The existence of a board of directors is essential for maintaining a company's corporate governance. He defines strategic guidelines, supervises the executive board’s actions, and ensures that decisions are aligned with shareholders' interests and the sustainability of the business.
According to theBrazilian Institute of Corporate Governance (IBGC)The council is the "collegiate body responsible for the decision-making process of an organization regarding its strategic direction. In addition to monitoring the management, it acts as the guardian of the principles, values, social purpose, and governance system of the organization, being its main component." However, how is the board of directors of an organization organized? This is what I will explain in this article
To begin with, it is important to know that the constitution depends on the size, sector, and corporate 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, the councils generally have a minimum of three and a maximum of eleven members. In large companies, it is normal for them to be composed of multiple members. In medium-sized organizations – such as growing family businesses,startupsin the process ofscale-upand companies with investment funds – tend to be leaner, usually with up to seven members.
Typical terms last from one to three years, with the possibility of re-election of members, and clear rules should be in place for renewal or replacement. These must be provided for in the company's bylaws or internal regulations, including periodic performance evaluations of the board members, a succession planning plan, approval of the election by shareholders through a general meeting, and assurance of partial turnover, which prevents disruptions and preserves institutional knowledge.
For there to be diversity within the council, it is important that members have different skills, experiences, and backgrounds. Furthermore, the presence of independent advisors, without direct ties to management, is usually quite beneficial. This is because they tend to bring a more impartial and conflict-of-interest-free perspective, enriching strategic debate and contributing to decisions being made in a more balanced manner.
The council must have a president responsible for leading the meetings and ensuring their effectiveness. To avoid conflicts of interest, the president should not be the same as the CEO.Chief Executive Officer). Within the organization's structure, depending on the company's size, support committees may exist, such as an audit committee, ESG committeeEnvironmental, Social and Governance), of finance, strategy, and people or compensation.
Board meetings should be held regularly, possibly monthly, bimonthly, or quarterly. It is ideal that they have a defined agenda, prior material, recorded minutes, and are well organized. They should have as their main functions to define the strategies and general guidelines of the business; approve long-term plans, budgets, and relevant investments; supervise the executive management, especially the performance of the CEO; ensure corporate governance and risk management; and represent the interests of the shareholders.
In short, the organization of the board of directors is a fundamental pillar for good governance of any company. Well-defined structures, qualified advisors, and transparent practices directly contribute to more strategic decisions, greater market credibility, and long-term sustainability. By adopting good practices in the composition and functioning of the board, the organization strengthens its ability to face challenges, innovate responsibly, and create value for its stakeholders.stakeholders.
