Twenty-five CEOs' views on their Supervisory Board Members

When performing their role, supervisory board members assess directors. But how do the directors actually assess their supervisory board members? To obtain an answer to this question we conducted a survey of CEOs from the hundred largest companies in the Netherlands.

Image: © Nationale Beeldbank

We asked the directors about their opinions on the following four roles of the Supervisory Board (RvC):
• advisor, as a sparring partner in major decisions or strategy development
• monitor, as a controller with regard to important processes,
• employer, assessing/compensating and/or appointing/firing directors, and
• networker/ambassador, as a champion of the company's interests in the outside world.

In total we received twenty-five completed questionnaires. Of these companies fifteen are stock listed companies (60%) and ten are not stock listed (40%).
Importance

First and foremost the director was asked to indicate the importance he assigns to the four roles as a director. A choice of five ratings was provided, ranging from unimportant to very important. Directors appear to consider the roles of advisor and monitor to be most important: in both cases twenty directors find these roles important or very important. The directors find the roles of employer and networker less important, thirteen and twelve directors respectively find this role to be important or very important.

Valuation

The directors were then asked to indicate, using a five-point scale, ranging from poor to very good, how they believed each of the four roles was fulfilled in their organization. Ratings for the roles of advisor and monitor were equal; both roles were rated by twelve directors as good and by eight as very good. Four directors rated these two roles as 'average' or 'satisfactory'. Just two directors rated the roles of employer and networker as very good and fourteen directors rated the role of employer as good while eleven directors assign this rating to the role of networker. These roles are often classed in the lower categories as 'average' and 'satisfactory'.

Time invested

The directors were asked to divide 100% of the supervisory board's actual and desirable time spent across the four roles. All the directors believed that in their view the supervisory board spent most time on the monitoring role: on average the director estimated this at 45%. This is followed by the advisory role (30%). The role of employer was estimated at 15%. Lastly the role of networker/ambassador was estimated at 10%. For the desired amount of time invested (on average) the monitoring role lost ground, decreasing from 45% to 40%. The director wants to assign this time to the role of advisor, from 30% to 33% and to the role of networker, which increased from 10% to 13%. The role of employer remained more or less stable (from 15% to 14%).

On an individual level, the survey revealed that ten directors find it desirable for more time to be spent on the role of networker while no directors find that less time should be spent on this role. Eleven directors would like less time to be spent on the role of monitor while no director believes that the supervisory board should spend more time on this role.

Developments over time

When asked about developments in their supervisory board's performance over time, the CEOs view the greater importance of among other things, dialog, involvement, responsibility and transparency in the modern supervisory board as positive. The progressive attention to compliance and control, formalizing consultation and thus the increase in attention to liability and loss of reputation are viewed as less favorable developments.

The directors' views could contribute to an understanding and therefore improvement of the mutual (perceived) effectiveness of monitoring.

The survey was conducted by four professors from four universities: Prof. Mijntje Lückerath from TIAS School for Business and Society, Prof. Muel Kaptein from the Erasmus University, Prof. Barbara Bier from Nyenrode Business University and Prof. Hans Van Ees from the University of Groningen. They also form the editorial team of the Corporate Governance Yearbook [Link to KG.04.12].

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Twenty-five CEOs' views on their supervisory board, Mijntje Luckerath, Barbara Bier, Hans van Ees and Muel Kaptein (2014) - in Dutch