The role of boards in Switzerland and Germany

In this podcast episode, you'll hear:

Board member, President of SwissVR, and Founder of 2bridge AG, Cornelia Ritz Bossicard, as she discusses the differences and responsibilities between the Board of Directors in Switzerland and Supervisory boards in Germany. Having lived and worked in various organisations in Europe, the United States, and in Asia, Cornelia believes that change is the new constant. In a fast-paced, demanding landscape, today's boards have the daunting task of recognising new opportunities as well as weighing up associated risks — and controlling them. This is no small feat given the rate that cyber risks and technological innovations like artificial intelligence are developing.

Listen to the podcast episode to learn more about boards' responsibilities, geopolitical shifts and their impacts on today's business environment, and ways boards and C-suite can work together to ensure long-term organisational success. This episode answers the following:

• What are the differences between the Swiss Board of Directors and the German Supervisory boards?
• How can the modern Board of Directors influence change?
• Geopolitical shifts: How can boards prepare for the future?
• Board meetings: How can boards achieve top-notch meeting preparation?
• What is the current and future impact of AI in corporate governance?

*Please note: The podcast episode is available in German.

The role of boards in Switzerland and Germany with Cornelia Ritz Bossicard

What are the differences between the Swiss Board of Directors and the German Supervisory boards?

"The answer is simple. It does everything, except what it delegates. According to Swiss law, it is the top supervisory body of an organisation, and we [i.e. the board] can delegate most issues, but there are some issues the Swiss law does not see as being delegated [...] it is the responsibility of the organisation. 

In other countries, such as Germany, this responsibility lies with the management or the Supervisory boards, and not with the Board of Directors, and secondly, it lies with the organisation. 
 
If you ask me what the main duty of the Board of Directors is? It's to appoint the right CEO, to develop [themselves] further, and to control the finances. In particular, the obligation to inform a court in the event of an over-indebtedness. This is Swiss-specific.

How concrete are the tasks of a Board of Directors in Switzerland?

I'll give you an example. If we have a Board of Directors meeting, we look at what topics we need to address. Take for example the topic of strategy. It's about evaluating how the environment changed, which are the technological developments that can affect us or our competitors. This is in collaboration with management, and the management strategies that are also approved by the Board of Directors. 

This has a later influence on how we use our resources, how we prioritise our activities, where we invest the money, especially in the budgeting phase. We have to make sure that we use the money where it's strategically relevant. 

The Board of Directors in Switzerland and the Supervisory board in Germany 

In Switzerland, the rules that we have from the legislator go further into the responsibilities. Typically, that means a board doesn't have strategic responsibility, but a Swiss Board of Directors does. Therefore, the division of responsibilities between the Supervisory board in Germany is different from the division of responsibilities of the Board of Directors in Switzerland. [...] 

How do you recognise good management of a company?

There are different angles. If I look from the outside, I'd say that an indication of this is the success on the market. If I look at the company from the inside, you can see that it's not just about what you do, but also about how you do it. It's helpful or indispensable to good management to have a relationship of trust between the Board of Directors and the management. 

An important component is transparency. It is very important that you communicate transparently with each other. It requires a balanced relationship between leadership and control because it's important that all people have the right knowledge and experience, and that we have time to deal with questions. If I can add a third aspect, it's also important in the boards to have the ability to take criticism, and to learn continuously."

How can the modern Board of Directors influence change?

"It depends on the role of the Board of Directors. We act as a board, and we decide as a board. When I am a board member, especially when I am President of a Board of Directors, I have a lot of discussions outside of the board meetings. I am also the sparring partner to the CEOs. That means there are informal conversations, or the reflection on questions that a CEO has in areas of focus, especially in resource planning. 

The need for resources is dependent on what strategy we have chosen. That means that the strategy determines the requirements for our resources. Therefore, it is important to see if we have the right skills at the table. The Board of Directors is primarily concerned with the board itself, and the management. The CEO is responsible when it comes to operational management.

How do you feel when you have to say 'we have to guide the company in a different direction'?

First, we have to recognise that we have to go in a different direction, or what are the different perspectives. There are different paths that lead to Rome or that lead to the goal, and it's important to define what the vision, and the strategy is. The first order of discussion for changes is the strategy discussion.

If we are united in the strategy discussion or share the vision, then there are different possibilities of how to get there. I can have a perspective, someone else can have another, and both can work. How to approach this change is through conversation, by understanding and weighing the advantages and disadvantages.

That is also one of the tasks we have in the Board of Directors. To help focus and prioritise, and make decisions on which way we go, with all the advantages and disadvantages that come with it. [...] 

At the end of the day, the basis for strategic decisions stands with the Board of Directors. I'm also aware that the Board of Directors alone can't run the company. My job is to run the Board of Directors, I run the General Assembly, but the CEO runs the operational management. That's where we need this interaction."

Geopolitical shifts: How can boards prepare for the future?

How do the Board of Directors assess the current situation?

"Last summer, we did this survey [i.e. SwissVR] and it was exciting to see that the geopolitical developments were viewed as both a challenge and a chance. I'll share some numbers and facts. 

About half of the people interviewed said the top four topics are availability or costs of raw materials, and energy. The same people said that the collapse of the supply chains are top challenges. About a third [of the people interviewed] said that the costs of consumption are because of consumers' problems. Not surprisingly, about a third said that cyber attacks are rising.

If we look at these challenges, about a third [of the people interviewed] also said that this is a chance for product and service innovation, or for higher costs and process efficiency. We saw as well that about a fifth of the people said that geopolitical developments do not present any opportunities at all. 

If we look at the measures boards take regarding these risks and consequences, on the one hand, you see examples of regular discussion on geopolitical development in the Board of Directors. On the other hand, scenario analyses have become very important.

What do you recommend to the Supervisory boards in Germany to prepare for the future? 

It's important to have the knowledge that everything is changing. Change is the new constant. That's really something that I've seen more and more in the last 4-5 years. And it's also the responsibility of the Board of Directors to recognise new opportunities and risks, and to control them. In fact, polarisation is also taking over in the world, and the Corona pandemic has shown that the crisis can act as a catalyst. 

Who would've thought that we could hold topics like podcasts or digital hybrid meetings? That would have been unthinkable in certain industries. 

We have also seen, and this is underlined by certain surveys that we have done with SwissVR, that boards are always better prepared. With every crisis, we are better prepared for a new crisis. [...]

Prepare yourself for crises, and test these crises. If you ask me what is the biggest risk I see for organisations these days, it's clearly cyber risks. It's not a question of whether I'm hacked, but when or when I notice it. And here too, the better we are prepared as an organisation, the better we can react. We know we are never prepared enough, but we can keep the damage smaller by better preparation."

Board meetings: How can boards achieve top-notch meeting preparation?

"When I'm a member, I read the documents thoroughly before I go to board meetings. Depending on the company, there are more or less documents. 

First, I look at the agenda: What are the topics that are on the agenda for the Board of Directors? What are the documents that I have? What are bilateral talks that I have to lead before or after? As President of the Board, I also design the agenda and have many pre-meeting conversations, be it with the management or with people who come along, for example, external reviewers.

These conversations help me to define which topics need more depth, where we need to discuss things, where we need to make decisions, what is only informative, what is a status update. Depending on that, the depth of the preparation is a bit different. It's also important to realise that the various board members, which sit at the table, have a different level of knowledge. Some have more, some maybe a little less. It's also my task to get people on the journey and make sure we have a basis for decision-making."

What is the current and future impact of AI in corporate governance?

"It's very exciting that you ask this question because I took part in a study which asked me exactly about this topic. This shows that the subject is concerning not only employees or boards, but also academia. When we look at it, AI is here to stay and develop. It's part of our new normal. We'll see how it develops. 

AI is particularly helpful when it comes to processing information, I'd say, as a basis for decision-making. There's more to it than that, there's more potential in applications at business or operational level. As board members, the issue of confidentiality is very important. There's the question of how we can handle confidential information using AI. As members of the board, we bear responsibility that we can't delegate.

If you look back a few years, there was an AI element part of the Board of Directors in Japan, but to my knowledge there is no longer one today. I've never seen it in Switzerland either. As long as AI can't take responsibility, and isn't involved in the liability, I see limited applications. [...]

At the end of the day, the responsibility for the decision remains with the Board of Directors."

Recommended

• What makes a supervisory board effective?
• The future of communications: A new approach

Cornelia Ritz Bossicard

About the author

Cornelia Ritz Bossicard is a Board member, the President of SwissVR, and Founder of 2bridge AG, a corporate advisory boutique. For over 25 years, she worked with companies ranging from start-ups to multibillion-dollar multinationals in the fields of technology, commerce, and services' industries.