Research: Increasing professionalism among Supervisory Boards

Measurable shifts are occurring – partly as a result of external pressure – in relation to the composition and attitude of Supervisory Boards (SB) within Dutch companies and organisations. In addition, there are also signs of significantly increasing professionalism within both listed and non-listed companies. This is clear from recent research conducted with 93 supervisory directors into the current and future role and position of the Supervisory Board. On behalf of research partner Grant Thornton, Bart Jonker presented the first copy of the research report to Peter Elverding, supervisory director at several large companies and institutions. Fellow directors point to Elverding as a well respected director.

The Grant Thornton research, conducted by Aalt Klaassen and Prof. Herbert Rijken demonstrates that an accelerated process of professionalisation has been taking place within the Supervisory Boards of listed companies. The director is increasingly regarded as liable and is frequently being called upon to take responsibility by shareholders and the company. These developments are now expanding to include additional Dutch companies and organisations. For example; in terms of the current deficit in ambition and future developments, Supervisory Boards from non-listed companies are aiming to catch up with and attain levels similar to their fellow directors at listed companies. The inclusion of Supervisory Directors with experience at listed companies on Supervisory Boards will accelerate this process. It also seems reasonable that the degree of change among Supervisory Boards at non-listed companies and organisations is set to rise significantly in the coming years.

The Grant Thornton study also concluded: 

• Information provision vital – outside the Board of Directors too
  Information must be provided to the Supervisory Board in order for the directors to be able to carry out their tasks. The interpretation of the information received, however, is also gaining in importance. Members of the Supervisory Board nowadays often seek company information outside the Board of Directors. Annual company visits, presentations of non-Board members to the Supervisory Board and meetings with people from the ‘work floor’ after referrals by the Board of Directors, for example, are just some of the activities that have significantly increased compared with the recent past. There is also a far greater demand for non-financial information.
• After the crisis – strategy is on the agenda
  Now that the crisis has taken a back seat, the Supervisory Board would once again like to focus on strategy (increase from 32 to 44 percent between 2009 and 2010). Particular attention is being paid to mergers and take-overs. The respondents also indicate that they would like the Supervisory Board to be more involved with targets and strategy.
• Duality between Board of Directors and Supervisory Board topical after crisis
  Respondents indicate that it is once again time to more clearly delineate the roles of the Board of Directors and the Supervisory Board. The crisis made the sounding-board role of the Supervisory Board more significant but increased distance (a return to the normal relationship) and, as a result, duality is now preferable. This is also pertinent from the viewpoint of corporate governance.
• Justification provided by Supervisory Board
  Within the context of responsibility, it would seem reasonable that the chair of the Supervisory Board provides the first draft of the report from the Supervisory Board. This voice and fewer summaries of the agenda points that have been processed will give this report a new dimension. This will form the basis for accounting to groups such as the shareholders.
• Diversity: the Dutch preference
  When it comes to the composition of the Supervisory Board, the preference, in relation to new candidates, is for Dutch people with foreign experience rather than non-Dutch individuals. This is due, in part, to agenda problems involving urgent issues, insufficient knowledge of the Dutch situation in relation to issues such as corporate governance, the language barrier and an occasionally somewhat hesitant commitment to the company.

Independent supervision
Bart Jonker from Grant Thornton; “Our reasons for supporting this research were, on the one hand, our desire to make an independent contribution towards development within the sphere of corporate governance and, on the other, to gain an improved insight into the thought processes of top management. Formally, for example, the Supervisory Board is responsible for selecting the company accountant however, in practice, this decision is often made by the Board of Directors. In terms of the jurisdiction and tasks of the Supervisory Board, we believe that an accountant can contribute added confidence and quality within the sphere of information provision. This is important for a strong division between supervision and management, or an independent position for the Supervisory Board.”