How to modernize the boards of directors?

All the boards of directors and its members must be very clear about their functions within the organization. From the traditional ones, to those that must play in the current market, to be in tune in an increasingly competitive world.

If it is intended to participate in industries that require high levels of competitiveness and efficiency; especially in those oriented to international markets, it is necessary to go beyond complying with being directors of the management and monitoring operations and results.

Success could be closer in those companies that are run with the collaboration of boards of directors aware of their roles and responsibilities in strategic matters and with capable and independent directors.

But How to modernize the directives and their work in general? Facilitating this modernization process involves following the following recommendations:

»Separate the positions of president of the board of directors and that of the general manager. This measure is intended to facilitate, within the board, the presentation of opposing points of view, constructive discussions and healthy criticism of ideas. In addition, it seeks to reduce the concentration of corporate power.

" To form boards of directors composed of a relatively small number of members. Active participation must be encouraged, responsibilities must not be diluted, and the necessary confidentiality must be guaranteed. Experiences in other countries suggest that boards of directors with more than nine members function less efficiently.

»To promote, when it comes to integrating the boards, an appropriate balance between internal and external directors.

In Latin America, mainly, the only internal director who participates in the meetings is the chief executive. This practice facilitates the monopoly of information and the centralization of power. A healthy measure is the participation of a functional manager within the board.

»Encourage external directors to become fully involved and dedicate the necessary time to the tasks related to their position. The availability of time for preparation, attendance at meetings and follow-up of resolutions, should be an important criterion in the selection of directors. A director probably needs to dedicate to a company (or group of companies) between 15 and 20 days per year.

»Promote a level of compensation for directors in accordance with the functions, responsibilities, risks and time invested. It should be noted that the compensation can be made totally or partially in shares or in rights to purchase shares of the company. This decision is extremely important; since it contributes to the directors being co-owners and to a long-term interest in the performance of the company.

Article published by José Nicolás Marín and Eduardo Luis Montiel, Full Professors of INCAE Business School.