The Chairman’s role taken into account

In the last few years, corporate governance has been an important topic within the business community. Contrary to countries like the UK, the Netherlands has a two-tier governance structure: Companies have an Executive Board and a Supervisory Board. Although the Executive  and the Supervisory Boards are separate bodies, it is common pracitice that they meet in joint sessions, with the Chairman acting as president.

Supervisory Boards are underperforming
Supervisory Boards are increasingly held accountable for balancing the interests of all stakeholders of the company. Therefore, the importance of their role in the company is growing. Nonetheless, Prof. Steven Schuit, professor of Corporate Governance and Responsibility at Nyenrode, believes that, in recent years, Supervisory Boards of most listed companies in the Netherlands, have been underperforming. How is that possible, having so many skilled and talented people on board? In his view, this under performance is largely caused by interaction problems within the board, by the boardroom dynamics. The key for improvement of the boardroom dynamics is the Chairman, Schuit states. His role must be taken more seriously. But is he or she fully equipped for the increasingly difficult and responsible job?

Book ‘The Chairman makes or breaks the board’
Beside being a Nyenrode professor, Schuit is also a former corporate/M&A partner at Allen & Overy and in this capacity he was over a long period of time the legal advisor to many CEOs and Chairmen. Furthermore, he is a member of the boards of several public and private companies. Schuit recently published a book on the Chairman’s role, titled ‘The Chairman makes or breaks the board’.

  
  The role of the Chairman
  According to Schuit, good governance requires good checks and balances. This means that a
  strong CEO needs an equally strong Chairman. The two are counterparts. Therefore, the
  Chairman has to play an active role and needs to invest a substantial part of his time in the job.
  The Chairman must be very well informed. If he were to engage in a discussion with
  stakeholders or for example with the government, he needs to be prepared to operate on his
  own and, if necessary, without the CEO. Therefore, he needs to be aware of the ins and
  outs of the company. This means he has to speak to every relevant person (to his opinion) in 
  the firm.

  Members of the Supervisory Board should know about the dilemmas the Executive Board is
  facing. They also should know what actions to undertake when things go wrong and what
  the time restraints are. Therefore, in Schuit’s view, the Supervisory Board needs to be
  actively involved in discussions about the company’s strategic plans from an early phase
  onwards.

  With increasing responsibilities requiring more and more time and energy from the Chairman
  and the other members of the Supervisory Board, Schuit suggests that their terms of office
  should be more limited. Should the Chairman almost automatically be re-appointed after six
  years? Do members still add enough value after 9 years? Schuit’s answer is negative.



 
Interviews and experience
These are some of the issues Schuit addresses in his book. For his book, he held 32 interviews with prominent Chairmen and CEOs. He also based his views on his own experience in the corporate arena.


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