Supervisory boards in times of crisis
Executive Education / 18 August, 2020
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Stellv. Leiter der Executive Education an der Frankfurt School
Christian Schaetzlein ist stellv. Leiter der Executive Education an der FS. Zuvor hat er mehrere Jahre in Paris, London und Frankfurt bei internationalen Banken als Controller und Financial Analyst gearbeitet und anschließend das Competence Center Risikomanagement & Regulierung an der FS aufgebaut. In seiner Verantwortung liegen weiterhin die Programme zur Qualifizierung von Bankenvorständen und Aufsichtsräten.

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The core competencies most in demand

Earlier this year, the COVID-19 pandemic came down on the world like a ton of bricks, bringing our business and social lives to an almost complete standstill. When we look back over 2020, the coronavirus will almost certainly dominate other issues. Indeed, many companies will be struggling with the after-effects of business lockdown for years to come.

According to the AlixPartners Supervisory Board Study 2020, experienced crisis managers are now in high demand for positions on supervisory boards. Between November 2019 and March 2020, as part of their analysis for the third edition of the annual study, the AlixPartners consultants interviewed supervisory board members from Dax, MDax and Austrian ATX companies, as well as family businesses. Their questions focused primarily on how supervisory boards should be composed, and how they should act to most effectively overcome the business challenges that emerge in the course of an unfolding crisis.

Experience in crisis management and restructuring

For years, companies and investors have been aware of the need to make supervisory boards more diverse and professional. In the current circumstances, experience in crisis management and restructuring is in especially high demand. The study’s authors emphasise that during a crisis, the role of supervisory board members extends well beyond mere monitoring and oversight. At least some of them – as “storm-tested navigators” – should also become constructively critical sparring partners for the management board. The survey shows that over half (55%) of the new members appointed to the supervisory boards of companies facing crises in 2019 have in turn selected new board members with significant experience of crises and restructuring.

Ready to provide senior management with advice

In times of crisis, the supervisory board must be available to provide the senior management team with advice. The supervisory board has a prominent role to play whenever “management board members have important decisions to make, as well as providing support whenever overwhelming developments threaten to shock senior managers into paralysis,” concludes the study. Supervisory board members should also be present whenever companies are forced to decide, in just a few days or weeks, on drastic measures that would, in normal governance conditions, be discussed by the management and supervisory boards over a period of months.

The study shows that in times of crisis, supervisory board members must invest significantly more of their time, especially in extraordinary meetings, sparring with the management board, or talking to investors or other stakeholders. The standard formal, committee-based modes of collaboration between management and supervisory board members are not flexible enough to deal with crisis situations. Closer cooperation is required.

Supervisory boards must stay objective

When engaged in such close collaboration, supervisory board members can easily find themselves entering grey areas of corporate governance. They must ask themselves just how far they can afford to be involved in operational management issues without losing the objective distance required for effective oversight. In cases of doubt, they must also be able to gauge whether the management board is part of the problem, or part of the solution.

In the study, the consultants make recommendations concerning the composition and mix of competencies of supervisory boards prior to and during crises. In the short term, crisis management skills may be brought onboard by resorting to external specialists such as restructuring experts or legal advisers. In the medium term, continuing education should be used to ensure that in terms of both personnel and structure, the board is suitably prepared for crises. And as a long-term goal, ensuring that restructuring experience is properly represented on the board should be a key criterion when making new appointments.

Developing supervisory board competencies

The supervisory board members interviewed for the study highlighted the relevance of continuing education and training themselves. Supervisory boards cannot be expected to possess the ideal spread of competencies required in all circumstances and in every business situation. There is always a need for external input.

In response to calls to make supervisory board activities more professional, Frankfurt School has devised the Excellence Programme for Supervisory Board Members. By offering a modular structure consisting of activities focusing on specific areas of the supervisory board’s remit, Frankfurt School takes participants’ limited time into account by providing maximum flexibility while simultaneously maintaining the very highest standards of quality.