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Ten years have passed since the German Corporate Governance Code Commission enshrined the professionalisation of listed companies’ supervisory boards as one of the recommendations set out in the German Corporate Governance Code (GCGC). How has this professionalisation worked out in practice? And what are the issues involved in providing supervisory board members with some form of sustainable continuing education?
Judging by declarations of compliance in accordance with Section 161 AktG (the German Stock Corporation Act), we may conclude that most management boards are complying with every aspect of this recommendation. Compliance takes various forms. For example: organising in-house training courses for the supervisory board as a whole or for individual members, or taking advantage of continuing professional development (CPD) programmes offered by specialist institutions, such as Frankfurt School’s Excellence Programme for Supervisory Board Members.
Only someone who understands the complex issues involved can act as a competent “supervisor”. A supervisory board is only able to perform its legal and statutory duties if its members are capable of understanding and analysing any given situation. This in turn requires them to possess the skills necessary for efficient supervision. Supervisory board members who continuously update their specialist expertise and competencies play a vital role in successful companies. In addition, they can support the executive board by providing effective advice.
All supervisory board members should have a minimum level of knowledge. But in certain situations, they may also need more specialised knowledge – if, for example, the company decides to invest in or develop new lines of business. At such moments, a business needs supervisory board members with the necessary specialist insights. Similarly, legislative changes resulting in new regulatory requirements for financial institutions may also impose a need for further training on senior managers in directorial positions.
On a related note, management boards should regularly ask themselves the following fundamental question: In the interests of society as a whole, and to carry out its supervisory duties competently, what should the composition of the management board look like over the next few years? To answer this question, a precise requirements specification should be drawn up, including a succession plan. By drawing up these documents, the supervisory board will be obliged to answer certain key questions which must be addressed if it is to be able to respond to unexpected situations with a suitable variety of alternative actions.
Furthermore, businesses themselves benefit from having supervisory boards filled with well-informed, expert members. The precise areas on which a CPD programme should focus can be ascertained by conducting an efficiency audit, or else established by the board itself. CPD programmes should be regarded as an innate part of good corporate governance, hence as an integral element of risk management and corporate compliance. They can also serve to reduce the supervisory board’s liability, thereby acting as an important factor in the supervisory board’s own compliance. Equally, it is in the interests of both companies and shareholders to bolster the quality of the supervisory board’s work. Or to paraphrase a major German business newspaper: In economic terms, you could say that as the marginal utility of expertise and specialist knowledge declines, there is a commensurate rise in the marginal costs of communication.
Frankfurt School offers a broad portfolio of executive education programmes for supervisory board members, featuring a particular highlight: evening talks with opportunities for peer-to-peer exchanges. In a relaxed, informal atmosphere, the talks are a perfect opportunity to hear about the very latest developments at first hand and to enhance and expand your own network.
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