Companies increase demand for independent directors

Brazilian private companies have increasingly demanded the presence of independent directors on their boards of directors. This search has led to a professionalization of the selection process and also arouses the interest of professionals in areas such as innovation and sustainability, who seek certification to work in these collegiate bodies.

According to a study by consultancy Korn Ferry, the percentage of independent members on boards of directors in the private sector in Brazil grew from 35% to 61% in seven years. Women represent 26% of these professionals, up from 20% when considering non-independent workers.

Economist and lawyer Tarcila Ursini has been working on boards and committees of large companies for about ten years. She is currently a member of the collegiate groups Agrogalaxy, Korin, Simpar and Baumgart, having also worked in Santander and Duratex, among others.

After working as a mergers and acquisitions specialist and consultant in the area of ​​strategy and sustainability, she found a new path by participating in sustainability committees in private companies and later becoming an independent member of boards of directors.

She is also a professor at IBGC (Brazilian Institute of Corporate Governance) and curator at the institution of the ESG Program — an acronym in English for good practices in the environmental, social and governance fields.

In this activity, he works with people who want to act as advisors, and seek certification, and with those who are already in this market and want to increase their knowledge.

“Just as you can’t go to a board without knowing at least the basics of finance and accounting, there are topics that increasingly have to be part of a board member’s knowledge, such as climate change and diversity”, says Ursini.

An independent director is one who does not have any other remuneration relationship with the company, nor does he have a shareholding interest in it, even if he has been appointed as a representative of a controlling shareholder or minority shareholder. Its presence is a requirement of the Corporation Law and also for companies on the Novo Mercado da Bolsa.

There is no guarantee, however, that the person will actually act independently. In theory, all directors, even independent ones, should act in the interests of the company and not of a particular group. But independent directors are also chosen by shareholders and remunerated for their participation in the collegiate body.

At Petrobras, for example, all those appointed by the government and minority shareholders are considered independent, except for the president of the state-owned company and the employee representative.

Interference can also occur in the private sector. “The independent director cannot be there because he needs the salary. The responsibility lies with the company and the shareholders as a whole. And not with what the controller wants”, says Jorge Maluf, senior partner at Korn Ferry.

He says that the increase in the presence of independents occurs at a time when collegiate bodies have been acting more actively than in the past, ceasing to be just a pro-forma body. There are cases in which the controller, for regulatory reasons, is obliged to leave the company’s presidency and go to the board, which becomes the place where major discussions take place.

In large companies, the board’s agenda has also become broader. Innovation and the ESG agenda were discussed, in addition to greater involvement with the company’s strategy.

“It is necessary to have people who can help the board to think about these matters. It is not that board that is only monitoring financial statements, audit notes, in a control and supervision role. You start to have people with the capacity to discuss business”, he says . “Companies started to bring in external people who can contribute”, she says.

Among the factors that boosted the demand for an independent is the increase in the number of companies with dispersed capital (companies without controllers) on the Stock Exchange. Maluf also cites the maturing of privately held family businesses, which have realized the value of bringing outside knowledge into the board. In some cases, this occurs when command is passed from one generation to another.

He says that in the US, where the existence of dispersed control companies is more common, practically all the board members are independent. With the exception of the chairman of the board, who is often also the CEO or one of the founders.

When considering countries with the largest number of privately held and/or family-owned companies, Brazil is relatively advanced, he says, both in terms of the board’s performance and in terms of independence.

Luiz Martha, Research and Content manager at IBGC, says that companies have also been looking for a professional selection model, instead of being nominated by the shareholders themselves. In this case, it is up to the board to define a profile according to the specific competence or knowledge that the company needs. An external consultancy makes the selection and the company chooses one of the names.

He says that the profile of the independent who seeks certification from the institute is still very concentrated on executives and former executives in career transition. But there are people from the areas of innovation, human resources and academics, for example, who see opportunity and demand for these profiles.

“With this issue of diversity, we see people coming from other areas and with other experiences to prepare to be directors. As the council is a collegiate, it is built on the sum of competencies”, he says.

The vision of diversity as something that brings value to the company is also shared by Jorge Maluf, from Korn Ferry. He says that companies, in general, have programs in this direction for executive positions, and that their boards have to set an example for the rest of the company.

For director Tarcila Ursini, the role of independents is fundamental to bring new blood, new visions and diverse experiences, but a profile that fits the strategic needs of the company is necessary.

“Governance has to create value. It’s no use putting those big shots, five white men, with exactly the same experience or very far from the executive group. You’re just creating expense.”