This article first appeared in El Comercio Perú on February 07, 2018.
One of the effects of the recently implemented Administrative Responsibility Law, which provides for effective sanctions for companies in cases of bribery (kickbacks), money laundering, and financing of terrorism, is that private entities now have incentives to have an ethical compliance model, which, according to the same law, allows them to exempt themselves from such responsibilities.
Compliance models, if they are well implemented, must have concrete but simple conditions, requirements, and evaluations for their main executives and also, of course, for their directors. They are responsible for the long-term vision that is so necessary for the strengthening and survival of companies.
In recent months we have seen how directors committed to dubious practices have caused damage to companies. The market punishes more visibly those listed on the stock market, but if a study were made of lost contracts, distanced partners, and possibilities that will never materialize, we would know the real negative impact.
Therefore, compliance models, or their development through manuals and guidelines, should be explicit in requiring a minimum knowledge of their directors regarding the operations, risks, goals, and paths that the company follows to meet its objectives.
If one reviews company directories, one can notice that there are names that do not appear only three, four, or five times, but many more. The due diligence and depth of commitment demanded by the assignment make the task of being in too many directories a complicated one.
A highly trained professional with recognized experience will generate value for the companies to whose board he or she belongs. However, as time is one of the scarcest resources, it is quite likely that an excess of responsibilities will lead to a relaxation of criteria and the only priority will be to create more and more profits for the company, without taking into account the risks that are being assumed or, even worse, created.
Society should trust in the good judgment of the companies when appointing their directors, as well as in the discernment of the professionals summoned to recognize at what point their capacity is exceeded when their contribution will be diminished. However, with a clear, explicit, well-implemented, and constantly measured compliance model, it will no longer be necessary to rely on criteria and judgment or to assume that professionals are guided by categorical imperatives.
It would be arbitrary to set a maximum number of boards in which a person can participate, and, at least soon, we do not believe that the authorities will put a cap on this. But since we are not an authority, we can give some advice in this regard. A person should not participate in more than five boards. And in this case, it is worth heeding popular wisdom, which assures us, without fear of being mistaken, that he who grasps all, grasps little.
By Susana Sierra