Last Big Corporate Scandals in Brazil: Why Investors did not see it in the Annual Reports? ARTHUR DO NASCIMENTO FERREIRA BARROS Universidade Federal de Pernambuco RAIMUNDO NONATO RODRIGUES Universidade Federal de Pernambuco LUIZ CARLOS MIRANDA Universidade Federal de Pernambuco Abstract This paper measures the level of disclosure of information in the fight against corruption in sustainable reports disclosed by companies that participated in the last major corruption scandals in Brazil, between the years 2013 and 2016. The data were collected from the sustainability reports of the organizations (Petrobras S.A., Odebrecht Organization, Brasil Foods S.A. and JBS S.A.). To measure the disclosure level was used the content analysis through the Novethic/SCPC survey (2006), as used in other papers (Branco, 2010; Machado, 2013; Branco & Matos, 2016). Among the results, the main was that the fact that companies were exposed to large corruption scandals did not modify their level of disclosure of information in the fight against corruption, contrary to what was expected, companies had high levels of this kind of disclosure before the scandals and continued to have after. The results also showed that the information about internal organization to combat corruption, such as ethics committees, reporting system, departments to deal with this issue and about the implementation of procedures related to suppliers and other business partners, such as actions that encourage the implementation of anti-corruption training and systems was the most disclosure. While information about partnerships with nongovernmental entities or other organizations that have an interest in combating to this type of behavior was the least reported. The results demonstrated that is necessary look carefully to what is really happening and what it is disclosed in the companies’ reports. Moreover, where are the failures so that what has been disclosed will not actually happen? Keywords: Corporative Social Responsibility, Sustainability Report, Corruption, Disclosure. 1 www.congressousp.fipecafi.org 1. INTRODUCTION The theme of sustainability becomes increasingly present in the discussion lines carried out, both in the academic and in the business environment. The concept of sustainability involves three aspects: (1) environmental; (2) economic; and (3) social. However, acting in an economically, socially and environmentally sustainable way is one of the greatest challenges today. The leaders of each organization must be aware that companies also have ethical responsibilities to contribute to the creation of a sustainable society (Hopwood, Unerman, & Fries, 2010). In relation to the social perspective that sustainability covers, there is the concept of Corporate Social Responsibility (CSR). That is defined by the form of management that relates the organization's ethics and transparency to society and by the valorization of responsibility as well as morality. CSR arises due to the impact of business decisions in the community, which should not be taken solely by the economic aspect, it is also necessary to take into account the interests of society (Pescador, Briere, & Novak, 2016). The organizations which act according to the values of CSR are well regarded by society, a factor that contributes to the continuity of these companies (Pescador et al., 2016). As we can see in the United States, in 2006, about 2.3 trillion dollars were invested in companies that acted on the foundations of corporate social responsibility, and the following year, 64% of Fortune Global 100 published reports that showed characteristics of CSR (Tewari & Dave, 2012). In the last few years, a growing number of academics, scholars, international organizations as well as executives have devoted some of their time and resources to topics that involve corporate social responsibility and its strategies. In particular, the benefits generated by CSR. Since organizations use their practices as a means to strengthen their relationships with their stakeholders (Cheng, Ioannu, & Serafeim, 2014; Simionescu & Dumitrescu, 2014). Although, those who do not operate on the values of CSR, could become fragile, uncompetitive and risk both their image and reputation (Pescador et al., 2016). For instance, Siemens (2002), KBR/Halliburton (2004), BAE System (2005), and more recent national cases such as Petrobras (2014), Odebrecht (2015), JBS and BRF (2016). All involving corruption schemes, which contrary to what many think, corruption is not an exclusive problem for governments and public entities, it is also within the reach of private institutions, which can also harm the society (Machado, 2013). Corruption can be defined as the act of giving or receiving something of value so that someone does something that violates a formal or implicit rule for the benefit of that who delivers something of value or of a third party. Corruption undermines social, political and economic development. First, it makes the services provided by the State reduced, especially for the less fortunate. Considering corruption favors the choice of more profitable investments, where the possibility of receiving bribery is greater, while the provision of basic services is neglected. As for economic development, corruption distorts public investment, discourages foreign capital inflows, and encourages organizations to operate in the informal sector. Finally, there is the loss of the legitimacy of the market economy and democracy (Branco, 2010). Corporations are the main sources of corruption, but they could also present solutions to the problem. Therefore, the fight against corruption corresponds to an opportunity for demanding corporate social responsibility programs, with the objective of solving issues related to both corporate and social interests (Branco, 2010). One of the ways to combat corruption is access to information, as it develops in environments characterized by a lack of 2 www.congressousp.fipecafi.org transparency and occurs, so, when decisions are taken with closed doors, away from the public eyes and the press (Bento & Bringel, 2014). One way for companies to make information available to society is through their sustainable reports, which are recent trends that have been expanding in the last two decades. There are several reasons for organizations to produce this type of report, but according to the literature, they aim to be transparent and accountable, but also expect a financial return for being socially responsible (Leszczynska, 2012). However, it is necessary a critical look at corporate disclosures in order to perceive discrepancies between what is published and what is actually done. Evidence for such behavior is difficult to provide, despite, many organizations are suspected of taking advantage of the massive publication of sustainable reports to strengthen their reputation without actually adopting the environmental and social practices that are described in their reports (Jacomossi, Casagrande, & Reis, 2015). Based on what was stated, the present research aims to measure the level of disclosure of information in the fight against corruption of companies that have been involved in the last major corruption scandals in Brazil: Petrobrás S.A., Odebrecht Organization, Brasil Foods S.A. (BRF) and JBS S.A. Between the years 2013 and 2016. The relevance of this study is based on the importance of combating corporate corruption, due to the impact on society. Since, all the money diverted in these schemes could contribute to the improvement of the conditions that society that a developing country suffers. The current article is structured in five sections, including this first one, consisting of the introductory aspects in relation to the theme. Followed by the theoretical foundation on the subject studied. In the third section, we present the methodological aspects that involve the research. The last sections correspond, respectively, to the main results obtained and the final considerations about the article. 2. LITERATURE REVIEW 2.1 Corporate Social Responsibility Many authors argue the definition of Corporate Social Responsibility, often referred as CSR, is still unclear. Because it is a recent, dynamic and even controversial subject, since it involves from the generation of profits by managers to the implementation of social actions. The literature on CSR is still very fragmented, with multiple and diverse approaches, further the several definitions and understandings about the topic (Tewari & Dave, 2012; Hiller, 2013; Pescador et al., 2016). According to Simionescu and Dumitrescu (2014) there is no single definition when it comes to CSR and its role in society, but most of the authors when dealing with Corporate Social Responsibility, see an attempt by organizations to act in a legitimate way towards the society that is inserted (Simionescu & Dumitrescu, 2014; Pescador et al., 2016). From the early twentieth century to the 1950s, the concept of CSR has a strictly economic dimension, linked to the generation of profits, job creation and tax payments. Between the 1950s and 1960s, began the rethought of the definition of CSR in the US due to the involvement of some companies in the Vietnam War, causing a repudiation of society with these companies. In addition, from that point, social values entered the concept of CSR and the moral conduct of the companies underwent a transformation (Pescador et al., 2016). Acting on the ethical and moral perspectives, in the Corporate Social Responsibility approach, is described