|Why does your company have substitute directors on the board?|
The board of directors is a fundamental component in the development of a public company. Its attributions include not only establishing the organization's strategic guidelines, but also fostering the best corporate governance practices. To make sound, safe decisions, board members must have a profound knowledge of their company's business operations. Therefore, the new best practice code issued by the Brazilian Institute of Corporate Governance (IBGC) recommends that companies refrain from appointing substitute directors to stand in for titleholders who miss a meeting. According to the institute, substitute directors are not adequately familiarized with a company's problems and, therefore, they are not qualified to exercise the attributions of a board member.
Lupatech, CCR and NET understand that having substitute directors is an adequate preventive measure, should any of the title-holding directors fail to attend a board meeting.
Lupatech stresses that its " substitute directors are representatives of important shareholders and, therefore, they are qualified to understand the company and its relationship with the financial market".
TIM claims to follow a principle where board meetings must be attended by all directors. Therefore, the company appoints substitute directors to attend to isolated cases where a minimum quorum is required for analysis or approval of an issue presented by the company's agenda.
Usiminas stresses that the absence of substitute directors could hinder the board's decision-making process. "In a decision which must be approved by a qualified quorum, the absence of an effective director could delay the decision or even make it unfeasible, potentially harming the company's interests", it says. The steel company disagrees with the IBGC's claim that substitute directors engaged as occasional stand-ins are not satisfactorily familiarized with the company's problems. Usiminas argues that "the directors are aware of their respective responsibilities and assume fiduciary duties under the terms of the law. In other words, each of them must endeavor to exercise his or her attributions with the care and diligence required by the position."