Gonçalo Cerejeira Namora participates in the IR Global Guide – International Governance: The Risks You Face as a Global Director

Foreward by Andrew Chilvers

As companies continue to look for opportunities in global markets, directors from diverse jurisdictions are hired to serve on the boards of foreign businesses as well as domestic ones that have operations and assets in other countries.

Enterprises across the world look for directors from other jurisdictions for any number of reasons. Hiring board directors from other countries can help to build investor confidence, for example. Likewise, an enterprise that is headquartered in a different jurisdiction but with a subsidiary in the US or Europe could seek directors to gain expertise and credibility. The director may have valuable international or local geographic expertise regarding business objectives, strategy, operations and risk management.

Nevertheless, serving as a director on the board of a global enterprise can bring major challenges. It’s true that during the past few years corporate governance laws and regulations have started to converge across regions, but there remain critical international differences regarding the responsibilities and liabilities of directors.

With recent data protection legislation across different jurisdictions, companies are now being held to account regarding their use of personal data. Will this result in a more litigious culture for companies and what does this mean for boards?


With the introduction of GDPR, the privacy and protection of personal data became a much debated topic in 2018. Despite a lot of inaccurate information being shared at the time, the new regulation generated a lot of discussion on the topic, particularly at board level.

The major change from the previous directive to the current regulation is related to the creation of a level playing field for all organisations in the EU (as well as overseas via representativeness of EU citizens and EU markets). Today we all work within a dense and complex legislative framework with identical terms and rules across the EU that facilitates global and cross-border action allowing for a clarity in decision-makers.

Compliance in terms of privacy is here to stay and can no longer be underes­timated by organisations when making decisions. Simply put, the new self-reg­ulated system transfers to the heart of organisations the responsibility of docu­menting evidence of compliance and, above all, the ability to make decisions based on risk assessments that have been carried out.

On the other hand, the existence of a similar legal framework throughout the EU will also increase the liability of organisations in eventual contingencies as, for example, for imposing fines on the global revenue of company. In addition to the financial impact that fines may have, there’s also the reputational damage done to a company or brand. Additionally, there’s a growing trend of class actions and/or claims from data holders for compensation for the illegal treatment of their personal data. Although we haven’t seen, to date, a large number of con­victions, it is likely there will be an increase in judicial and administrative litigation in the near future.

With global directors now increasingly in demand, how important is it for boards and directors to understand the different expectations of directors and different cultures of governance?


Economic globalisation has meant that companies have expanded across bor­ders. As a result, the management of these local subsidiaries and branches raises challenges for which more traditional boards of directors may not be prepared. Hence, the growing demand for global directors whose profiles, train­ing and competence guarantee a coherent line of action and understanding. Perhaps the most valued quality in these global directors is the ability to adapt to new environments, corporate cultures, countries and jurisdictions.

In fact, empirical evidence shows that management cultures and regulatory frameworks vary from country to country, and it is necessary to understand the ownership and business structure of each region. Nevertheless, it is always possible to identify fundamental principles of action of the boards, regardless of the number of jurisdictions involved. Most corporate governance rules, in the form of law or (self) regulation, impose two basic (fiduciary) duties on managers: loyalty and due care or diligence. These duties emanate from the international recommendations on corporate governance, namely from the G20 and OECD Corporate Governance Principles.

The duty of loyalty implies, simplistically, that decision-makers act in the best interest of the company (i.e., shareholders, workers, creditors and the public interest) and not according to any other interests (mainly their own). The duty of due care requires board members to act (at least) in good faith, and in an informed and diligent way. As some authors have already mentioned, the duty of due care requires (only!) that managers be present, attentive and try to make rational decisions, by reference to the standard of a reasonably prudent person placed in similar circumstances. It is more or less unanimous in all jurisdictions that a director should not be personally responsible for taking risks, even though his or her business strategy may be considered bold and the outcome negative. Thus, only in cases of gross negligence, deceit or pure irrationality can directors be held responsible.

How important is an effective board that follows core principles of international corporate governance? Does this give boards a shield against litigation and other issues such as bankruptcy and bribery?


The international body for recommendations and guiding principles on corporate governance now exists in most jurisdictions, in the form commercial, corporate or securities laws. In addition, most countries have been adopting corporate gov­ernance codes that are based on international principles, although duly adapted to the corporate realities to which they are directed.

Corporate governance aims at building an environment of trust, transparency and integrity, which promotes long-term investment and the stability of com­panies. Boards know that if they want to exploit the full potential of the global capital market, they must follow credible, understandable and internationally accepted corporate rules, only thus generating confidence in investors. Hence, it has become increasingly important for boards of directors and companies to follow high ethical standards, where they take into account the interests of all stakeholders.

When we are dealing with corporate groups, these concerns are even more pressing, as a transparent and ethical corporate culture common to all compa­nies and all bodies is essential, and it is up to the parent company to set the tone within an organisation. Thus, good practices must respect a chain of command from top to bottom.

The implementation of the best international practices in the field of corporate governance by companies, although fundamental, may not be enough.

Firstly, too often the principles of corporate governance within organisations are nothing more than programmatic statements without true adherence to corpo­rate culture. Thus, not even the most demanding body of rules can resist unless serious methods of enforcement are instituted by independent bodies.

Secondly, not even obedience to good international practices exempts boards of directors from strategic failures or bad business. In the business world, it is known that the existence of a crisis in an organisation is never a question of if, but a question of when.