Supervisory boards: Strategies to overcome the current challenges
The expectations of boards continue to grow as companies become more global and interconnected. In this article, we highlight the common challenges that supervisory boards face, and offer practical solutions to help overcome them.
The work of supervisory boards has become much more complex in recent years. Their members spend more time on their mandates than ever before. For example, according to a McKinsey survey, directors have already increased their time commitment by 20% from 2019 to 2020 — in the wake of the COVID-19 pandemic — and expect this trend to continue.1
This has come true, as Dr Viktoria Kickinger, Managing Director of the Directors Academy, reports in a recent, German-language interview with us. Supervisory boards nowadays have to be permanently operational — the responsibility has increased and a higher level of commitment is expected from them.2
Disruptive technologies, demanding macro trends, and rising expectations mean greater effort and a variety of challenges for supervisory boards. Against this backdrop, they need to play a more active role in overseeing corporate strategy and risk management.
Maintaining efficiency — and an overview — is vital
It is therefore crucial that supervisory board members keep their levels of efficiency high. Greater responsibility also means having to prioritise more effectively overall, which in turn increases the demands on meeting preparation. Modern supervisory boards must always maintain an overview of a wide range of information and enable themselves to advise company boards in a targeted manner.
This requires supervisory board meetings that are well structured, get straight to the point, and lead to resolutions that the entire board supports. If preparation is a decisive factor, the meeting itself — and its follow-up — also count immensely here.
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Challenges of supervisory boards: a summary
All in all, supervisory boards in today's world face a multitude of challenges that generate high demands for their meetings. What’s more, members of the respective boards need to play an active role in overseeing companies. Strategy and risk management play a crucial role for several reasons, including:
- Emerging digital technologies
- Consequences of the COVID-19 pandemic
- Trade conflicts
- Regulatory pressures
- Various megatrends
Time commitment: Boards are becoming more active
Looking at recent trends, it is not surprising that supervisory board members report spending more time on their tasks than ever before. The fact that there is no set time limit on supervisory board work makes the actual time spent on a mandate unpredictable.
If, for example, a member begins their work during a relatively quiet period, this quickly becomes a problem if four to five planned meetings a year suddenly turn into 20 — especially if the member has other board activities, or a large number of mandates.
The outbreak of the COVID-19 pandemic, for example, with its seemingly opaque consequences — many of which are still being grappled with — has shown with all its force that such a scenario is anything but remote. Geopolitical crises or issues such as climate policy and sustainability (which bring additional reporting obligations) also increase the uncertainties and can add to the volume of work considerably.
Effectiveness counts for a great deal
Against this backdrop, experience shows the following: the actual time required for meaningful supervisory board work usually exceeds members' initial expectations quite significantly. However, the amount of time spent is not the only factor that matters for board work. For example, the Global Board Culture Survey3 shows that moderately effective boards spend the same 200 hours per year as the most effective. In other words, truly successful work is not driven by spending additional hours, but about using the available hours more efficiently.
Successful work is not driven by spending additional hours, but about using the available hours more efficiently.
Great responsibility — to both shareholders and management
In addition, shareholders have become increasingly influential and place greater pressure on management. For example, 71% of directors say that a direct dialogue with shareholders would increase stakeholder confidence.4
The board has the challenge of acting between and mediating between the interests of the board as well as those of the shareholders.
This shows that the responsibilities of supervisory boards have increased. As a bridge between the different interests of all parties, supervisory boards also have to prioritise tasks and interests and make important decisions. It is increasingly important to be fully informed and positioned to act in meetings. The highest possible level of effectiveness is required.
In this white paper we present solutions to the concrete challenges of the supervisory board.
We explore how supervisory boards should:
- Develop strategies for current challenges.
- Evaluate their own knowledge and performance and improve where necessary.
- Consistently optimise meetings to achieve the best possible results.
- Consider efficiency-enhancing solutions such as a board portal.
1 ‘How boards have risen to the COVID-19 challenge, and what’s next’, Celia Huber, Frithjof Lund, and Nina Spielmann, McKinsey, 2021.
2 ‘Greater Expectations: Strategies for Effective Board Meeting Preparation’, Columbia Law School, 2018.
3 ‘Global Board Culture Survey: Understanding the Behaviors that Drive Board’, Effectiveness Russell, Reynolds Associates, 2016.
4 ‘PwC‘s 2022 Annual Corporate Directors Survey’, PwC, 2022.
