By Rafael Albuquerque
Boards of Directors in Brazil and the United States play critical roles in corporate governance, but they operate in distinct legal and cultural contexts that shape their practices and responsibilities.
Meeting frequency and board structure:
In Brazil, Boards of Directors have been meeting more frequently, often on a monthly basis, reflecting a practice aimed at continuous and detailed monitoring of the company’s operations. This regularity is crucial for allowing directors to make timely strategic adjustments and closely monitor the execution of previously defined action plans. This practice is supported by the Brazilian regulatory environment, which requires a high level of diligence and board oversight.
In contrast, in the United States, although meeting frequency is also significant, meetings are generally held quarterly with a highly formalized structure. Agendas are carefully prepared, primarily focusing on financial results and medium-term strategic decisions. This difference in frequency can be attributed to the distinct emphasis each system places on continuous oversight versus periodic, results-focused reviews.
Directors’ responsibilities and accountability:
In both Brazil and the United States, board members are personally accountable for their decisions. In Brazil, the Corporate Law (Law 6.404/76) clearly defines directors’ fiduciary duties, including the responsibility to ensure the accuracy of financial statements and compliance with regulatory standards. Directors can be held civilly and criminally liable in cases of reckless management or significant violations of governance rules.
In the United States, directors’ liability is also treated with rigor. The Sarbanes-Oxley Act, for example, imposes strict compliance and transparency requirements, compelling boards to maintain strict oversight of operations and ensure governance practices are followed closely. Directors’ personal liability in the U.S. is closely tied to board independence, with a strong emphasis on avoiding conflicts of interest and ensuring decisions are made in the best interest of shareholders.
Comparison of governance systems: Nippo-Germanic vs. Anglo-Saxon
The Nippo-Germanic system, prevalent in Brazil, emphasizes a governance approach that integrates different stakeholders into the decision-making process, seeking a balance between the interests of shareholders, employees, suppliers, and the community. This approach results in boards that often involve members of management, reflecting a culture of collaboration and consensual decision-making. While this promotes a long-term vision, it can sometimes compromise board independence and hinder bolder decision-making or rapid changes.
In contrast, the Anglo-Saxon system, predominant in the United States, focuses on maximizing shareholder value and rigorously protecting their interests. This system is characterized by boards of directors with a majority of independent members, separate from the company’s daily management. Governance here is more oriented towards the short to medium term, with a strong emphasis on financial results and strict adherence to fiduciary duties. Board independence is a central pillar of this system, ensuring that decisions are made objectively and without undue influence.
In conclusion, while both systems aim to ensure efficient and responsible company management, the approaches adopted in Brazil and the United States reflect the cultural and legal differences of each country. In Brazil, governance is more collaborative and integrated, while in the United States, independence and a focus on shareholders are paramount. These distinctions not only shape the dynamics of boards but also impact how companies are managed and how strategic decisions are made.
