CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS

As noted in the article “Corporate Governance in Family Businesses”, recently published in FC Partners blog, the good practices of Corporate Governance have played a prominent role in the corporate environment in recent years. Among the various practices and initiatives recommended for any company seeking greater professionalism and organization, one deserves mention: the Board of Directors. The Board of Directors is a body whose primary responsibility is to oversee the management of the company, certifying that the objectives and interests of the shareholders are being pursued. It is this body, together with the executives, that defines the company's Strategic Planning, Budget and main objectives. Although mandatory only for public limited companies and those with authorized capital, the Board of Directors can be implemented in any company, regardless of size or business segment. However, organizations that have a low complexity business model or that are in the initial phase of their activities often opt for slightly simpler instruments and mechanisms, such as the Advisory Board. There is no definite rule for the composition of the members of the Board of Directors. In smaller companies, this body is generally made up of three members, while in others, larger ones with pulverized control (corporations), is composed of up to fifteen members. It is recommended that the number of directors be an odd number, since several of the decisions, depending on the Shareholder Agreement or Shareholder Agreement, are taken by a simple majority of votes. More important than quantity is the quality and experience of the members who will make up the Board of Directors. It is essential that its members have prior knowledge in the segment in which the company operates and that, preferably, they have complementary experiences and competencies, for example, one member comes from the financial area, another has deep knowledge in marketing and sales, and so on. Another important but often overlooked aspect is the board members' network of relationships, the so-called networking. In short, it is important that members add value to the company, helping executives in the constant search for efficiency, responsible management, and alignment with shareholder interests. Based on the primary responsibility of the Board of Directors, to oversee the company's management, various other related activities may be assigned to it. Among these attributions, which are generally formalized in the Shareholder Agreement or Shareholder Agreement, are: hiring or dismissing board members, approving investments or raising funds from third parties not provided for in the budget, and choosing strategic service providers, such as auditors and consultants. Although it is simple to create a Board of Directors, the difficult thing is to operationalize it efficiently, so that the body actually adds value to the company and its shareholders. Generally, companies, especially Family Businesses, have difficulty separating the personal interests of the partners from the interests of the company. Personal interests vary according to the moment of life, profile and characteristic of each individual. Although there is no problem in keeping family members in executive functions in companies - on the contrary, partners tend to have a more long-term vision and contribute to the maintenance of the company's culture and values - it is important that the functions and remuneration are well defined and consistent with the company's size and business segment. It should also be noted that the preparation of the company's partners and employees, the coexistence with independent external members, their participation in the decision-making process and the focus on the implementation of Corporate Governance practices are the main challenges that must be faced by Family Businesses that are seeking professionalization. The implementation of good Corporate Governance practices can generate several benefits for Family Businesses, such as quality and decentralization in decision-making, standardization of processes, control of company indicators, proximity between shareholders, directors, members outside the family and with in-depth knowledge of the market, among others. Incorporating these measures represents a real possibility of professionalizing companies, generating more credibility and transparency to the business, both internally and in the relationship with third parties. Family Businesses are increasingly concerned with professionalizing their management, establishing governance rules and strategic alignment. However, few have actually initiated this change. Shareholder Agreement, Strategic Planning, Budget and Board of Directors are still terms that are little known and applied to the daily lives of these organizations, which currently represent 90% of the total number of companies in Brazil. Companies need to be aware that it is essential to establish a culture change that contemplates and promotes awareness that personal interests, however relevant they may seem, should not interfere with company decisions. Article written by Pedro Fenati - Associate of FC PartnersGo to our site: http://www.fcpartners.com.br