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Strategic decisions are rarely evaluated at the time they are made. As a rule, they are judged retrospectively, when the outcome has already materialized, expectations have been reformulated, and the economic, legal, or regulatory context that supported them no longer exists.

It is in this time lag that significant tension can arise: managers may be held accountable for choices made in scenarios that no longer exist, often in light of parameters and information that were not available or even predictable at the time of the decision.

The Brazilian Corporations Law, when dealing with the liability of managers, seeks to mitigate this risk by recognizing that there is no duty to be right, but rather a duty of diligence and loyalty, determining that, in cases where the manager has fulfilled such duties and acted in good faith, he or she cannot be held liable for losses to the company.

In practice, this means that the manager’s defense lies not only in the merits of the decision, but in the ability to demonstrate how it was made. And it is precisely at this point that the documentation supporting the decision becomes essential.

Corporate restructuring and mergers and acquisitions are particularly sensitive areas. They involve complex assessments, uncertain assumptions, long-term projections, and information asymmetries that, if poorly structured, can raise questions about the actions of management.

Problems usually arise when decisions are made without a technical basis, when relevant assumptions are not properly questioned, or when potential conflicts of interest are not identified and addressed. In these situations, independent committees, valuation reports, and qualified approvals cease to be formalities and become part of the fiduciary duty itself.

In this scenario, decision-making is no longer just a good governance practice. Minutes that reflect the debates that took place and record the alternatives considered, explaining the reasons and assumptions that justify the final choice, are essential to demonstrate that fiduciary duties have been properly fulfilled.

The same applies to legal and financial opinions. They reinforce that the decision was supported by adequate and independent technical analyses. Even so, the credibility of these documents depends on who prepares them: a lack of autonomy or excessive proximity to management can weaken the probative value of these documents in the event of future questioning.

Ultimately, managers are not evaluated solely on the results of the decisions they make, but on the quality of the decision-making process they were able to structure, conduct, and prove.

In an environment where decisions are reviewed in light of circumstances that only become apparent over time, investing in governance, documentation, and rigorous decision-making is no longer a formality but a protective strategy.

By Isadora Schwartzmann