Personal Governance: DWS defines the independent Supervisory Board

Personal Governance

The Supervisory Board, as stated in the professional principles of the Association of Supervisory Boards in Germany (VARD) under the keyword”independence”, should exercise its mandate”self-determined and free from third-party influences”. But when exactly are supervisory boards”independent”? Corporate governance expert Michael Schmidt (DWS) and Julia Redenius-Hövermann (Frankfurt School of Finance) have now shed light on this. In their analysis, which is worth reading, they take the view that supervisory boards representing more than ten percent of the share capital are generally not to be classified as independent.

Does it have to end after ten years?

The same applies to”political elected officials” and supervisors who were sent by a company foundation in accordance with the Articles of Association (as in the case of ThyssenKrupp). Former board members, auditors and consultants are not independent either – nor are longstanding supervisory board members: After ten years, according to Schmidt and Redenius-Hövermann, the “proximity to the company” was too great. We are sceptical about sweeping rules and only formal considerations – independence is ultimately a question of attitude (and thus of personal governance). But the authors themselves emphasize that”an exclusively independent cast [….] is neither desirable nor completely achievable” – and that qualification and experience are also important. The analysis is therefore not only trenchant, but also balanced – and thus a constructive contribution to a debate that we must conduct more intensively. Thanks for that!