Functioning and structure of the Board of Directors

October 27, 2026

Choosing a board member requires evaluating what they can contribute to the company's challenges. Previous experience counts, but it must be accompanied by judgment, preparation, and availability for the role of a board member. To select well, it is advisable to understand the functions of the board and the capabilities it needs to gather.

Serving on multiple boards and receiving good remuneration might seem like an attractive evolution at the end of a managerial career. The problem arises when getting paid for a past track record is confused with assuming the responsibility of contributing to a company's future.

This article uses Spanish capital companies as a reference and distinguishes the particularities of listed companies when applicable.

Competencies of the board of directors

As a body, the board has administration and representation attributions for the company within the legal and statutory framework. Its non-delegable powers include determining general policies and strategies and supervising delegated bodies. These attributions are distinct from the professional skills of each individual director.

Main functions of the board of directors

In practice, the board must connect strategy with supervision: reviewing priorities, analyzing results, questioning the risks taken, and verifying that management has the resources and capabilities to execute the plans. Governing requires looking beyond immediate results and assessing the consequences of decisions.

For example, faced with an international expansion, its contribution is not limited to endorsing a sales forecast. It must examine the scenarios, the financing, the necessary team, and the conditions that justified reviewing the investment.

Functions of board members

Each director contributes to that collective task by preparing for meetings, analyzing documentation, requesting clarifications, and participating in deliberations. Their value is seen in the quality of their questions, the alternatives they propose, and the follow-up on agreements.

A brilliant track record does not guarantee this contribution. Nor should a capable professional be ruled out simply because they have not yet served on a board: someone had to offer current directors their first opportunity.

Types of board members

In Spanish listed companies, four categories of board members are distinguished. This classification should not be automatically applied to all companies:

Executive directors: perform management functions in the company or its group.
Proprietary directors: are linked to shareholdings under the terms provided by law or represent those shareholders.
Independent directors: are considered board members who provide a valuable external perspective. They are appointed based on their personal and professional qualities and must be able to act without conditioning derived from specific relationships with the company, its group, or its significant shareholders.
Other external directors: can be independent directors who provide an objective vision. They are not executives and do not fit into the categories of proprietary or independent directors.

Competencies and profiles for selecting directors

Selection should begin with the difficult decisions the company expects to face over the next five years. A competency matrix allows contrasting these challenges with the capabilities already present in the board's composition and identifying what is missing. It is advisable to assess:

Technology: understanding of artificial intelligence, business transformation, and cybersecurity from their strategic implications.
Strategy and finance: ability to analyze investments, growth, financing, and return on capital.
People: experience in leadership, talent development, and succession of critical roles.
Risks: judgment to interpret regulatory, geopolitical, and market changes.

It is not necessary for each person to master all areas. The goal is to gather complementary profiles with their own judgment, capacity for dialogue, and sufficient time. To contrast them, real decision cases, professional references, and questions about results and learnings can be used.

Who chooses and appoints board members

In general, the appointment corresponds to the general shareholders' meeting. There are legal exceptions, such as co-optation to fill certain vacancies in public limited companies. In listed companies, the appointments committee proposes the independent directors; for the rest, the proposal belongs to the board and requires a report from that committee.

Searching for candidates and evaluating their fit is a distinct phase from the formal appointment. Those involved in the search must broaden the field beyond the usual names and justify what each profile brings to the specific board.

Responsibilities of a good board of directors

Directors must act with diligence and loyalty, protect confidential information, and avoid conflicts of interest in accordance with the law. The position can generate liability for damages when the legal requirements are met; it does not mean automatically answering for any poor business result.

A good board turns these requirements into habits: it requests sufficient information, questions assumptions, acknowledges its shortcomings, and dedicates time to understanding decisions. Personal prestige does not replace this preparation.

Composition and organization of the board of directors

The organization is usually structured around a presidency, which leads the work; a secretariat, which supports its proper development; and the other directors. Committees allow delving into specific matters before bringing conclusions to the board. The specific structure depends on the type of company and the rules applicable to the company's administration.

In listed companies, the CNMV's Good Governance Code addresses the balance of profiles, diversity, dedication, and specialized committees in the functioning of the board. When selecting new members, it is important to evaluate how each addition improves the group as a whole, in addition to their individual resume.

Functioning and decision-making of the board of directors

A useful process begins with a clear agenda and documentation sent well in advance. During the meeting, data, scenarios, and alternatives are contrasted; then, agreements are adopted according to the applicable rules of constitution and majorities and are documented in the minutes.

The quality of the work also depends on the follow-up. Each relevant decision should translate into responsible parties, deadlines, and information that allows verifying its execution. A board adds little if it receives presentations but does not delve into their assumptions or review what was agreed upon.

Evaluating the board of directors' performance

The evaluation must examine the quality of the deliberations, the information received, the composition, the dedication, and the contribution of its members. The CNMV recommends that listed companies conduct an annual evaluation and enlist the support of an independent external consultant every three years.

The result should translate into concrete improvements: training, changes in agendas, better information, or new profiles. The decisive question is what decisions the board is helping to improve. There is valuable talent outside the usual circuits; recognizing it requires evaluating its potential contribution to the functioning of the board.

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