Corporate Governance: A New Standard for Strategic Leadership

Following a recent webinar hosted by Latam Investment Banking, a boutique advisory firm specializing in M&A, in partnership with iDirectores, an exclusive digital community for board members across Latin America, several key insights emerged regarding the evolution of corporate governance in the region, with particular emphasis on Mexico and its landscape of family-owned, private, and publicly traded companies.

In an environment marked by volatility, regulatory scrutiny, and the rising expectations of capital markets, corporate boards are no longer limited to financial oversight and compliance. Today, boards must become strategic leaders, entities that actively shape long-term value and resilience.

A paradigm shift is underway. Boards must now take ownership of:

• Strategic direction: Understanding macroeconomic shifts, business model transformations, and value drivers.
   

• Risk resilience and antifragility: Governance must extend beyond operational and financial risk to encompass reputational, structural, and technological factors.
   

• Alignment of stakeholders: Effective governance depends on aligning shareholders, directors, and management through the distribution of power, incentives, and decision-making agreements.

This transformation is particularly relevant in Mexico, where many of the country’s most significant companies are family-owned. Generational transitions are reshaping corporate leadership and ownership structures. New generations are rethinking what value means, shifting from operational control to investment-oriented roles, including ventures into family offices, including investment allocation and geographical diversification.

This transition also brings complex decisions around internationalization, governance professionalization, and long-term wealth preservation.

A case discussed in the webinar illustrated how digital transformation now directly affects governance: the failed 2024 software update by Sonos led to a reputational crisis, a sharp stock decline, and the CEO’s resignation. This raises a critical question for Mexican boards: How involved should governance bodies be in innovation and technology decisions? Boards must develop a minimum level of digital literacy to understand the strategic implications of tech choices.

External Pressures Are Setting New Standards

Latin America has seen improvements in corporate governance standards driven by external forces, particularly institutional investors, development banks, and international funds. These actors are demanding stronger board structures, performance evaluations, and integrated risk management.

However, major gaps remain:

• Low board compensation: In Mexico, conservative approaches to board member remuneration persist, limiting board effectiveness.
   

• Limited performance compensation: Many family companies resist granting board members performance compensation, which could otherwise improve incentive alignment.
   

• Lack of structured evaluations: Few companies systematically assess their board’s performance or renewal mechanisms.

Mexican companies need to embrace boards that are strategically capable, technologically informed, and diversified in skills and perspectives. This includes preparing for international expansion, portfolio management, mitigating risk proactively, and integrating sustainability and innovation into long-term strategy.

I believe in the power of governance as a tool to drive purpose-led transformation in the region. Family-owned businesses that are forward-looking and modernize their boards can best navigate complex environments and take advantage of opportunities in a carefully planned manner. Mexico has an opportunity to lead this shift, if its corporate leaders are willing to rethink the role of the board.

If you'd like to watch the full recording of the webinar mentioned at the beginning of this article, please use the following link (YouTube):

https://www.youtube.com/live/69daTL-cE-E?si=g2TWc0oOMZjujdOO