Supervisory Boards — Challenges Demand New Skills
- Requirements placed on supervisory boards have increased
- Backlog in digital skills
- Board remuneration fair to excessive
Vienna, February 27, 2019
Differing Expectations of Supervisory Boards
According to the study, the list of minimum professional requirements on members of supervisory boards was headed up by fundamental economic and legal expertise. “In second place, we had knowledge of the fundamentals of accounting and financial accounting as well as knowledge of Corporate Governance,” explains Alfred Berger, Head of Compensation and Performance Management at Kienbaum Vienna. Executive boards on the other hand, were looking for more knowledge of compliance, risk management, and supervisory law.
Efficient Configuration of Supervisory Board Responsibilities Desirable
Almost all participants in the survey were of the opinion that supervisory board responsibilities have increased in recent years, especially the amount of work away from meetings, while the number of meetings itself remains unchanged. “Participants’ estimates of time spent varied widely,” explains Alfred Berger. “The chairman of a supervisory board can expect to devote between 36 and 54 days a year to it, a deputy between fifteen and 33 days. For ordinary members, the figure is between twelve and 24 days.” The study’s slogan “the road to success in the triad” appears fully justified, with collaboration between the executive board and senior executives described as being good to very good, with the latter working autonomously and independently, despite clear guidelines. Executive boards were keen to see the responsibilities of the supervisory board configured with greater efficiency in the future, with virtual data spaces and better qualification and preparation for individual meetings seen as key levers for change.
Digitalization Demands New Skills
The extent to which the importance of digital skills is categorized, differed between supervisory boards and executive boards. The former set great store by adherence to IT compliance and to dealing with modern organizational forms, while the latter considered experience with digital business models and scrutiny of technological innovations as key to alignment with the digitalization mega trend. To ensure the requisite skills, the majority expressed a desire to populate supervisory boards with members from countries seen as digital leaders and to integrate “digital natives” into committees. “There was, however, quite a gap between want and reality. None of those surveyed said that they had supervisory board members from any of these countries,” explains Alfred Berger.
GFMA-G: Lack of Pool of Suitable Female Candidates for Senior Positions
The Gender Equality Law, or GFMA-G, came into force on January 1, 2018, and was considered unhelpful by the majority of participants in the study. Women currently account for sixteen percent of supervisory board members, with the figure for executive boards as low as seven percent. The study indicated that the biggest hurdle to more women being posted to both boards is a lack of a pool of suitable candidates.
Board Remuneration Remains a Central Task
Participants opined that the level of remuneration was rather excessive, especially in larger companies. For medium-sized companies and their own companies, participants considered remuneration mostly appropriate. “Many participants expected remuneration to stagnate in the future, especially in their own companies and medium-sized companies. For larger companies, participants were equally split between those expecting consistency and those expecting an increase,” explains Alfred Berger. Participants from executive boards and supervisory boards considered a ratio of 2.3:1 to 3.9:1 between the board chairman’s remuneration and the directly subordinate management level appropriate. This ratio was considered appropriate in private ownership structures, with a ratio of 1.5:1 to 3.8:1. Both supervisory boards and executive boards agreed that when it comes to configuring board remuneration, the priority lies in increasing company value. Multi-year variable remuneration in particular will see an increase in the market, thereby gaining in importance.
Kerstin Wandt – T.: +49 (221) 801 72-0 | E-Mail: Contact@kienbaum.de