As is taking place within the upper echelons of DAX-30 and M-DAX companies, there is also a paradigm shift in supervisory boards. Thus the supervisory board is defined increasingly as an organising coach within company development rather than as a monitoring body. The business of supervisory boards is becoming increasingly fast-moving, more demanding and more risky. In the future, supervisory board members will require greater strategy-oriented communication and visionary skills.
Commissioned by shareholders, stakeholders or family businesses, I represent their interests on committees, advisory boards, management committees and supervisory boards for a specified phase of the company’s development. This often occurs in turnaround situations and on behalf of foreign investors, whose interests can be better promoted locally.
The corporate governance debate is currently and almost without exception still limited to structural aspects of the monitoring function of the supervisory board. By contrast, absolutely no attention, or only superficially, is being directed towards quality and content elements of that monitoring. This includes, for example, the extent to which the supervisory board is integrated in strategic management processes and the material information budget. In this context I view my task as a pro-active involvement.
Seeing the function of the supervisory board as pro-active involvment, and stock corporation law does not contradict this in principle, this also can result in courses of actions. However the actual integration of our own expertise and experience, and the adjacent synchronization of information outside the company for the purpose of comparing executive members’ statements, for really critical scrutinization, and for sustainable activation of additional business for the corporation etc., the core of the method is nothing more than the quality, one is committed to incorporate into the activities of the supervisory board.
ASPECTS AND BACKGROUND
Initial studies have discovered that the supervisory board as a whole concentrates largely on the monitoring of strategy results. This means that the monitoring happens too late and so an early amendment of strategic decisions is hardly possible in practice. It is also significant that the supervisory board has hardly any influence on the definition of strategic company objectives. The strategy devised by the management board is judged by the supervisory board with the wrong figures: orientation is from the annual accounts or the profit according to the balance sheet as well as the return on equity. In the age of shareholder value this is indeed a somewhat „surprising“ result.
Another notable result of the study regarding organisational structure oft he supervisory board: more than 70% of the supervisory board members questioned requested the establishment of a strategy committee, whereas only 22% of those asked had had any practical experience of a strategy committee. Consequently they were unable to judge how this functions. Here as with regard to Board reviews there is an iincreased need for action.
The communication of information between supervisory board and management is characterized in terms of the balance of accounts, profit and loss statement and appendix functioning as the most important informatory basis for the advisory board. This constitutes the so-called monitoring understanding, however enabling hardly any judgement of the feasibility of a strategy. In a similar direction, observation shows that the supervisory board makes hardly any use of external information sources. Instead it relies largely on the information from the management and its own experiences.
In the majority of cases this inward-orientation leads to the supervisory board failing to sufficiently adjust its monitoring activities and demand for information to suit the financial situation of the company:
- The supervisory board usually operates focusing on the past
- The supervisory board works far too introspectively
- The supervisory board is too passive
However in the case of turnarounds there are firms, who manage also in a crisis significantly better than the majority. What do they do differently? Where does this knowledge, the strategies and concepts come from? What alternatives do small and medium-sized firms have in particular?
The setting up of an advisory board, carefully selecting 3-4 persons with experience in business strategy and a strong network, can give the operative management many different impulses. Between 4 and 8 discussion meetings per year suffice in order to work through the most important strategic issues with a well-prepared agenda. The frequency of these meetings generally depends on the willingness of the management board members to cooperate.
The issues are extremely diverse and include the acquisition of new customers, the setting up of a new distribution channel, the taking over of competitors, the selection of new management board members, the succession planning for the company owner, the sale of the company or just getting through a major crisis.
At the same time, the advisory board or, on specific issues, the respective competent member of the advisory board is the business sparring partner or coach of the owner-manager. Reflection on business decisions and thought processes creates security or forces a re-think, when essential new arguments are presented.
The same rates apply for meetings, expenses and annual expenses, as stipulated in the company regulations.
See also: Restructuring
Where legal advice is required, transition-manager works closely with appropriately experienced law firms.