Corporate Governance Trends in Brazil

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Governance and risk management in a more complex ecosystem

The risk management landscape is becoming more multifaceted as companies strive to meet compliance requirements in areas such as sustainability, auditing, and cybersecurity. This challenge is compounded by the complexities of data theft, ransomware, and the rise of AI, which introduced questions on workforce dynamics, product development, and industry knowledge. Boards are increasingly being asked to grapple with these technological advancements, while also focusing on workforce transformation. (Incidentally, our Global Leadership Monitor found that workforce transformation—the emergence or decline of new jobs, reskilling, shifting expectations of work, and new models of employment—is a top five threat for leaders globally, with technology being the primary reason workforces need to transform.) As companies adapt to rapid changes, upskilling and reskilling have become crucial. As such, board members must understand what these technologies offer, as well as the risks they entail.

In parallel, regulatory bodies are working to ease access to capital markets, revisiting rules and regulations to encourage growth. In response to past scandals, corporate governance standards are tightening, pushing for increased independence in board composition and stricter regulations on audit practices. Stock exchange reforms—revisited every five to seven years by Brazil’s B3 stock exchange—aim to align local practices with international standards. While these efforts may elevate governance quality, the primary focus is on balancing investor protection with maintaining a competitive, attractive business environment.

Pressure for stronger diversity and effectiveness

Effective boards (and board leadership) are increasingly focusing on long-term strategy and better equipping boards to address challenges. However, board effectiveness is often hampered by a lack of attention to critical evaluations. Experts anticipate that, just as CEO planning has become an area that some companies are starting to approach more systematically, board evaluations may also begin taking a more structured approach.

While Brazilian boards have made strides in promoting board diversity, progress remains slow. Many targets are still conservative—often aiming for boards comprised of 30% women. Current board member selection processes are sometimes described as opaque and dominated by shareholder influence. This is resulting in stronger calls for increased transparency in board member selection.

Balancing long-term strategic oversight

Boards are increasingly tasked with managing the delicate balance between maintaining core business operations and embracing innovation. The rapid adoption of digital technologies, AI, and big data requires boards to make strategic choices about when and where to invest in emerging trends without neglecting traditional business strengths. ESG considerations also play a role. While environmental factors continue to gain momentum, the "S" dimension—focused on social mobility and improving living conditions—remains underdeveloped. Activism among shareholders is also on the rise, emphasizing the importance of having credible and capable directors who can earn the trust of institutional investors. Experts anticipate that there will be a stronger push for directors who can challenge the status quo and facilitate more robust strategic discussions within the boardroom.

Brazil’s volatile environment continues to present unique challenges for corporate governance, with fluctuating economic conditions and legal uncertainties complicating decision-making. Boards must stay vigilant in overseeing companies' strategies, particularly as many seek internationalization to diversify risk and mitigate the constraints of operating in Brazil. The setback limitations of state-owned enterprise (SOE) legislation promises greater stability, but effective oversight will be critical.

Sustainability commitments with COP 30 on the horizon

As global environmental concerns grow, Brazil faces intense scrutiny, particularly with the COP conferences highlighting the country's role in the forest regions. The upcoming events will test whether Brazil can stand as a leader in sustainability or fall under global criticism for failing to meet climate goals. Water and sewage utilities are areas of concern, as they lag behind in achieving sustainable development standards, and carbon emissions remain a persistent issue without a clear reduction plan.

Corporations are increasingly under pressure to disclose sustainability efforts, with the CVM issuing Resolutions 217, 218, and 219 that dictate compliance with mandatory requirements by 2027. Companies are starting to adapt the sustainability and climate-related disclosures voluntarily, but this transition is far from complete. Sustainability reports will soon require audits, prompting boards to elevate the seriousness of their sustainability committees and move from educational discussions to actionable strategies. The risk of greenwashing is high, with recent high-profile cases demonstrating the severe penalties for misleading sustainability claims. Companies must focus on transparent, honest reporting to build trust with stakeholders. The ongoing evolution of ESG criteria, particularly in the Brazilian context, requires boards to stay ahead of expectations and demonstrate a genuine commitment to environmental and social responsibility.