Reputation on the #3 board
Advisor to family and publicly traded companies in the energy, retail and agribusiness sectors, Leila Loria has a comprehensive perspective on the performance of these bodies and no doubt about what the focal point of organizations should be when it comes to building and maintaining reputation: people. Currently, Leila contributes to the boards of Assaí Wholesaler, Pernambucanas and Moinhos Anaconda and, until this year, participated in the boards of Copel, an energy company in Paraná privatized in August, and JBS.
Third interviewee in the series Reputation on the board, Leila lists, among the challenges facing councils, the integration between management and collegiate bodies and a greater understanding of the interrelationships of risks in organizations. With transparency, it also addresses issues such as the need to not only increase diversity, but also make inclusion effective on boards, and the dilemma of combining long-term projects with short mandates. It also advocates that the board include components that have already experienced crises in their corporate journey. Check out the main excerpts from the conversation below:
“Company risk management has become very complex”
Agendas have become more complex, and a more dynamic and uncertain world requires more flexible action and rapid changes. It's a challenge that I and most counselors face. From a practical point of view, putting together the council's agenda is another challenge, as it is necessary to add long-term and often difficult-to-discuss items – such as climate change – and day-to-day results, which are more common. Furthermore, companies' risk management has become very complex, because the risks are reputational, regulatory and financial. And, among the most relevant, the last challenge is reaching the point of balance between the board and management team. During the pandemic, there was greater integration. Now, we need to find another type of balance, because we can't be as distant from the business as some advice used to be.
“Increasingly, reputational risk crosses the organization, but few boards discuss it in depth”
We are increasingly understanding that reputational risk crosses the organization. Because cyber risk becomes a reputational risk, the risk of racism is a reputational risk, financial risk becomes a reputational risk. So, risk analysis has to be integrated, but few councils discuss this in depth. The discussion happens more in times of crisis, in situations where reputation is being affected. In WCD research (Women Corporate Directors), published in October, 28% of those consulted responded that topics related to reputational risks are raised with high frequency in the committees or councils in which they participate. In other words, it is not the majority. Understanding the interrelationships between various risks, including reputational, is sometimes difficult for boards. When a crisis hits, everything becomes crisis management, and reputation becomes the main issue. But I think this will be an increasingly common situation in councils, given so many reputational risks such as those arising from social media and cyber attacks, for example.
“Reputation with investors, consumers and employees is regularly on the agenda”
Regularly, the board's agenda discusses reputation within the organization in relation to at least three stakeholders, which are:
- Investors, because reputation with investors directly impacts the company’s value.
- Consumers, as it is fundamental for business and there is greater concern about consuming from companies with responsible practices.
- Collaborators, because having employees speaking highly of the company online is priceless. Furthermore, today it is no longer the company that chooses the employee, it is the employee that chooses the company they want to work for and leaves it if they believe that their values are no longer met.
“Of the niches that impact reputation, that of employees is huge, because it can make it difficult to achieve the company’s results”
Looking at all companies, public and private, large and small, the challenge of employees, for me, is the biggest. Today, several generations live together in the company, and the level of demand is different. It has not been easy to retain these employees. I have no doubt in saying that the niche of employees, of all those who impact reputation, is huge, because it can make it difficult to achieve the company's results.
It's good for reputation to have people on the board who have been through a crisis
“Diversity goes beyond gender and race, it is cognitive”
The first thing you need to have on the board is diversity. And diversity goes beyond gender and race, it is a cognitive diversity, of worldview. A good composition for both reputation and all topics is made up of different people, with different perspectives within a board. Furthermore, it is important to have people on the board who have been through a crisis.
People learn to value reputation more when they experience a problem related to it (in business). I, for example, was VP at Telefônica, when Speedy (broadband internet service) went offline, a breakdown in the state of São Paulo. It was 12 years ago and it created a reputation crisis. Whoever lived this gained experience. It's good to have people who have experienced good and bad business management situations and who can bring them together in a discussion within the board.
“Diversity doesn’t solve, it helps”
Today, there are no 20% women on boards. There is a lot of talk and little practice, not only about diversity on boards, but in companies. Diversity doesn’t solve it, it helps. It's the first step. But it has to have an inclusive environment. There's no point calling to the party and not asking to dance. If a woman who joins the board is interrupted all the time, it doesn't solve the problem. The council is a collegiate body. The council must have this inclusive environment so that everyone can give their opinion.
“There are people who think that the committee takes responsibility away from the council. Do not take"
Committees assumed increasing importance. I'm a fan of committees. There are people who think that the committee takes responsibility away from the board. Don't take it off, in my opinion. It helps the board make more thoughtful, in-depth and analyzed decisions. If there weren't these committees, I don't know what the council's agenda would be like.
Sometimes, a board with fewer individual talents, but higher collective talent, manages to have a good dynamic
“If the board does not provide chemistry, it cannot operate efficiently”
“The Council has to ensure that there is no slippage in the administration”
Today, more than previous experience, experience and training, the essential skills are most important to the success of a board. Sometimes, a board is made up of just wild people, with all backgrounds, but if it doesn't have chemistry and doesn't have a good dynamic, if egos enter the meeting together, the board can't operate efficiently. Why? Because everyone wants to impose their idea, everyone wants to get their project approved. So, the behavioral part is fundamental. I mentioned diversity, the inclusive environment, but I mention a lot and, increasingly, the behavioral part of the counselor. Sometimes, a board with less individual talent, but with higher collective talent, manages to have a good dynamic of discussion, respect and interactions between one board meeting and another.
“Challenge: council tends to look at the long term, but has a short mandate”
The tendency is for the CEO and his executives to look more at the short term. Directors, on the other hand, have to think today and plan activities that will have a return when they are no longer on the board, in five or 10 years. So this is another long and short term challenge. Although the board tends to look at the long term, the advisor has a short mandate and wants to achieve things during the period he is on the board. It is up to him, however, to bring management into the long-term vision and establish indicators. Many companies already make long-term incentives represent more of executives' total compensation, which is one path towards this perspective.
More about Leila Loria
Before debuting on the board of directors in 2015, Leila Loria followed the executive path at companies such as Walmart, Grupo Abril and Telefônica, among others. Today, he is on boards of directors, advisory boards, audit and people committees. He was president of the Board of Directors of the Brazilian Institute of Corporate Governance (IBGC), from April 2021 to March 2022, and is co-chair of the Women Corporate Director in Brazil (WCD Brasil). As a counselor, she says her main personal challenge is how she can contribute to each council specifically. “I have this reflection all the time, and my contribution depends a lot on the company’s current situation and what the organization needs at that moment”, he says.
Christianne Schmitt is editor of Reputation Feed