Learn how a company's board of directors is organized

The existence of a board of directors is essential for maintaining a company's corporate governance. It establishes strategic guidelines, oversees the performance of the executive board, and ensures that decisions are aligned with shareholder interests and the business's sustainability.

according to the Brazilian Institute of Corporate Governance (IBGC), the board is the "collegiate body responsible for an organization's decision-making process regarding its strategic direction. In addition to monitoring the executive board, it acts as the guardian of the organization's principles, values, corporate purpose, and governance system, being its main component." But how is an organization's board of directors structured? This is what I will explain in this article.

To begin, it is important to know that its composition depends on the size, sector, and ownership structure of each institution. However, there are good practices and basic principles that apply to almost all cases, contributing to transparency, integrity, and risk reduction in management.

Regarding the number of members, boards typically have a minimum of three and a maximum of eleven directors. In large companies, it is normal for them to be composed of multiple members. In medium-sized organizations – such as, for example, growing family-owned industries, startups in the scale-up phase and companies with investment funds – they tend to be leaner, usually with up to seven members.

Typical terms last from one to three years, with the possibility of member re-election, and there must be clear rules for renewal or replacement. These should be outlined in the company's bylaws or internal regulations, including periodic performance evaluations of directors, a succession planning plan, approval of the election by shareholders through a general meeting, and ensuring partial rotation, which avoids disruptions and preserves institutional knowledge.

To ensure diversity within the board, it is important that members have different skills, experiences, and profiles. Furthermore, the presence of independent directors, with no direct ties to management, is usually highly beneficial. This is because they tend to bring a more impartial perspective free from conflicts of interest, enriching strategic debate and contributing to more balanced decision-making.

The board must have a chairperson, responsible for leading meetings and ensuring their effectiveness. To avoid conflicts of interest, the chairperson should not be the same person as the CEO (Chief Executive Officer). Within the organization's structure, depending on the company's size, there may be supporting committees, such as an audit committee, an ESG (Environmental, Social and Governance) committee, a finance committee, a strategy committee, and a people or remuneration committee.

Board of directors meetings should be held regularly, whether monthly, bimonthly, or quarterly. It is ideal for them to have a defined agenda, pre-circulated materials, recorded minutes, and be well-organized. Their main functions should be to define business strategies and general guidelines; approve long-term plans, budgets, and relevant investments; supervise the executive board, especially the CEO's performance; oversee corporate governance and risk management; and represent shareholder interests.

In short, the organization of the board of directors is a fundamental pillar of good governance for any company. Well-defined structures, qualified directors, and transparent practices directly contribute to more strategic decisions, greater market credibility, and long-term sustainability. By adopting good practices in the board's composition and functioning, the organization strengthens its ability to face challenges, innovate responsibly, and generate value for its stakeholders.