Philine Erfurt Sandhu is a lecturer at the Berlin School of Economics and Law.
(Photo: press photo)
The 2022 Annual General Meeting season has started. The climate crisis, geopolitical conflicts and an ongoing pandemic are placing far greater demands on supervisory boards than usual. They have to promote and report on structural, strategic and personnel innovations in the company.
Never before have supervisory bodies had to combine as much expertise as they do today. They must both meet numerous regulatory requirements and be able to assess the urgent issues with expertise.
The question is: Does the supervisory board have sufficient competence to deal optimally with the major transformation processes and crises? Studies on the composition of supervisory boards give rise to doubts as to whether many supervisory boards are filled in a sufficiently professional manner.
About 20 percent of the selection of suitable candidates is carried out by personnel consultancies. Conversely, around 80 percent of recruitment is via networks – “family & friends”, as it is so often called.
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A study by the University of Speyer illustrates the lack of professionalism when it comes to appointments to supervisory boards: a narrow search radius in well-known networks, insufficient use of a competence profile and the omission of the principle of multiple eyes were found in five out of six supervisory board members. The selection processes are still too opaque. To put it bluntly: the supervisory board often chooses itself.
Use influence to create greater transparency
Especially in these times, however, it is extremely important that supervisory board members support the management board with good advice and the necessary control. Appropriate expertise is required when the question is: What issues is the company confronted with? Where is the company headed?
Are the supervisory bodies competent enough?
(Photo: IMAGO/NurPhoto)
Diversity in the competence profile of the supervisory board is required right now in order to be able to evaluate requirements from geopolitics, supply chains, the climate crisis or cyber security in addition to legal and financial competences. In order to be able to deal with these different perspectives, diversity skills are also required for the ability to transform.
For the new AGM season, shareholders should therefore not blindly hand over their influence to voting rights advisors or even let their voting rights expire.
Instead, they should use their leverage to demand greater transparency about appointment processes and take a close look at the profiles of the supervisory board members. Actively dealing with the transformation competencies of the supervisory board not only serves their economic interest in a profitable and long-term existence of the company.
It is also to be understood as a commitment so that companies with a focus on sustainability and good corporate governance make their social contribution – especially in these times.
More: More green, more luxury – Mercedes appoints new board members.