Where the Supervisory Board ends and the Management Board begins

When I changed my role from CEO to Chairman of the Supervisory Board, the most complex challenge involved leaving the operations of the business alone. This is done so that the Supervisory Board can be a good sparring partner, to be able to supervise. So says article 111 (1) of the German Stock Corporation Law (AktG). This requires you to embrace several mindsets:

1. The management is the responsibility of the Executive Board. If I disagree with decisions, I can express that and, depending on the rules of procedure, refuse my consent.
2. I have selected the members of the Executive Board. To appoint them was an expression of my direct influence. Their decisions are the result of my previous selection.
3. If I refuse to approve decisions too excessively or if I ask too minutely for information from the Executive Board, this is indeed an expression of my mistrust, but first and foremost an expression of taking influence.
4. Every management relies on advice and freedom. To give advice without leaving the necessary space for implementation is useless. So if I refuse the latter, I do not have to give the former.

Now there is a development that supervisory boards are becoming more and more direct contact persons of external stakeholders. Mind you, the management is the responsibility of the Executive Board. Article 105 (1) of the German Stock Corporation Law (AktG) says very clearly that one can not be a member of the Supervisory Board and the Executive Board at the same time or authorized signatory or general representative in one and the same company for that purpose. You can not be a fox and a hen at the same time. And yet, there may be circumstances in which one has to fill a void which may arise in the Executive Board. Article 105 (2) of the German Stock Corporation Law (AktG) comes to the rescue and allows me this for a maximum of one year.

Germany has a dualistic system in its stock corporations. Executive Board for management, Supervisory Board for supervision and advisory. The Supervisory Board is not the better management and the Executive Board does not supervise itself. So it is designed. And it is also this complexity one has to keep in mind when being offered a Supervisory Board mandate. You advise and supervise, but leave the management to the executives.

We are happy to assist you in changing the role from the Executive Board to the Supervisory Board or in assuming a Supervisory Board mandate in the form of mentoring / coaching. Contact us!