I see the task of the supervisory bodies and the Supervisory Board in particular as being to check whether the Management Board is developing the right prospects for the future.

Christoph Vilanek
Chairman of the Executive Board of freenet AG

We spoke with Christoph Vilanek about #FutureGoodGovernance.
The interview was conducted before the outbreak of the Corona Pandemic.

A ship needs a captain. There is much talk about new leadership concepts, about participation and freedom. How much leadership does a company need in the future and how much agility can it tolerate? How do you envisage corporate management in the future?

It is predicted that a driver behind the wheel will still be needed for at least 10 – 15 years before real autonomous driving will be possible. In my opinion, this also applies to human leadership – this will also remain necessary and inevitable in its current form for at least this period of time. Furthermore, forecasts are much more difficult.

The degree of uncertainty, unplannability and unpredictability is increasing dynamically and all the more managers are needed who have the ability to lead a team with strength, vision and conviction. The methods, handling, tools and also the distribution of the leadership role may change, but they must be adapted to the image of man, the need for independence and the educational and socialisation requirements of the employees concerned. Personally, I continue to believe in the existing principles of “one-person-one boss” and accordingly, there will continue to be only one national trainer, for example, or only one CEO who defines the overall direction – not authoritarian, not dictatorial, but sovereign and without egalitarianism.

The world’s greetas have also drawn attention to companies and their fields of action. What challenges do you expect in terms of social responsibility and thus sustainability in the company?

I suspect that the need for and willingness to embrace sustainability is perceived very situationally and subjectively, depending on the general conditions. With prosperity and full employment, the issues of environmental protection and sustainable behavior come to the fore to an extreme degree, yet the number of air travel and car journeys is increasing – in phases of higher unemployment and recession, this will change quickly. As a company and entrepreneur, you should break away from this – that is, not follow short-term trends, but take a long-term perspective and steer towards the environment and sustainability. There is no doubt that even in times of recession many consumers will judge brands by whether or not they contribute to improving and securing living conditions. Although I find the consideration of whether my next (i.e. the xten) sneakers should be made of recycled material cynical. The questions should be – how many sneakers are already underused in the cupboard and do I even need any? Or do I buy an e-car because it is so sustainable or do I better use public transport?

Trust is good, control is better. Today it is still primarily about numbers and compliance. However, artificial intelligence is also changing perspectives and thinking here. How can you imagine a future system for monitoring the board of directors? Will there still be a supervisory board watching over the management or will the ‘monitoring’ be replaced by a technically highly equipped external service provider?

Systems, revision, auditing or ICS only examine the past and at best the present. I see the task of the supervisory bodies and the supervisory board in particular as being to check whether the management board is developing the right perspectives for the future. If the Management Board has a grip on the company’s competencies and uses them, it takes sufficient account of macroeconomic and regulatory conditions and defines the strategy under the conditions of competition and disruption and digitization. AI can only support. I believe that the composition, structure and competence of the supervisory boards must be fundamentally questioned in order to meet these new requirements.

Today’s requirements, which focus on experience and seniority, are not sufficient in the long term. On the contrary, what is needed are “young people” and supervisory boards that are in the same challenging context as the respective executive board. Also relevant is knowledge of the respective industry, the corresponding market and the size of companies.

Companies are subject to a constant process of change. What challenges do you expect for your company in the next 10 years? How will they change your company? What will change in terms of employment and qualification of employees?

I see three very fundamental changes for our company:

  1. Historically, we have developed in an evolutionary way and every three to four years we have carried out change projects driven by extrinsic factors, such as M&A, change of ownership or competitive factors, such as slowness or cost pressure. The next ten years will be characterized by constant transformation and permanent, very fundamental change. This means for organization, management and employees much more necessary flexibility, learning ability and the ability to suffer than before.
  2. The interests and competencies of the workforce will continue to diverge. Today, we have around 50 percent of our employees who, in the next 10-15 years, will retire from traditional working life through pension, part-time work, etc. These employees cannot be blamed for adopting the concept of security, little change and a limited ability to learn. On the other hand, there are employees who are in their existential structure and see their personal situation as being hindered by the first group with regard to the development of their role, salary and prospects. And finally, there are young people who are looking for a compromise between life and work that is completely different from the first two – this is explosive in all dimensions.
  3. No one can predict exactly in which functions and at which hierarchical level digitisation will have what effects. This maximum degree of perceived threat, which in contrast to automation is in any case directed at well-trained workers, is unique and there is no experience whatsoever in dealing with it.

All in all, the demands on HR and above all on leadership are increasing exponentially and there is no textbook in which you can read what you have to do or how to behave now. Courage and personal responsibility is required.

There is much debate about centrality vs. decentralization, agility and core competence in organizations. Will there still be companies in today’s sense of the term in 20 years’ time? What changes do you expect or would you like to see in terms of corporate organization and financing?

For me, too many contradictions are built up in this discussion. It is not always just about inventing something new. It is about optimising the existing, ensuring stable operations and, on this basis, pushing the new in a targeted manner. In other words: to act extremely flexibly on a stable framework of values. In many cases, companies do not have to reinvent themselves for this. But it is about enabling them to find the right balance.

Car manufacturers are becoming mobility service providers, food producers are becoming lifestyle providers, media houses are becoming data science companies. Where will your industry develop? Will industries – as we know them today – still exist in ten years’ time? What will happen then?

The recently retired CEO of Vodafone Vittoria Colao has self-critically stated at the end of his term of office that the telcos have not succeeded in differentiating themselves. So our industry is a commodity and an infrastructure game. I don’t see anything changing in that; we have to accept that our core competence is not content or apps, but the delivery of both. With few exceptions, recent industry history shows that companies cannot abandon their core business and develop into new industries. This is not going to change and even the super dynamic Silicon Valley players show that it is not that easy – Google has made several very expensive attempts to bring hardware to the market and despite their enormous financial and content commitment this has not really worked so far.

Corporate leaders today are being asked by various parties about the purpose of the company or the specific mission of the company. How do you meet this demand? What positive or critical lessons have you learned from this? What advice do you give a CEO from another industry on how best to approach this topic?

Everyone has probably seen the video about the “Why” and I, too, have asked myself critically where our Why is? We have formulated a vision and a mission for our company and have placed great emphasis on comprehensibility. The individual divisions in the company have broken this down to their own contribution and derived a strategy. Of course there is a strategy for the group and a mission statement.

But my personal assessment and experience is much more pragmatic:

  • Success binds the employees to the company and provides identification, fun and pride. If this success is no longer there or if there is stagnation in the industry, then this element quickly falls away.
  • The question of employees and managers about strategy is actually the question of security and future. People want to know whether what they do will still have meaning and sense tomorrow – that is one of the tasks of management to answer this question.
  • The best strategy is written afterwards – in other words, with courage into the future and with your head held high. Don’t be afraid if you don’t know everything and above all don’t be afraid of your competitors, who are also boiling with water.
  • A lot of communication, above all in a manner appropriate to the addressee, using all media for this and doing the communication yourself and not leaving it to external PR consultants. The employees have an unmistakable sense of authenticity.
  • Fail Fast – this does not mean making mistakes or failing quickly – it means giving up something that does not work and not pursuing it forever. Take the good parts with you, but don’t keep on optimizing them when you know that nothing will come of it.

The so-called stakeholders, in particular the (institutional) shareholders, are exercising their ownership rights and obligations much more than just a few years ago. It is therefore no longer enough to tick off the requirements of a code (“comply-or-explain”). Internationally, the intensive and permanent communication/interaction of stakeholders with corporate management is gaining ground (“apply-and-explain”). What trends do you see here and how do you assess them?

In my experience, shareholders are divided into three groups

  • Large institutional investors: they remain passive and silent, listen carefully, follow the assessments of proxies. You win them and you lose them and actually you don’t understand why
  • Active or activist investors: they come, articulate their wishes and measure management by its reaction. They are important because they bring dynamism to the market and they are dangerous because their interests are not always long-term and sustainable
  • The small investors, they are overestimated in their influence, although they probably pursue the most honourable goals

Unfortunately, many provisions of the Code or the proxies are not appropriate and meaningful. This is the result when different industries, companies, company sizes and nations are to be lumped together.

#FutureGoodGovernance is currently still comparable to a crystal ball in many areas. Which future aspects of good governance are particularly important to you? What would you wish for if you had three wishes? Where do you see the political challenge? And what responsibilities will companies and their managers have in the future?

I would like to see good approaches implemented without dogmatism, for example diversity – I sit on a committee where everything is interpreted because one person only speaks English. I am interested in a contemporary view of the demands on supervisory boards with more youth, more entrepreneurship, more advice on the status quo instead of supervision of the past.

It is also important to be sensible and realistic about executive compensation – how can you limit initial appointments to three years, but at the same time demand long-term elements that are only evaluated after five years and paid out after seven years.

Stock corporations need protection from quarterly thinking, from predatory hedge funds and from the omnipotence of proxies. We call for entrepreneurship and long-term thinking from management boards, but these are measured in terms of quarters and short-term price fluctuations.

At the beginning and at the end of success are people who, through personal motivation, creativity and the joy of doing things, bring this world forward. Politics and regulation should provide these people with a framework that allows precisely these skills to be brought to bear. Compliance and governance are necessary, but alone they do not generate revenue, profits or jobs.

Thank you very much for the interview!