Diligent Q&A – Mauro da Cunha on navigating increased board demands, embracing diversity, and ongoing education for effective governance
Mauro da Cunha is a distinguished governance expert and Independent Director at leading organizations across Latin America, including Embraer, AES Brasil, Klabin, and Hypera. In our conversation, he emphasized the importance of adapting board practices to address emerging risks, the critical value of diverse perspectives in governance, the common challenges boards face today, and the essential role of ongoing education for board members.
Q: The demands placed on board members have increased significantly over the last several years. How can boards balance and prioritize emerging risks like cybersecurity and AI, with more traditional risks on the board agenda?
A: Boards are facing increasing demands, and addressing these challenges requires a more proactive approach. One important step is to acknowledge that the workload has grown, which may mean more frequent and focused meetings, beyond the traditional four or five per year, even when factoring in committee work.
Second, boards should reassess their current purview to make room for new challenges, or in other words, “unload the backpack.” This involves revisiting all board processes, from the annual agenda to policies, to authority thresholds. Routine data and reports should be separated, remaining accessible to directors at any time. This allows meetings to focus on key performance indicators (KPIs) that prompt meaningful discussions or encourage valuable challenges from directors. Corporate secretaries are a strategic asset in this scenario, helping boards be more productive, offering continued education, and encouraging the use of AI-powered software (like the Diligent One Platform) to streamline board activities.
Q: With increasing regulatory scrutiny worldwide, what steps can boards take to ensure they remain compliant while also focusing on long-term strategic goals?
A: Scrutiny is good and should not be feared. Instead, let’s call it accountability, which helps us all become better professionals. As a matter of fact, I believe scrutiny from owners, like shareholders and stakeholders, is even more important than scrutiny from regulators, who often focus on whether or not the right boxes are checked. Also, I would argue that the only way to stay compliant is to focus on long-term strategic goals!
Q: How does having a diverse board contribute to better risk management and decision-making in governance?
A: Diversity is absolutely crucial to better risk management and decision-making. While gender and racial diversity are important and often contribute to diverse perspectives, there is a lot of value in diversity of thought, skillsets and experience. It's essential to ensure that directors bring a variety of viewpoints and approaches, regardless of their background, to truly enhance board discussions and decision-making processes.
I see a lot of nominating committees - as well as activists - focusing strongly on bringing directors with “industry expertise.” In my opinion, this is the opposite of seeking diversity. Of course you need a level of industry experience on the board, but you also need strong cross skills in areas such as governance, audit, compensation, etc. In fact, many boards fail because no one is thinking about these issues.
Q: What challenges does a director appointed by shareholders face when the majority of the board is appointed by another body, such as a controlling shareholder or government?
A: It varies by jurisdiction. In many places, this setup is common because the law permits it. Some companies and boards are mature enough to see it as an opportunity, recognizing that it can bring genuine diversity of thought. However, in other cases, existing board members may view the shareholder-appointed director as an outsider or disruptor, making productive conversations difficult. Over time, though, if the independent director understands this dynamic and approaches it with patience, they can help foster a culture that values the fresh perspectives and debates the outsider brings.
Q: In your view, how critical is ongoing education for board members in staying updated on governance and risk management trends, and what are the most effective ways for boards to stay informed and prepared?
A: Continued education for boards is absolutely critical, but it should not be confined to a series of dull presentations on topics of interest. It requires a joint effort, involving the director, chair, board and company. Directors need to be proactive in seeking continued education, especially in novel areas or those outside his or her area of expertise. The chair should stimulate continued education by openly addressing gaps and needs of the company. The board must allocate resources for education, including frequent visits to facilities. And, management should support curious directors that want to learn by recognizing the importance of a knowledgeable board, helping to identify resources and gaps.
Finally, ongoing education is both a collective and individual responsibility. Much of the learning will need to be tailored to each director’s unique background and experience, especially given the diversity among board members.
