Companies are compelled to face new challenges – a particular responsibility falls to supervisory boards. Those challenges are being constantly compounded by new factors to consider, such as ESG, digitalisation and geopolitics. The skills and competence needed to deal with these aspects must be developed. Due to increasing regulation, established in part by tighter requirements under the German Act to Strengthen Financial Market Integrity and the latest version of the German Corporate Governance Code – which recommends disclosing qualification matrices – the relevance of such measures has been increasing considerably for a number of years now.

1. Qualifications for supervisory board membership

The confluence of issues such as geopolitical crises, their effects on markets and supply chains and in particular the swift progress in applications of artificial intelligence is consequently also influencing what qualifications are necessary in order to fill the positions on any given supervisory board. It is therefore unsurprising that 79 per cent of the supervisory board members we surveyed overall stated that familiarity with the field of digitalisation and AI was important. Besides that, knowledge on matters of sustainability and proficiency in cyber and information security (each deemed relevant by 60 per cent of respondents) as well as experience in the fields of finances, accounting, financial reporting and auditing (59 per cent) were given nearly the same heavy weighting. These answers were followed by industry expertise (45 per cent), transformation know-how (41 per cent), ability in governance strategy (36 per cent), capital market expertise (34 per cent), experience with innovation, research and development (32 per cent), board leadership skills (31 per cent), ability to work in a team, legal and compliance proficiency (each 30 per cent), human resources familiarity (26 per cent) and knowledgeableness on procurement, supply chains and logistics (11 per cent).

Additionally, in text entry fields, respondents mentioned further qualifications that would be particularly important in the near future: know-how in the field of distribution/growth, general IT competence, investor relations experience, ability in developing strategy to make an enterprise viable in the future and the CEO profile.

At publicly traded companies, industry expertise was considered more important than at unlisted companies (60 per cent of respondents from the former deeming it relevant compared to 40 per cent at the latter). In contrast, ability in governance strategy (58 per cent compared to 42 per cent), experience with innovation, research and development (60 per cent compared to 40 per cent) and knowledgeableness on procurement, supply chains and logistics (68 per cent compared to 32 per cent) are seen as clearly more relevant at unlisted companies than they are at listed companies.

Figure 3: Qualifications in which areas will be particularly important in the near future for the make-up of supervisory boards and should therefore be found among their members?

2. Criteria for the success of a modern supervisory board

High standards are being set for the modern supervisory board. Its members are seeing themselves confronted with an increasingly nuanced and diverse range of subjects. These developments necessitate new skills that are indispensable for the work they do. When asked about criteria for modern supervisory boards to be successful, 73 per cent of the supervisory board members we surveyed identified the interaction with the management board. This was followed by professional skills (72 per cent), composition/competence/size (65 per cent), the chairperson's understanding of their role, critical self-evaluation (each 48 per cent), onboarding, training and professional development (34 per cent) succession planning (28 per cent), committee structure (27 per cent) and remuneration of the supervisory board (12 per cent). Other success factors additionally cited in text entry fields included strategic thinking, diversity, communication culture, trust in the different skills and roles, involvement of the individual members and the interaction of board members with one another.

Figure 4: What are the most important criteria for success of a modern supervisory board?

3. Training and professional development for supervisory board members

According to the German Corporate Governance Code, the members of supervisory boards are to take responsibility for undertaking any training or professional development measures necessary to fulfil their duties. The Code recommends that companies provide their supervisory board members with the appropriate support so that they can perform their work accordingly in a responsible and forward-looking manner. With regard to how training and professional development were handled at their companies, 39 per cent of surveyed supervisory board members indicated that they on their own were responsible for organising any such programme and also bore the costs themselves. The deviation between the two respondent groups is only minimal in this respect (37 per cent of supervisory board members at listed companies having stated this compared to 40 per cent at unlisted companies). Some 36 per cent said that their company took care of the organisation as well as the costs. At publicly traded companies, that figure jumped to 42 per cent. A further 25 per cent stated that the costs were covered by their companies, but that they needed to organise any continuing education or training course themselves. On this aspect, the difference turns out to be relatively major between listed (21 per cent) and unlisted (31 per cent) companies.

Abbildung 5: Wie ist in Ihrem Unternehmen die Aus- und Fortbildung für Aufsichtsratsmitglieder geregelt?

4. Supervisory boards' qualification matrices

The following results of our survey underscore the great importance of qualification matrices in relation to supervisory boards' skills and expertise profiles. The latest revision of the German Corporate Governance Code has defined in more specific detail what is expected in order for supervisory boards' skills and expertise profiles to be fulfilled. One such demand is the disclosure of the implementation status for completing the profile in the form of a qualification matrix. In doing so, the skills and qualifications of the individual members of the supervisory board need to be presented in an overview table juxtaposing those with the know-how stipulated under the skills and expertise profile. When asked how important the qualification matrix was to the selection of members and make-up of their supervisory board, the majority of respondents said they considered its impact to be either important or very important (exact figures are 79 per cent of respondents from listed companies and 61 per cent from unlisted ones). In contrast, 18 per cent of supervisory board members at publicly traded companies and as many as 26 per cent of their counterparts at unlisted companies replied that the matrix was neither significant nor insignificant or tended to be unimportant. Entirely unimportant was the response from 4 per cent of officers at listed companies and from 9 per cent of those at unlisted companies.

Figure 6: How important is the qualification matrix to the selection of members/make-up of your supervisory board?

5. Sustainability in committee structures

In the most recent update of the German Corporate Governance Code, main emphasis was placed on the significance of sustainability factors in managing an enterprise. In light of the increased focus on sustainable corporate governance, more and more special expertise is being demanded of supervisory boards. Asked how the subject of sustainability is incorporated into their committee/qualification structure, 61 per cent of surveyed supervisory board members at unlisted companies replied that there was no distinct committee for it, while only 30 per cent of respondents from publicly traded entities said this was the case on their board. At 32 per cent of listed companies and 9 per cent of unlisted companies, the audit committee was addressing the subject of sustainability in addition to its other tasks and duties. Eighteen per cent of listed entities even had a distinct sustainability committee (which was the case at only 4 per cent of unlisted companies). Strategy committees were dealing with the subject at 7 per cent of publicly traded entities and 9 per cent of unlisted companies. At 5 per cent of listed companies and 7 per cent of unlisted companies, a single member displayed this competence prominently and bore responsibility. The executive committee was involved in handling sustainability at another 5 per cent of listed companies and 7 per cent of unlisted companies. At 4 per cent of unlisted entities, addressing sustainability was one of the responsibilities of another type of committee, which was not reported at all from listed companies. Two per cent of respondents representing the latter even reported to be planning a distinct sustainability committee (something that was not reported for any unlisted company).

Figure 7: How is the subject of sustainability incorporated into your committee/qualification structure?