1994; Le Coze, 2015). Organizational failures can be the
result of pragmatic calculations within corporations prioritizing profit
(or cost reduction) over safety, and not exclusively the effect of biased
judgments – especially when the harms of disasters fall on third parties
(Golbe, 1986; Walters and Bailey, 2013; Armstrong et al., 2019).
Corporate risk disclosures aim to provide information to investors, as
a mechanism to reduce uncertain (Lajili and Zéghal, 2005; Linsley and
Shrives, 2006). They are conducted even in high risk sectors, such as
mining (Moloi, 2014; Thai and Birt, 2019). These disclosures normally
use the category “social risk” to refer to undesirable socioenvironmental
effects of corporate activity (Kytle and Ruggie, 2005; Thomson and
Boutilier, 2011). The notion of “social license to operate” is employed to
deal with dissatisfied stakeholders and to ensure investors’ confidence in
a risky context of operations (Acselrad and Pinto, 2009; Owen and
Kemp, 2013; Pinto, 2019). Social risks are considered to be successfully
managed when projects are accepted by communities, regardless of the
magnitude of the disasters and other socio-environmental harms the
project could produce (Prno and Slocombe, 2012; Parsons et al., 2014;
Moffat et al., 2015). Hence, risk management and production is related
to the ability of organizations to impose risks on others, as well as to
what level of risk is considered “acceptable” by the public (Clarke, 1989;
Tierney, 1999).
Contemporary mining disaster research draws attention to the eco­
nomic and social processes that create vulnerability as important po­
tential causes of catastrophic events. Corporate and governmental
power structures, which dictate laws, regulations, policies, access to
information, monitoring etc., shape the conditions of vulnerability
(Labonne, 2016; Santos and Milanez, 2017). The catastrophic potential
of unexpected events, such as tailings dam ruptures, can be increased by
B.M. Saes and R. Muradian
the vulnerability of people, particularly when they are unable to respond
to or cope with the damaging consequences of the disaster (Kemp, 2020;
Kemp et al., 2020). From this perspective, preventing disasters also in­
volves understanding and assessing risks from the point of view of
vulnerable groups.
Democratization of corporate decision-making is seen as important
for both preventing certain conditions of vulnerability and improving
risk assessment. Risk perception pays an important role in the mobili­
zation of social groups for inducing firms and governments to adopt risk
reduction actions (Boelens et al., 2019). The risk perception of poten­
tially affected social groups is normally not reflected in organizational
decision making settings, since they are controlled by investors, man­
agers and engineers. However, after the occurrence of disasters, risk
governance improvements (involving the participation of stakeholders
external to the firm) are expected to be introduced as a response to social
pressure (De Marchi and Ravetz, 1999).
The proposition that public risk perception should be incorporated
into decisions of the firm started to gain influence in the mining sector
with the rise of the notion of corporate social responsibility (CRS),
particularly during the late 1990s (Jenkins and Yakovleva, 2006).
However, in most mining companies, risk management and CRS stra­
tegies aim at protecting business and shareholder value instead of
responding to the concerns of communities (Kemp and Owen, 2013;
Owen and Kemp, 2013; Frederiksen, 2018). In general, mining corpo­
rations still rely heavily on techno-scientific approaches to risk and
exclude external voices and visions in their risk management (Kemp
et al., 2016; Kemp, 2020). Social risk assessments also address in general
potential impacts on business that may result from the interaction with
communities. When dealing with potentially affected populations, risk
management focuses on reducing threats to projects such as protests and
opposition by communities. Risks imposed by mining companies on the
livelihoods of people or the environment, especially where they appar­
ently do not imply risks to the business, tend to be neglected by man­
agers (Kemp et al., 2016).
3. Methods
Our analysis is based primarily on the examination of three sets of
documents and information: i) Vale’s Form-20F and Sustainability Re­
ports from the period 2015–2019; ii) Vale’s presentations and webcasts
in the same time period; and iii) The PCIs conducted in 2019. The Form-
20F is a financial statement that must be submitted to the U.S. Securities
and Exchange Commission by all overseas companies with shares traded
on the New York Stock Exchange (NYSE). The information is standard­
ized for all companies, including financial and operational results, risk
factors and projections about investments and projects. The Sustain­
ability Report is also published annually, following the directives of the
Global Reporting Initiative.
The webcasts about the company’s financial results consist in pre­
sentations by main Vale executives followed by a question-and-answer
session, which is open to investors. Similar conferences, called Vale
Days, take place annually on the stock exchanges of London and New
York, both with investors and journalists. Finally, the public inquiries to
investigate the causes of the Brumadinho tailings dam’s failure were the
following: i) the Brazilian Federal Senate PCI, from March to June
20191; ii) the Brazilian Chamber of Deputies PCI, from April to
November 20192; and iii) the Assembly of the Minas Gerais state PCI,
from March to September 2019.3 Public inquiries can be defined as “a
1 volatility in commodity prices; ii) risks as unpredictable outcomes of
https://legis.senado.leg.br/comissoes/comissao?0&codcol=2246.
2 state interference; iii) risks linked to mining operations, including
https://www2.camara.leg.br/atividade-legislativa/comissoes/comissoes-te
mporarias/parlamentar-de-inquerito/56a-legislatura/cpi-rompimento-da-ba
rragem-de-brumadinho.
3
https://www.almg.gov.br/acompanhe/noticias/arquivos/2019/09/12_cpi_
barragem_relatorio_final_principal.html.
3
Resources Policy 72 (2021) 102022
ceremonial event organized by a governmental agency that assembles,
often using the power of subpoena, persons knowledgeable about a
disaster” (Gephart, 1993, p.1474). The PCIs provided testimonies of
people directly or indirectly involved in the event, representatives of key
organizations (e.g. governmental bodies) or groups (e.g. social move­
ments), and experts with relevant technical knowledge.
The core purpose of our analysis was to examine the perceptions
about risk within Vale after the Samarco dam failure in 2015. Risk
perceptions of managers and engineers were assessed based on selected
textual extracts of their speeches, testimonies and statements. Content
analysis is often employed to identify patterns and prevailing informa­
tion in corporate documents, encompassing risk management disclo­
sures (Lajili and Zéghal, 2005; Linsley and Shrives, 2006; Gao, 2009;
Elzahar and Hussainey, 2012; Metaxas and Tsavdaridou, 2013). We
adopted an interpretive approach for textual analysis focused on risk
analysis (Tregidga and Milne, 2006; Amaeshi and Amao, 2009; Milne
et al., 2009; Tregidga et al., 2012; Harjanne, 2017; Benevene et al.,
2019).
By recognizing that meanings are dependent on the context in which
words or texts are used, the most important consequence of working
within our interpretive approach was taking the links between texts and
the broader context into consideration. Categories of analysis, although
inspired by existing empirical and theoretical works, were defined based
on the data, in order to express what was relevant in that given context.
Finally, because some inevitable degree of subjectivity in this type of
analysis can lead to rival interpretations of the same documents, addi­
tional steps to check the adequacy of the selected analytical categories
and main interpretations were employed, such as describing the findings
through selected textual extracts (Ahuvia, 2001; Hardy, 2001; Hardy
et al., 2004).
Aiming to find the relevant risk categories for our analysis, the
various risk factors listed in Vale corporate reports were systematized.
Our categorization sought to reflect the fact that not all the risk factors
presented in both the financial and sustainability Vale Reports – namely,
market, credit, operational, compliance and strategic risks – are
emphasized equally in webcasts. Webcasts were considered valuable
sources of information because these conference calls are meetings in
which Vale’s main executives describe the company’s results, as well as
its challenges and strategies in a looser way, as compared to corporate
reports, which are elaborated by public relations specialists following
standardized external rules. As well, being quarterly events, webcasts
can reflect more variations throughout the year than annual reports
(Matsumoto et al., 2011).
Through a careful reading of the webcasts, we selected 124 risk-
related extracts in which events and issues explicitly related to risk,
uncertainty, security, safety or predictability were discussed. After
classifying the extracts in the risk categories listed in the Vale Reports
(market, credit, operational, compliance and strategic risks), we found
that the vast majority were related to market risks (68), followed by
strategic (30) and operational risks (21). Most extracts related to market
risks have to do with the vulnerability of commodity prices (53). Stra­
tegic risk comprises the business model (8), external environmental is­
sues (2), governance (11) and regulatory, political, economic or social
actions taken by governments (13). Finally, half of the extracts related to
operational risks refer to the Samarco disaster (10). It is worth noting
that operational risk is the category more directly related to social risks.
The prevalence of these risk factors was then revised according to the
main strategies, priorities and governance changes listed in Vale’s Re­
ports and stated by its CEO in webcasts over the period 2015–18. Finally,
the three risk categories more present in the discourses were: i) risk as
geotechnical ones. Based on these prevalent risk categories, excerpts
from Vale’s top management speeches were examined taking into ac­
count the broader context. The relevant contextual factors were the ones
revealed in the texts, during the readings and analysis of the documents
B.M. Saes and R. Muradian
(Chouliaraki and Fairclough, 2010). For instance, the period considered
was characterized by instability of commodity prices and political
turmoil in Brazil.
In the last phase of the research, we focused only on the third risk
category, aiming to deepen the analysis of risk perceptions exclusively
linked to mining operations, and particularly to tailings dams. The
perceptions of risks were assessed through the testimonies of the three
PCIs mentioned above. While the webcasts addressed topics affecting
financial results, the PCIs were a valuable opportunity to hear Vale’s
upper management addressing operational risks in front of an audience
composed by politicians, social movements, press, etc. Among the 236
testimonies in the three PCIs, we examined in depth 69, given by 38
Vale’s managers and engineers or external engineers working temporary
for Vale or consulting companies offering services to Vale. As some of
the inquiry participants were heard in two or three commissions, the
testimonies are more numerous than the selected actors. For each actor,
we examined how the risk of the tailings dam failure in Brumadinho was
perceived, how this perception was justified, the elements to blame for
the disaster and how they describe Vale’s risk management following
the Mariana disaster. By analysing the content of the testimonies of the
executives and engineers regarding dam safety, we aimed to explore
how geotechnical risks were perceived at different organizational levels
within Vale. Furthermore, the testimonies of Vale’s engineers were
compared to the other specialists in the field.
The format of the PCIs imposed some limitations to our analysis. In
the PCIs, the witnesses are cautious, since some of them were being
investigated as responsible for the accident. The discomfort of Vale’s
executives during inquiries was noticeable. The audience present at the
PCIs was composed by a wide range of stakeholders, from parliamen­
tarians to the relatives of victims, which certainly imposed constraints
on what could be said and how. Lastly, during the PCIs, both Vale’s
engineers and executives were advised by lawyers hired by the com­
pany, which definitively shaped their discourses. These particularities
and biases were considered, as much as possible, throughout the
analysis.
4. Results
Between the two tailings failures the company recovered from a
financial crisis that included a peak of indebtedness. During this time
period, the firm made important changes concerning its shareholder
structure and a new corporate governance was introduced in 2017,
reflecting a series of concerns, particularly in relation to predictability
and stability:
Everything that we’ve been doing in the company in the last few
months was related to become a more predictable company. (…) we
are evolving in a very decent way towards becoming a more pre­
dictable company, and a company that you can … that you know
what to expect in any given circumstance.4
In 2018, the perception of Vale’s executives was that considerable
progress was made towards the desired predictability. For instance, in
April 2018, Vale’s CEO stated: “So, it seems that in this quarter we are
moving forward with the idea of keeping the company as predictable as
possible and delivering a very constant results flow.“5 In July 2018, the
same optimism in relation to the achievement of goals was expressed:
“(…) I just want to emphasize that the company will continue to perform
the same way it has been performing, so the predictability and the sta­
bility of the company is there ( …)”.6 Finally, a few months before the
Brumadinho disaster, the company’s CEO said: “And on top of every­
thing, we think that we are moving forward in the right direction,
4 8
CEO-Vale. Conference Call, Fourth Quarter 2017 Results, 28 Feb 2018.
5
CEO-Vale. Conference Call, First Quarter 2018 Results, 26 Apr 2018.
6 9
CEO-Vale. Conference Call, Second Quarter 2018 Results, 26 Jul 2018.
4
Resources Policy 72 (2021) 102022
becoming, as expected, a more predictable company ( …).“7
However, while the company was still celebrating the good results of
its new corporate governance, Vale proved instead to be a very unpre­
dictable company when it tragically surprised the workers of the
Córrego do Feijão mine and the communities of Brumadinho with one of
the most fatal dam breaks in the history of mining. This leads to question
what in fact the company considered the main sources of risk and
instability. The following sub-sections report the results of the discourse
analysis in relation to the perceptions of managers as the main sources of
risk between the disasters of Mariana and Brumadinho.
4.1. Risk as volatility in commodity prices
During the decade 2001–2011, most commodities experienced a
price boom, which had a positive impact on mining revenues. However,
during the following decade, the reversal of this trend significantly
reduced the revenues of the sector. Vale’s reports in the period
2015–2019 highlighted the risk due to volatility of prices, particularly of
iron ore and iron ore pellets, which account for about 70% of Vale’s
operating revenues. The iron ore price was US$135 per dmt in 2013, US
$97 per dmt in 2014 and US$55.5 per dmt in 2015 (Vale-20F,
2015–2019). In 2015, the reduction of commodity prices was a major
concern for Vale:
Vale’s financial performance was impacted by the sharp drop in
commodity price in 2015 (…). Despite all our efforts, Vale reported a
net loss of US$ 12.1 billion in 2015. This result was impacted by two
non-cash effects: impairment in the amount of around US$ 9 billion
as a result of sharp decline in commodity prices; financial losses
stemming primarily from the depreciation of the Brazilian real on
our US dollars denominated debt in derivative positions.8
The quote stresses that the bad 2015 performance of Vale was mainly
due to the decline in prices (and not the Samarco disaster in Mariana). In
2015, the decline of prices induced a reduction of the value of Vale’s
assets of US$9 billion. It is worth noting that the company spent much
less with the remediation of the environmental and social damages of
the Samarco disaster: US$71 million in 2016, US$294 million in 2017,
US$284 million in 2018 and US$309 million in 2019 (Vale-20F, 2019,
p.93). The discourses of Vale’s executives show the perception that the
company was at the time too risky because of the instability of com­
modity prices, and not because of unsafe mining operations. The
following speech was given by Vale’s Chief Financial Officer (CFO) at
the NYSE in 2016:
The stock market was very tough on us about two years, one year and
a half ago. The message we heard from you was that Vale was too
risky to invest in a scenario in which commodities were also risky in
terms of their price outlook. You said to us, you’re not as competitive
as your peers. You’re spending more money on Capex than your
peers. And you have a more leveraged balance sheet in this envi­
ronment, which is also bad ( …). So what I’m going to show you is
that we’re about to finish the journey towards de-risking the Com­
pany in those three dimensions. And hopefully the market will
reward Vale in this new shape and form after the journey’s
complete.9
It is interesting to note that “you as an investor”, “the stock market”
and “the market” are important subjects in this quote. While the in­
terlocutors of Vale’s CFO are actually the investors of the NYSE, the
more abstract term “market” is used interchangeably. “The market” is
7
CEO-Vale. Conference Call, Third Quarter 2018 Results, 25 Oct 2018.
Former CEO-Vale. Conference Call, Fourth Quarter 2015 Results, 25 Feb
2016.
CFO-Vale. Vale Day 2016, New York, 20 Nov 2016.
B.M. Saes and R. Muradian
personified as someone who reacts to the company’s risk profile. If the
company proves to be non-competitive in relation to its peers, the
market may choose to buy the shares from another company. High
capital expenditures (Capex) and indebtedness is also risky in the eyes of
the market, as they may induce lower dividend payments. Given the
volatility of the commodity prices, managing these financial aspects was
the way to maximize shareholder value and to achieve predictability in
the company’s performance:
‘How can you ask for predictability in a company that is producing a
commodity?’ My point is that at any given price level, everybody will
have to know in advance how much Vale can perform, without effort.
This is predictability. We have to control, and show the control, of
everything else that the company does for this purpose. Of course we
don’t control prices and therefore the idea is: one price, one result. 10
In the quote below, the reduction of costs and capital expenditure are
proposed again as strategies to overcome market uncertainties and
shareholders’ fears:
We will become a boring company, a no-frills company, a company
that will deliver and run like a clock. And if you look back to the
trajectories of cost reductions in all of our businesses, the trajectory
of Capex reduction, this will continue into the future. And looking
back, you will get past the uncertainties and your fears and you will
say this is a predictable company ( …).11
Here, the metaphor of the clock is used by Vale’s CFO to represent
the company’s desired predictability. It is interesting to note, however,
that the clock, as an accurate and sensitive device, was used to indicate
the predictability of the company in response to the instability of prices –
and not to dam safety problems. The clock metaphor also reveals a
mechanistic view of the company, incompatible with the management
of conflicts related to socio-environmental risks.
By focusing on its financial performance, Vale was supposedly on the
right track to achieve a higher level of predictability. In mid-2018,
Vale’s credit rating had been raised by the world’s four largest rating
agencies – Moody’s, S&P, DBRS and Fitch. The company announced this
achievement and “the improvement in the market perception of Vale’s
credit risk” as the result of the company’s “commitment to become a
more predictable company” (Vale, 2018). Therefore, the perception that
the company was on track was not only pervasive in Vale, but also it was
reinforced by independent rating agencies.
4.2. Risk of state interference
The other important source of risk in the discourses of managers and
Vale’s official documents was governmental interference (Santos, 2017).
Avoiding government interference was a key concern for the new Vale
corporate management. In 1997, the former Brazilian state-owned
mining company Companhia Vale do Rio Doce12 was privatized
through an auction won by a consortium composed by private economic
groups and pension funds of state-owned enterprises. This consortium
(Valepar S.A.), which has more than 50% of the company’s (voting)
shares, became the controlling group of Vale. In the 2000s, Valepar S.A.
10
CEO-Vale. Vale Day 2017, New York, 6 Dec 2017.
11
CFO-Vale. Vale Day 2017, New York, 6 Dec 2017.
12
The Companhia Vale do Rio Doce (CVRD) was renamed as Vale in 2007.
5
Resources Policy 72 (2021) 102022
was composed by Litel Participações S.A. (formed by pension funds), the
Brazilian Development Bank (BNDES), the bank Bradesco, and the
Japanese trading company Mitsui Co. The pension funds and the BNDES,
whose administrations were traditionally aligned with the federal gov­
ernment, had a majority stake in Valepar and thus an important role in
the company’s management (Musacchio and Lazzarini, 2015).13 In
2017, for instance, the pension funds had almost 60% of Valepar’s
shares and BNDES close to 10%.
The goal of the new governance of Vale was to have a company with
no controlling group in the shareholder structure, and this was going to
be achieved by merging the group Valepar into Vale and unifying Vale’s
share classes (Vale-20F, 2016, 2017). By mid-2017, the common shares
(with voting rights) and preferred shares were unified, giving all
shareholders of the company the right to vote while also reducing the
power of Valepar:
I want to make a quick comment as well in this capital restructuring
of Vale (…) and it is my pleasure to tell the market that the results so
far are far beyond our best expectation. (…) the vast majority of the
market was supporting the operation. (…) it will represent a very
important step forward the direction of preparing this company to
become a true Corporation, with better governance and less gov­
ernment interference. That is the aim of all of that.14
The concern with the risk of state intervention was shared by “the
market”. In 2012, a report made by Ernst & Young on Business Risks
Facing Mining & Metals listed “resource nationalism” as the number one
risk facing mining companies between 2011 and 2013, warning for the
“uncertainty and destruction of value caused by sudden changes in
policy by the governments of resource-rich nations” (Ernst and Young,
2012, p.11). Another major consulting company, Deloitte, identified
“resource nationalism” and “political risk” among the top ten threats for
mining companies between 2009 and 2015 (Deloitte, 2012). In line with
these warnings, the reorganization of Vale was welcomed by investors.
The Brazilian investment bank Itaú BBA stated that “The proposed deal
could, in our view, mitigate corporate governance risks (…)”. The same
was expressed by another investment bank, BGT Pactual: “There are
multiple angles of value creation here: re-rating of shares, lower dis­
count rates, higher liquidity, reduced perception of governmental
interference, removal of an overhang.“15
“Resource nationalism” was a strategy from Latin American gov­
ernments for appropriating part of the growing income in the primary
sector during the commodity boom (Gudynas, 2013; Svampa, 2013). In
Brazil, the national mineral industry remained under private control
during this time period (Saes, 2018). However, the fear of resource
nationalism echoed among Vale executives and shareholders:
Remember guys, one year ago you were all very nervous about the
future of this company. The shareholders agreement was going to
expire, maybe the company would become state-owned again, lots of
uncertainties, talks about a change in CEO (…). But now, the world is
completely different from a governance perspective.16
In 2017, Vale migrated to a special segment of the Brazilian stock
13
Some authors claim that the Lula and Roussef governments used Vale as
instruments of social policy, diverting the company from a more efficient
operation aimed at generating profits. These governments made three main
suggestions to the company: i) not to lay off as a result of the 2008 crisis, ii) to
invest in steelmaking in the country, and iii) to buy large bulk carriers manu­
factured in Asia, instead of buying them from Brazilian shipyards. Of these
suggestions, Vale only invested in steelmakers (Musacchio and Lazzarini,
2015).
14
CEO-Vale. Conference Call, Second Quarter 2017 Results, 27 July 2017.
15
Quoted in the Vale presentation “Vale: Roadmap to the True Corporation.”
May 2017.
16
CFO-Vale. Vale Day 2017, New York, 6 Dec 2017.
B.M. Saes and R. Muradian Resources Policy 72 (2021) 102022

exchange: B3-Novo Mercado, which requires “a distinguished standard starting. At the moment, we have no sign or at all. We have nothing.
in corporate governance” (Vale, 2017b). By the end of 2017, managers We are fine with our governance and the government, and we are
continued to be optimistic about the achievement of corporate gover­ fine with the integrity of the dams.21
nance predictability:
Despite the emphasis given to the possibility of improving dams’
You know that Vale is now moving to a direction that will transform
management, the probability of occurrence of a similar accident was
itself into a true Corporation. (…) and I think that our governance will
underestimated and minimized: “we have never had a dam break”, “we
become much more predictable than it was in the past. This I can
have no sign at all” and “we have nothing.” 22 Similar answers were
guarantee.17
given to the press: “Vale, in its almost 74 years of life … Fortunately, we
It is noteworthy that Vale’s CEO summarizes his vision as the need of
never had an accident with tailings deposit. So, Vale’s customers know
“collective efforts to make Vale a more predictable company in general,
Vale’s procedures very well and are always confident about this.“23 This
from governance all the way down to our costs, prices and results”.18
was later reinforced by the Executive Director of Ferrous and Coal: “In
However, nothing was said about operational risks. Knowing what
73 years of operation in Vale’s ferrous area, we have never had a dam
happened afterwards, we can only interpret managers’ priorities at that
accident.“24
time as reflecting a lack of capacity to perceive and assess critical
The following speech sheds light on the discussion held about the
sources of risk to the business. That bias was shared by investors. Before
proposal to ban upstream tailings dams – the construction method used
the disaster in Brumadinho, the price of the share of Vale experienced an
in the Samarco dam, based on safety concerns:
increase of about 250% – from around US$4 (November 2015) to US$14
(January 2019).19 (…) no matter what will happen in terms of specifically the up­
stream, the construction method of tailing dams in Brazil in terms of
legislation or restrictions, we must say that in Vale, we don’t have
4.3. Considering the mariana disaster as a unique and low probability
those dams. We don’t have, we practically have no upstream dams in
event
our operation, continuously, and also in the future we are not
considering any of those upstream dams, new dams.25
The topic of dam safety appears at Vale’s conferences not as a stra­
tegic theme for the company, like price volatility and government In this quote from 2016, the Executive Director of Ferrous and Coal
interference, but as an accidental issue related specifically to the goes so far as to deny that Vale had similar dams to the one that broke in
Mariana disaster. Less than a month after the disaster, the managers’ Mariana – “we don’t have those dams”. Although most of Vale’s dams
discourses revealed the perception that the Mariana disaster was an were not built using the upstream method, thousands of people lived and
exceptional event: worked below the 10 upstream tailings dams that the company owned in
Minas Gerais (Vale, 2019b) – and one of those collapsed in Brumadinho.
I have to say to you that, at Vale, our hearts and minds are deeply
The fact that no one corrected him during this conference indicates that
with the people who were affected by the accident. We were initially
either none of the shareholders’ representatives knew the dams’ char­
shocked, first because Vale has operated for 73 years with absolute
acteristics, or that they did not care for this kind of inaccuracies.
standards of safety. We have never had a single incident in our dams
As part of minimization of the probability of suffering another ac­
before. (…) our major goal is first to convince Brazilian society that
cident as the Mariana disaster, in 2018 managers considered that the
tailings dams and mining can be operated safely and, secondly, we
uncertainties concerning the failure had been overcome: “Regarding
need to support everyone who was affected.20
Samarco, the worst is clearly behind us.“26
According to the managers, the company already operated with
“absolute standards of safety” and, therefore, the problem posed by the
4.4. The diverging risk perceptions of experts
Mariana disaster was rather to “convince the Brazilian society” that the
tailings dams are safe, and that accidents of this type was extremely
In the PCIs, all Vale’s engineers argued that there were no signs of an
unlikely to happen.
imminent breach in Brumadinhos’ dam. Some of them worked in the
The investors’ concern with geotechnical risks appeared only in the
offices that were destroyed by the tailings mud after the break. The
first webcasts following the disaster in Mariana, when they raised
Executive Manager of Paraopeba Mining Complex stated: “I am not
questions about the operational costs to improve dams’ safety and assure
suicidal, I lived in that complex. We went there, we believed that the
the integrity of “those assets” (160 dams). The introduction of new
structure was safe ( …). It was an inspected, monitored, audited struc­
measures related to dam safety is described in the Sustainability Reports
ture. There was a stability report, right?“27 These inspections were
(Vale-RS, 2006–18). Most of the new procedures (mainly, more frequent
carried out by the team of the Senior Engineer in the mine, whose office
safety analyses, more detailed impact studies and the improvement of
was also under the dam. According to her: “I was the last one at Dam 1
dam monitoring systems) responded to regulatory changes introduced in
on Wednesday [two days before the breach], in a group of ten people,
2017 by the Brazilian Mining Agency. Brazilian dam safety legislation is
defined in this reports as “quite stringent”, “based on good international
practices” and “very judicious, both in terms of safety management re­ 21
Executive Director of Ferrous and Coal-Vale. Vale Day 2015, New York, 4
quirements and emergency management” (Vale-RS, 2017a, p.66). The
Dec 2015.
answer to that question was as follows: 22
Executive Director of Ferrous and Coal-Vale. Vale Day 2015, New York, 4
Dec 2015.
As Luciano said, in our 73-year history, we have never had a dam 23
Former CEO-Vale. Vale Day 2015 (Press Conference). New York, 1 Dec
break. There are several things you can do. You can upgrade your
2015.
monitoring systems, by laser or by radar, and install more water 24
Executive Director of Ferrous and Coal-Vale. Vale Day 2015 (Press Con­
piezometers and so on. That is what we are doing, and it is just ference). New York, 1 Dec 2015.
25
Executive Director of Ferrous and Coal-Vale. Conference Call, Second
Quarter 2016 Results, 28 July 2016.
17 26
CEO-Vale. Conference Call, Third Quarter 2017 Results, 26 Oct 2017. CEO-Vale. Vale Day 2018 (Press Conference). New York, 6 Dec 2018.
18 27
CEO-Vale. Conference Call, Third Quarter 2017 Results, 26 Oct 2017. Executive Manager of Paraopeba Mining Complex-Vale. PCI, Brazilian
19
http://www.vale.com/brasil/en/investors/equity-debt/stock-price/pages Chamber of Deputies, 14 May 2019.
/default.aspx.
20
CFO-Vale. Vale Day 2015, London, 4 Dec 2015.

6
B.M. Saes and R. Muradian
making an inspection for the audit stage, in which we did not identify
any abnormality.“28 Similar statements are repeated in other testi­
monies, including that of an engineer who managed to escape from the
facilities destroyed by the mud: “I had trust in it. I always felt safe there,
so much so that I was there every day, working normally. At the time of
the break, I was having lunch inside the cafeteria.“29
The engineers of the geotechnical management area30, working
outside Brumadinho, had a similar perception of the risks of Dam 1.
According to the Manager of Corporate Geotechnics, “the information I
had is that whoever monitored, inspected, and assessed the behaviour of
the structure in the operational routine never identified an imminent
risk.“31 The Engineer of Corporate Geotechnics also shared this
perception – “I was never told of any indication of instability, anom­
aly”32 – as well as the Executive Manager –“The information that came
to me from the operational area was that the readings and instruments
did not point to any type of anomaly.“33
We found divergent perceptions of risk between Vale’s and external
engineers. Engineers from outside the company participated in the Panel
of Specialists in Geotechnical Risks (PIESEM), an initiative of Vale to
evaluate the company’s operational risks in 2017 (Vale-RS, 2017–18).
The testimonies of external engineers pointed to the difficulty of pre­
dicting the phenomenon of tailings liquefaction – that is, when the
tailings lose its resistance and liquefy, as happened in Mariana and
Brumadinho. In the case of Mariana, one dam expert emphasized that
the liquefaction had not been generated by a typical trigger, such as an
earthquake, but by internal processes within the tailings, which make
the phenomenon harder to understand and predict. After describing this
phenomenon, the external consultant of Vale stated: “Prof. Morgenstern
even said that if a dam is susceptible to liquefaction, one day it will
liquefy.“34 Another Professor of Engineering who attended the PIESEM
reported how the Mariana disaster affected the geotechnics field:
(…) in Brazil we understood, until yesterday, that earthquakes were
not a problem. If a seism is not a problem, there is no problem
regarding liquefaction. This is a mistake (…) none of these dams
were designed to meet factor of safety [safety condition] for lique­
faction, because, at the time of the projects, the Brazilian community
did not know about this phenomenon. It is not studied at Brazilian
universities, or was not studied until yesterday, until the Mariana
failure. So, there is no culture in that sense.35
The perception of high uncertainty and lack of knowledge regarding
the probability of liquefaction arose among external experts after the
Mariana disaster. However, such concerns about the need to re-evaluate
28
Senior engineer in Córrego do Feijão and Jangada Mines-Vale. PCI, Bra­
zilian Chamber of Deputies, 21 May 2019.
29
Manager of Operational Geotechnics-Vale. PCI, Assembly of the state Minas
Gerais, 6 May 2019.
30
This area was created by Vale after the Marina’s disaster in order to ensure
compliance in contracting audits. After the new ordinance of the DNPM
(Ordinance No. 70,389, dated May 17, 2017), companies were required to carry
out two annual inspections for each dam and to prepare a report on the stability
conditions, to be produced by external auditors once a year. In Minas Gerais,
the two annual audits are external by determination of the State Council of
Environmental Policy. Normative Resolutions referring to tailings dams are the
COPAM Resolutions nº 62/2002 and nº 87/2005, complemented by nº
124/2008.
31
Manager of Corporate Geotechnics-Vale. PCI, Brazilian Federal Senate, 14
May 2019.
32
Engineer of Corporate Geotechnic-Vale. PCI, Brazilian Chamber of Deputies,
14 May 2019.
33
Executive Manager of Corporate Geotechnics-Vale. PCI, Brazilian Federal
Senate, 3 April 2019.
34
External Consultant. PCI, Brazilian Chamber of Deputies, 25 June 2019.
35
Professor of Engineering at UFRGS. PCI, Brazilian Chamber of Deputies, 11
July 2019.
7
Resources Policy 72 (2021) 102022
risk assessment procedures and technical knowledge on dams’ dynamics
were not present within Vale, even among experts that could have been
killed by similar accidents.
In the PCIs, the debate about the factor of safety (FoS) of Dam 1 drew
attention due to the sharp divergences among the testimonies. The FoS
measures the resistance capacity of the structure in relation to the tail­
ings load of the dam. It has to be greater than 1.0 so that the resistance
force of the dam slope is greater than the opposite force of the tailings
(Herza et al., 2017). Two different factors of safety can be calculated,
one considering the parameters of drained resistance (without excess
water pressure) and the other considering the parameters of undrained
analysis (accounting for the possibility of liquefaction). In Brazil, Sta­
bility Condition Statements issued by external consultants must have a
FoS higher than 1.5, considering parameters of drained resistance. The
value of the FoS that takes into account the susceptibility to liquefaction
was not regulated by legislation.
The testimonies of Vale’s engineers point to the possibility of some
flexibility around the FoS with parameters of undrained resistance. They
pointed out that there were no regulations requiring a minimum FoS:
“the definition of the FoS is left to the consultant, based on the infor­
mation and technical knowledge he has regarding the structure.“36 The
consultancy company Tüv Süd, which issued the latest Stability Condi­
tion Statements for Dam 1, adopted the FoS of 1.05 as the minimum
factor required to certify stability (Tüv Süd, 2018, p.64). Vale’s engi­
neers did not question these figures, although they considered a mini­
mum factor of 1.3 as desirable:
He [Tüv Süd engineer] had this autonomy to adopt a FoS above 1, as
well as to decide how much above 1. I was informed always that the
FoS of 1.3 was a goal for Vale, aiming to adopt the best engineering
techniques. But this safety factor was never considered to be a con­
dition of stability or necessary for the structure.37
Nonetheless, engineers not acting within the organizational con­
straints of Vale had less flexible opinions about these figures. The
divergence regarding FoS among engineers is reflected in this testimony:
Regarding the conclusion, the minimum FoS required: the studies [of
Tüv Süd] were very reasonable, well done, I would say, but what
they accepted as a minimum FoS, which was not 1.3 – it was 1.05, we
did not agree. We thought that the dam had to respect established
safety criteria recommended by international consultants, 1.3. And
the dam didn’t respect this value; it had a FoS of 1.09 (…).38
Based on these more rigorous safety criteria, the engineering
consulting company Tractebel did not sign the report attesting the sta­
bility of Dam 1 in late 2018. This company was then was replaced by
Vale for the company Tüv Süd, reinforcing the exclusion of discordant or
divergent risk perception within the company. The testimony of Trac­
tebel’s engineer working on that report expresses this divergence
regarding the FoS:
Upon receiving the periodic review report, with this FoS of 1.09, we
questioned it … we actually, even before questioning it, we saw that
they assumed a methodology to be able to consider this 1.09 ( …),
but Tractebel was unaware of that methodology. We had no expe­
rience in this … which is why we couldn’t assume anything other
than 1.3, any lower values.39
The divergent risk perception among experts was also reflected in the
36
Manager of Operational Geotechnics-Vale. PCI, Assembly of the state Minas
Gerais, 16 May 2019.
37
Senior engineer in Córrego do Feijão and Jangada Mines-Vale. PCI, As­
sembly of the state Minas Gerais, 16 May 2019.
38
External Consultant. PCI, Assembly of the state Minas Gerais, 25 April 2019.
39
Engineer of Tractebel. PCI, Brazilian Chamber of Deputies, 4 July 2019.
B.M. Saes and R. Muradian
fact that Vale’s engineers accepted the risk of working daily below the
dam. Their testimonies reveal that, even after the Mariana disaster, they
considered it normal to have administrative facilities below a dam of
tailings. Nevertheless, the report of an external consultant shows a great
discomfort with it:
Although everyone warned and they themselves know that these
numbers [FoS] are not … they were not common numbers in engi­
neering, right? Now, the decision really is up to Vale. I wouldn’t be in
those offices down there. Because one thing they [engineers] always
said was, “No, but we stay down there, I have my office down there”.
I used to say: “Look, it is not a good thing, it is not a good thing, no".40
Summarizing, the content analysis of Vale’s official documents, as
well as oral and written communications of managers show that oper­
ational risks were not acknowledged as a major threat to the company,
even after the Mariana disaster. During the period 2015–2019, the
corporate governance changes in Vale did not respond to the un­
certainties that arose in the field of geotechnics concerning the safety of
tailings dams. The content analysis showed that other sources of risks,
especially resource nationalism in Latin America and the instability of
commodity prices, were considered more important for Vale. The focus
on market risks seems to have undermined greatly the capacity of the
company to perceive significant operational risks. Moreover, this risk
misperception was reproduced by the company’s experts: while testi­
monies of external engineers in the PCIs pointed to the geotechnical
uncertainties that arose after the Mariana disaster, the risk perceptions
of Vale’s engineers did not change after the largest accident in the his­
tory of Brazilian mining.
It is worth noting, however, that these findings are not completely in
line with the results provided by the three public inquiries investigating
the causes of the Brumadinho disaster. The three inquiries present
similar diagnoses of the disaster, emphasising both the inadequate safety
conditions of Dam 1 (as we describe in Section 4.4) and the absence of
preventive measures, such as reinforcement of the dam or construction
of relief wells to reduce water pressure, avoidance of triggers of lique­
faction (e.g., detonations in the mine), activation of the emergency plan
and evacuation, removal of the company’s administrative facilities from
below the dam, etc. However, differently from our interpretation, the
inquiries conclude that these necessary preventive measures were not
adopted due to “conscious and voluntary omission” of Vale and Tüv Süd
employees (Assembly of Minas Gerais, 2019, p.166).
According to the inquiries, Vale and Tüv Süd employees signed the
Stability Condition Statements despite being “aware of the instability of
Dam 1”, thus “taking the risk of the tailings dam failure” (Brazilian
Chamber of Deputies, 2019, p.577). Additionally, the inquiries deduce
that "Vale’s management and directors knew about the risks and decided
to accept them” (Brazilian Federal Senate, 2019, p. 169), because senior
managers and Vale’s CEO often had access to information related to
dams through reports, email messages or meetings. The magnitude of a
potential disaster was also well known, since the Emergency Plan of
Dam 1 described precisely how, in case of breach, employees located in
the mine facilities would not have enough time to escape alive since the
mud would reach them in less than a minute. Therefore, engineers and
directors were supposedly aware of both the safety conditions of Dam 1
as well as the potential impacts of a breach over the offices and cafeteria
located downstream from the dam. Still, no one had the “the initiative to
remove or recommend the removal or relocation of the facilities that
were in the path of the tailings mud” (Assembly of Minas Gerais, 2019,
p.128).
All three PCIs concluded that Vale and Tüv Süd were fully aware of
the risks and, even so, failed to take the necessary measures to avoid the
tailings dam failure. The reports also called for the indictment of 13–22
40
External Consultant. PCI, Brazilian Chamber of Deputies, 25 June 2019.
8
Resources Policy 72 (2021) 102022
engineers and managers (depending on the PCI) for various crimes,
including homicide, personal injury and damage to the environment.
Senators decided to amend the final version of the Senate CPI Report in
July 2019, with the aim of placing crimes in the intentional rather than
negligent category. Interestingly, according to the Federal Senate Report
(2019: 259–261), this decision was based on “contemporary penal the­
ory” instead of Brazilian doctrine, and took into account that “such a
position has popular appeal”. The other CPIs also followed this inter­
pretation. The crimes were considered to be caused by the “wilful
omission of professionals who had a duty to act to prevent loss of life and
damage to the environment” (Brazilian Chambers of Deputies, 2019,
p.612). As stated before, in contrast to this interpretation, our findings
suggest that the acceptance of lower safety standards and the absence of
preventive measures resulted from more complex and subtle processes,
instead of individuals’ moral deviance.
5. Discussion
Our analysis suggests that environmental risks can be overlooked
when shareholder value maximization is adopted as the core goal of
corporate governance. Previous research on the shareholder value ide­
ology has noticed its possible negative social effects, resulting primarily
from corporate strategies for cost saving (Stockhammer, 2004; Dobbin
and Jung, 2010; Useem, 1996; Davis, 2009; Lazonick, 2014; 2017;
Lazonick and O’Sullivan, 2000; Aglietta and Rebérioux, 2005). This
ideology has been also associated with worsening safety measures in
corporations (Stout 2012, 2013). Our results indicate that more than a
strategic or intentional disregard for safety, the focus on short-term
financial results can generate strong biases in the perception and
assessment of environmental risks, which can not only cause massive
social and environmental harms, but also, paradoxically, the destruction
of shareholder value in the long run.
These findings are in line with cognitive studies showing the limits of
rational models to explain major corporate failures (Simon, 1955;
Tversky and Kahneman, 1974; Kahneman et al., 1982; Marnet, 2007,
2008). While these approaches tend to see cognitive biases and errors as
determined mainly by individual psychological features, like personal
beliefs, desires and affection (Slovic et al., 2002; Kahle and White, 2004;
Nisbett and Ross, 1980; Lord et al., 1979), we assume that these biases
are greatly influenced by the organizational culture (Douglas and
Wildavsky, 1982). In the case analysed, the predominance of market
factors in the perception of risk by Vale’s top management seems to have
affected the capacity of the whole organization to see and assess
considerable operational risks, which resulted in a huge organizational
failure and had tragic consequences for surrounding communities and
ecosystems to the mine.
The literature on industrial accidents have identified both the bias in
risk perception within organizations (Turner, 1978; Vaughan, 1996;
Antonsen, 2009) and the trade-off between profit and safety (Sagan,
1994; Le Coze, 2015) as important causes of disasters. Here we show
how these two causes can have an intimate relation. In other words,
more than independent problems, the combination of limitations of
human rationality and the focus on economic objectives can produce
catastrophic effects. In the case of Vale, changes in corporate gover­
nance narrowly aiming to enhance shareholders’ interests undermined
its capacity to perceive significant operational risks. Additionally,
following these changes, the overconfidence induced by the perception
of reduced business risks possibly prevented improvements in opera­
tional risk assessment in the aftermath of the Mariana accident, contrary
to what is reported in the literature regarding other major disasters (De
Marchi and Ravetz, 1999).
We think that the low monetary compensation for environmental
liabilities contributed to consolidate the company’s view that the
Mariana disaster was a unique and negligible event, very unlikely to
occur again. In addition, after the greatest mining disaster in the history
of Brazil, despite having made major organizational changes, Vale’s
B.M. Saes and R. Muradian
socio-environmental risk assessment was not revised (Nisbett and Ross,
1980; Marnet, 2008). The company hired a generalist CEO, not only
fully embedded in the shareholder value maximization ideology, but
also biased towards focusing his management goals on dealing with
short-term sources of market risks. Some studies have already pointed
the long-term problems associated with generalist top managers, unable
to connect with operational issues in the concrete sectors they operate
(Wang and Murnighan, 2013; Li and Patel, 2018; Gounopoulos and
Pham, 2018).
Biases in risk perceptions induced by the focus on shareholders’ in­
terest may explain the main limitations of social risk assessments of most
mining companies. It could also explain their emphasis on risks to op­
erations (instead of risks to people) and the low visibility of the peoples’
vulnerability to mining disasters in risk management (Owen and Kemp,
2013; Kemp et al., 2016, 2020; Kemp, 2020). Our results also suggest
that working within the constraints of corporations can affect expert’s
judgments, an issue that has been already reported in the literature
(Johnson and Covello, 2012; Lynn, 2012; Clarke, 1999; Ferguson, 1987;
Umphress and Bingham, 2011; Umphress et al., 2010; Chen et al., 2016).
Experts are subject to affective feelings that can result in biases in their
perceptions of even significant risks for their own lives (Slovic et al.,
2002; Finucane et al., 2000; Rowe and Wright, 2001). Additionally, even
external auditors, who are supposed to take an impartial position, can be
subject to similar biases when their independence is not assured – as in
the Tüv Süd/Vale case, where an auditor/client relationship was
established (Marnet, 2007).
By concentrating efforts on finding the individuals responsible for
the Brumadinho dam breach, the three public inquiries that investigated
the causes of the disaster appear to have underestimated the role of
biased risk perceptions within Vale. The punishment of those respon­
sible for the tragedy was considered important both to improve pre­
ventive measures in the mining sector and to respond to popular outrage
against the company (Assembly of Minas Gerais, 2019, p.20–22, Bra­
zilian Federal Senate, 2019, p. 261–264, Brazilian Chambers of Dep­
uties, 2019, p.421–423, p.519–520). However, while this strategy may
have increased the popularity of Brazilian legislators, it is less certain
that the rigorous punishment of some engineers and directors will
significantly help to improve risk management in the sector. The strong
emphasis on human error or deviance can overshadow rather deeper
causes of disasters such as organizational, institutional and social fac­
tors, making learning and prevention unlikely (Sagan, 1994; Tierney,
1999; Elliott and Smith, 2006). Paradoxically by ascribing to a simple
narrative that explain disasters as individual errors or criminal behav­
iour, public inquiries may take the attention away from structural and
institutional aspects of capitalism and the national regulatory frame­
work that favour a very biased risk perception in firms operating in
socially risky sectors, such as mining. Therefore, while playing an
important role in the allocation of (individual) responsibilities, public
inquiries may not be enough to change the way firms operate in sector
with high socio-environmental risks (Gephart 1992, 1993; Brown, 2004;
Topal, 2009). Our finding suggests that mining companies tend to be
very resultant to change risk-management practices, and only major
changes in the regulatory frameworks in which they operate would
induce such changes.
6. Final remarks
Future studies could investigate additional aspects of the organiza­
tional culture in mining companies, using methods such as ethnographic
research and interviews with managers and engineers. One hypothesis
to be further explored is that the absence of discordant arguments and
views among managers and investors created a cohesive corporate cul­
ture that paid considerable attention to financial risks, but was rather
blind to significant operational risks. While a strong organizational
culture is often considered an important attribute for corporate success,
several studies show that highly cohesive boards or committees are also
9
Resources Policy 72 (2021) 102022
less open to dissenting views, and consequently more likely to make
biased and bad decisions in the long run (Esser, 1998; Janis, 1972; Sims,
1992; Maharaj, 2008; Peterson et al., 1998; O’Connor, 2002).
Finally, our results call for two main recommendations for the
assessment of environmental risks related to corporate activity. From a
policy perspective, it is very important to ensure that environmental
impacts are not financially “cheap” for companies. Our analysis shows
that in the absence of significant costs on corporate financial results,
even disasters with catastrophic socio-environmental consequences can
go almost unnoticed among other sources of market risks for corpora­
tions. An adequate monetary compensation of environmental liabilities
is not only a matter of justice, but also a way to ensure a more cautious
approach by corporations and their shareholders. The recent US$7
billion Vale settlement with prosecutors and the state of Minas Gerais for
repairing the socio-environmental damages caused by the Brumadinho
tailings dam failure could be seen as an attempt to achieve better social
reparation for the committed environmental crimes. However, it is
worth noting that the company’s shares have already appreciated more
than 100% since the Brumadinho disaster, and the expected dividends
for 2021 (US$ 9 billion) are even higher than the value of the agreement
itself (Nogueira and Bautzer, 2021; Rizério, 2021).
Regarding environmental risk governance, our study shows that
relying only on internal decision making settings can lead to bad and
biased decisions, with serious consequences for society and the company
itself. This calls for paying attention to the need to establish ‘extended
peer communities’ for the assessment of environmental risks (Funtowicz
and Ravetz, 1993, 1994; Fiorino, 1990; Pearce, 2005; Beierli, 2002;
McDaniels et al., 1999). In order to prevent biases in the assessment of
risks imposed on third parties, governments must enforce the effective
representation of workers and communities in corporate
decision-making instances dealing with the evaluation and management
of environmental risks. The inclusion of other voices and visions into
corporate decisions has huge potential benefits not only for society, but
also for corporations themselves.
Acknowledgements
This work was supported by the Coordenação de Aperfeiçoamento de
Pessoal de Nível Superior, Brazil [grant number 88887.313730/
2019–00]. We are grateful to two anonymous referees for their valuable
suggestions and to Annalisa Powell for the English revision.
CRediT authorship contribution statement
Beatriz Macchione Saes: Conceptualization, Methodology, Inves­
tigation, Writing – original draft. Roldan Muradian: Conceptualization,
Methodology, Writing – review & editing.
Declaration of competing interest
The authors declare that they have no known competing financial
interests or personal relationships that could have appeared to influence
the work reported in this paper.
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