Timid Oversight

Fear in the Board Room

board
Traditional supervisory boards are fast becoming a thing of the past.
  • Why it matters

    Why it matters

    Supervisory boards have in recent years been blamed for failings that have led to scandals at several big German companies, such as Deutsche Bank and Bilfinger.

  • Facts

    Facts

    • Supervisory boards in Germany oversee the executive board’s decisions and can appoint managers.
    • They are usually a mix of former company managers and external experts and executives.
    • Investors are increasingly putting pressure on supervisory boards to meet regulatory requirements.
  • Audio

    Audio

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Politicians as well as shareholders have forced through greater regulatory oversight of the ways that German companies are managed in recent years. But despite good intentions, the resulting changes have not always been successful.

In practice, the myriad of new rules and regulatory requirements put in place since 2008 have raised fears about liability and personal prosecution. All of this has encouraged supervisory boards, the powerful overseers also known as non-executive boards, to minimise or avoid taking risks.

The many challenges also mean that fewer people now even want to do the job, and that is beginning to harm the very companies that the regulations were supposed to improve.

Examples of shareholders taking company supervisors to task are evident across the German corporate landscape in the past year. From Deutsche Bank to Volkswagen, investors are increasingly aggressive when it comes to holding the supervisors’ feet to the fire.

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