The Role of the Board Its Boundaries, Duties and Competencies

1
The Role of the Board Its Boundaries, Duties
and Competencies

• by Marcos E. J. Bertin
• The Third Meeting of the Latin American Corporate
  Governance Roundtable
• Mexico City, 8-10 April 2002

2
Governance ProjectIAGOStage 1, February-May
2000

• What was done in selected countries.
• Principios de Buen Gobierno published
• with major findings on
• Board Best Practices.
• Introduction and acceptance

3
Governance ProjectIAGOStage 2, June-October,
2000 Interview incumbents What should we do in
Argentina.

• External Directors
• Investors
• Banks
• Auditors
• Consultants
• Attorneys

• Executives
• Stock exchange
• Pension funds
• Minist. of economy
• Securities market
• Economists

4
Governance ProjectIAGOStage 3,
February-March, 2001

• A survey was carried out with incumbents of
  private sector.
• Publication of
• Best Practices on Corporate Governance
• Aiming at consensus building within the private
  sector

5
Governance ProjectIAGOStage 3, February-March,
2001Major Conclusions on Board functions

• 1. The mission is to add value to the company.
• 2. Should review and endorse strategy and
  supervise management compliance.
• 3. It is advisable to include independent
  directors.

6
Governance ProjectIAGOStage 3, February-March,
2001Major Conclusions on Board functions (Cont.)

• 4. Shall select, supervise, motivate and reward
  management.
• 5. Approve appropiate system for management and
  risk control.
• 6. Assure transparent systems for information
  distribution are established.

7
IFC SeminarRio de Janeiro, 09/02 Conclusions of
group discussions

• The implementation
• of Board Best Practices
• Drivers, Obstacles Recommendations

8
IFC SeminarRio de Janeiro, 09/02 Conclusions of
group discussions

• Drivers
• Global trend
• Competition
• Access to capital markets
• Regulations
• Younger management generations

9
IFC SeminarRio de Janeiro, 09/02 Conclusions of
group discussions

• Obstacles
• High No. of family companies
• Lack of trained directors
• Cultural change, takes time
• Capital markets, low activity in L.A.

10
IFC SeminarRio de Janeiro, 09/02 Conclusions of
group discussions

• Obstacles
• Co. Control, rubber- stamp boards
• Low implementation effectiveness
• Risks, information personal security

11
IFC SeminarRio de Janeiro, 09/02 Conclusions of
group discussions

• Implementation
• Shock treatment
• Compensation policies
• Directors assessment
• Code of ethics
• Start with Advisory Boards
• Proactive Chairmans

12
IFC SeminarRio de Janeiro, 09/02 Conclusions of
group discussions

• Recommendations
• IFC to consider best practices in loan evaluation
  process.
• There are no recipes, include only what is good
  for your business.
• Include Universities in the discussion of best
  practices and in the how to.

13
Push / Have to
INCUMBENTS BUSINESS-INVESTORS
Pull / Attractive
14
Work and Play

• Predictability
• Tension
• Rhythm
• Inmediate results
• Results before style
• Effort and skill
• Achievement and recognition

15
Interests alignment

• Share holders investors
• Board
• Executive management
• Customers
• Personnel
• Suppliers
• Society

16
Top down
Bottom up