To me the justification for the appointment of a supervisory board sends a strong signal that the shareholders are not satisfied with the corporate board’s performance; otherwise what justification is there for having a supervisory board? It also indicates that the shareholders haven't the intestinal fortitude to front up and tackle the real problem which is the poor director appointments which they, the shareholders, made to the corporate board. In addition it’s simply adding another layer of accountability and responsibility on corporate business models which in most cases need trimming not enlarging. From my experience I would never accept an appointment either as Chairman or director of a corporate board which had a supervisory board structure for the following reasons:
- the shareholders as a group would have to be dysfunctional, weak and lacking purpose to resort to appointing a supervisory board and thus would in all probability be difficult to deal with.
- as a chairman of a corporate board to whom am I accountable, the shareholders or the supervisory board? In the examples I’ve witnessed mainly in government enterprises this is an extremely grey area with, in some cases, both boards reporting separately to the shareholders;
- which board has the ultimate responsibility for company performance? Dual accountability never works, hence the very quick demise of matrix management which was the darling of the academics in the nineties;
- who is the arbitrator when there is disagreement between the two boards on strategic matters? Or is it a divide and conquer philosophy by the shareholders? And;
- who controls the executive? I've witnessed and been called in as an independent expert to resolve this problem on a number of occasions where supervisory boards were involved.
In summary, perhaps supervisory boards would work if there were clear and irrefutable guidelines regarding responsibilities and accountabilities. However the question remains - "what is their purpose and how will the enterprise benefit from this additional layer of oversight?"
To me supervisory boards are a nonsense. Give me a totally independent board with sound professional governance practices dictating professional board behavior and which include positive shareholder communication guidelines and clear demarcation of accountability. Such boards with strong leadership from the Chairman result in harmonious collective boards striving for best practice and leading the company to achieve its main objective which is to establish a sound operational and financial platform while increasing shareholders wealth.
"To me the justification for the appointment of a supervisory board sends a strong signal that the shareholders are not satisfied with the corporate board’s performance; otherwise what justification is there for having a supervisory board?"