Knowledge Center: Publication
Boards & Governance
Board Monitor Brazil 202010/1/2020 Heidrick & Struggles
Modern boards are expected to possess significant expertise in areas as specialized and diverse as digital transformation, corporate reputation management, and sustainability, to name just a few, and also include diversity in terms of gender, racial and ethnic background, age, and national origin, among other characteristics. This is all to improve decision making, by combining board members with specific expertise with the benefits of diverse teams, which are widely seen to make better decisions.
Most corporate boards in the 15 countries we study1 made some progress in adding new members with diverse backgrounds and skills. In Brazil, for example, 60% of directors joined the board of a company in a different industry than the one they work in day-to-day. Many boards around the world also continued to add a number of more traditional directors. This includes people with prior board experience—78% of appointments in Brazil, higher than the United States, Spain, or Portugal—or prior experience as a CEO or CFO. Though such directors don’t as often add diversity in other areas, their experience has been particularly valued by nominating committees when companies face significant enterprise risk.
Among the characteristics of new directors we have been tracking, we note a few trends among new directors globally, which are somewhat at odds with each other.
Some progress on diversity
- Women continue to make significant gains among newly added directors compared to previous years.
- Progress on racial or ethnic, nationality, and age diversity has been disappointing, with little progress to report anywhere in the world.
- The range of functional experience on boards has increased, with a corresponding decrease in CEO experience. In particular, digital expertise, now essentially a given on boards, trended highest. With sustainability and cybersecurity rising as central concerns for companies, boards also focused on adding experience in these areas.
A continuing preference for traditional experience
- First-time directors are still not as common as experienced ones, despite boards’ stated focus on adding new perspectives.
- Financial expertise and experience in financial services sectors remained highly sought-after backgrounds.
- Though the proportion of directors with CEO experience has continued to decline annually, it remains the most common type of prior expertise, followed by CFO experience.
As companies reshape themselves in the new environment 2020 is presenting, there will be many new opportunities for those who want to be best positioned to accelerate performance. Given the recent increased focus on racial injustice and social inequality around the world, many leaders are reconsidering and accelerating their diversity and inclusion efforts, including on boards. In Brazil, many boards have set specific targets for diversity. Boards around the world are finding they can do much better in building representation internally and in supporting diverse communities both internally and externally. Beyond that, boards will also need to focus more broadly on building the most capable board tailored to each company’s unique strategy.
Simply ensuring a board has an appropriate mix of perspectives is just the start. To be highly effective, a board must be clear on its purpose: what it stands for as an entity and whom it represents in a global society. Boards must also align on how they will serve as an underpinning for a purpose-driven, socially responsible organization that delivers value to a wide range of stakeholders. And boards must have a culture and processes that ensure their directors can work well together.
In 2020, with the added pressure from economic and societal volatility, fractured or dysfunctional boards present more risk than ever before. The solution is inclusion broadly defined. Many boards think of inclusion particularly in relation to their significant efforts to add diversity, but, as they seek to oversee recovery from a deep economic and social crisis, boards will benefit most from ensuring that every member is able to contribute fully, regardless of the board’s traditional norms or habits, varying personalities, inherent biases, or for any other reason. (For more on Heidrick & Struggles’ thinking on board dynamics, see Future-Proofing Your Board.)
In this report, you’ll find the data and our observations on the 2019 class of directors for companies on the Bovespa and some expectations for 2020.
To read the full report, flip through the interactive version above or click the download button for the PDF.
Thanks to the following Heidrick & Struggles colleagues for their contributions to this report: Isabella Camacho, Ana Paula Chagas, Paulo Mendes, Bruna Oliveira, and Pamela Oliveira.
1 Australia, Belgium, Brazil, Canada, France, Germany, Hong Kong, Ireland, Netherlands, New Zealand, Portugal, Singapore, Spain, United Kingdom, and United States are included in our studies of boards.