How to set up governance properly is a topic that is increasingly and more prominently on the joint agenda of managements and shareholders.
Recently, Daan Steenbergen of JBR Governance spoke with Prof. Dr. Mijntje Lückerath-Rovers on this topic.
The conversation
Daan: What is the time to install an Advisory Board (BoA) or Supervisory Board (SB)?
Mijntje: Choosing an SB or Supervisory Board often depends on the stage the company is in, combined with size and complexity. Formally, the role of the SB is freer than that of an SB. With proper composition of the SB, individual members will want to have "real" influence.
As the organization grows larger, the (shareholder) structure becomes more complex and business operations more mature, a formal supervisory board becomes more obvious and often legally required.
Mijntje sees four main roles for the SB. The role of supervisor, that of adviser and that of employer. As a fourth task, she sees the role as ambassador, where the SB is also a linking pin with the outside world.
Daan: Does a business owner have less freedom when there is a SB or SB?
Mijntje: An SB offers more freedom. The powers and duties of the SB are in the law and in the bylaws. For example, whether or not it has the power to dismiss the management or to submit takeovers above a certain amount. Furthermore, there is formal but also informal power.
Daan: What requirements must a supervisory board member meet?
Mijntje: There is often a generic profile for the entire SB and for the various positions within it (financial, digital, HR, etc.). A competency matrix then gives the optimal composition of the respective SB. The composition of a SB is customized and sometimes requires outside help.
Daan: Is diversity important?
Mijntje: Several studies show that a diverse SB is more effective. Diversity goes beyond gender diversity; by ensuring a truly complementary team, it will function better and act from different perspectives.
Daan: What is the role of the SB in an acquisition?
Mijntje: The Supervisory Board is primarily focused on the interests of the company and this should be at the forefront of any advice. The personal interest of a Supervisory Board member who is also a shareholder must be secondary to this; not always easy.
Daan: What is the secret of a well-functioning SB?
Mijntje: Communication, mutual respect, operating firmly but also pragmatically. Decisions must include interests of all stakeholders. Dilemmas should be named: it should not be a contest in who gets right.
Daan: Does the role of the SB become more complex with a private equity investor (with its own commissioner)?
Mijntje: Again, for me it still applies that the interests of the company must come first. When composing the SB, it is therefore important to appoint independent supervisory directors in addition to the PE commissioner. The latter sometimes have special powers, such as a right of veto in certain situations. These powers should be laid down in the articles of association.
Mijntje Lückerath-Rovers graduated as a Financial Economist and as a Labor and Organizational Psychologist. She is Professor of Corporate Governance at Tilburg University, TIAS School for Business and society. She is also a commissioner/supervisor at Pels Rijcken, Erasmus MC, NRC Media and Blijdorp Zoo, among others. And she is a crown member of the SER. In 2023, she published the book Moral Dilemmas in the Boardroom.
