On 8 June 2011, Mijntje Lückerath-Rovers officially accepted the position of Professor of Corporate Governance at Nyenrode Business Universiteit. She studied Financial Business Economics and worked at Rabobank International from 1994 to 2001 (her last position was Vice-President of Project Finance). She subsequently became a researcher at Erasmus University. In 2007, she obtained a doctorate for her thesis on the “Decision Usefulness of Operating Leases (an off-balance form of financing)”. In her lecture entitled “Learning manners; soft controls in corporate governance”, she called for more focus on soft controls. Lückerath-Rovers has noticed increased formalization in corporate governance codes and legislation in recent decades. Legislative proposals on such issues as the maximum number of supervisory functions that a board member can hold or having a minimum number of women in the boardroom, set rigid standards on conduct. These are ‘hard controls’: measurable control instruments to bring about cultural change.
Hard standards sometimes miss the mark
Lückerath-Rovers: “These ‘hard controls’ are not an end in themselves, but a means to achieve something else. The maximum number of supervisory functions is intended to ensure that people devote sufficient time to a supervisory board or to make sure that you don’t get the same people on every supervisory board. Because these standards are of the ‘one size fits all’ variety, and are not designed for specific situations, they don't always achieve the intended result. It is quite possible that a non-executive director with seven functions does put in the necessary time and effort, while another non-executive director with three functions – which meets the standard – is much too busy as the CEO of a major company.”
Gradation of focus
Lückerath-Rovers distinguishes four different stages in controlling culture. “The first stage is to focus on customs, the unwritten rules. To a great extent, customs set the culture in each group and have often been in effect for a long time. They are undisputed and people often follow them unconsciously. The second stage of control is a code of conduct. The next level is control through a corporate governance code; this is still a form of self-regulation, but one that is embodied in the law. Finally, there is actual legislation. This represents a more serious advance in the extent to which rules are defined in writing and enforced.”
Compulsory self-evaluation
In her lecture, Lückerath-Rovers turns these steps into a circle by the idea of bringing legislation back to a matter of learning customs. “Actually, you have to try to focus on the customs themselves. You can only do this if the group to which those customs are applicable agrees that certain things have to change.” Her recommendation is to make self-evaluation by Supervisory Boards compulsory each 3-year period, and to legislate that this self-evaluation has to be facilitated by an external party. She believes that this external party is necessary to prevent ‘groupthink’. “It’s not enough to say 'We're all intelligent people here'. Groupthink also occurs among intelligent people.”
Not a regulator of the regulator
“However, we do have to watch out that an external evaluator of this type doesn’t become the regulator of the regulator. He is more of a facilitator – someone who leads the process, gathers information and reports on it. But in the end, the board has to modify its own conduct. If an evaluation by an external party is enforced via the code and the law, I think you can leave out a lot of other legislation, because – all being well – the evaluation will show whether someone has devoted too little time to his supervisory role. In that case, he has to be called to task about it – even if he only has three supervisory functions and hence complies with the hard controls.”
Diversity and inclusion
The same applies to the goal of diversity. “With a good self-evaluation, a supervisory board may come to the conclusion: ‘We have six people of the same type here. That’s not good.’ Diversity is very important for supervision and management in order to avoid groupthink. Not because women have a right to those positions, but because the quality of the board is not always adequate if you only have people of one type. That is why the concept of ‘inclusion’ is also important, as well as diversity. If you don’t see that someone from China communicates differently in the boardroom to a Dutchman who has an opinion on everything, and if you don’t notice that the Dutchman does all the talking as a result, you may have a diverse composition but not an inclusive one.”
The New Way Working
When it comes to the question of how we can get more women at the top, Lückerath-Rovers attaches a great deal of value to ‘The New World of Work’. “I think our digital environment adds a lot of quality to life, especially for working mothers. I work four days per week at Nyenrode, but I live in Rotterdam. The fact that I can log in and work from home two days per week made it possible for me to become a professor here. And my work certainly doesn’t suffer as a result. Better still, I don’t lose any time in commuting on the days that I work at home, which actually gives me more leeway. It will always be difficult to get to the top in companies that don’t make that possible.”
Learning from accountants and controllers
Lückerath-Rovers thinks that corporate governance could learn even more from accountants and controllers. “Accountants and controllers have a professional organization; they have certified courses and permanent education. All of these are things one would want for supervisory board members. When writing the code of conduct for supervisory board members two years ago, I studied the code of conduct for accountants closely. I think accountants and controllers are in the same learning process when it comes to willingness to scrutinize your own performance and to approach others openly and critically without immediately saying ‘that is wrong’.
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