Michiel Lap: ‘The No-Goes of a Supervisory Director’

Later followed supervisory positions at investment firm Rijn Capital, ABN Amro and the Antoni van Leeuwenhoek Hospital (‘I worship people in healthcare as heroes’). With his current portfolio, Lap is in position 21 in the Top 100 Non-Executive Directors 2024, but such lists do not mean much to him, Lap tells Victor Prozesky of The Board Practice. ‘When I decided to leave the world of investment banking in 2014, my primary motivation was that I wanted to develop more broadly. I was 52. Looking to the future, I needed more colors in my palette than just banking. I wanted to stop going to the same office every day, stop being part of a large, well-run organization and doing the same thing there. In short, I wanted more diversity of experience. I still often consider how to make the most of the limited number of productive years I have. Where do I add most value? Does it really interest and fascinate me? Are there fascinating people working there? Also, I do not want too many supervisory positions at once, because there are things outside of work that interest me which I want to explore. My wife and I are closely involved in a few social impact and charity activities. We also produce olive oil in France, where I can let my agricultural fantasies run their course. I would caution fellow supervisory directors not to ‘over-board.’ Not only because of the work-life balance. If you sit on more than three or four supervisory boards and a crisis occurs - which is not at all inconceivable - I doubt whether you can still fulfil your roles successfully.’

For many years, your career was mostly in finance. What are the biggest challenges today, compared to 10 or 20 years ago?
‘People often point to the increasing complexity. This certainly is true if you look at the urgency of meeting climate goals, governance, artificial intelligence, a younger generation with a totally different view of work-life balance or having to consider many more stakeholders. Still, I do not know if that makes our work more challenging than that of directors in previous decades. I am convinced that they also found everything that came at them extremely complex. '
Much more determining, and well and truly of our time, I think is the speed of change and sometimes its scope. There is also a degree of contagiousness: if something happens at one company in the industry, it can have immediate consequences for your own company. One of the biggest weaknesses you can have as an executive or supervisory director today is to rely on past knowledge and skills. Willingness to learn and curiosity about new developments have become crucial character traits.’

What impact does the pace of change have on the work of supervisory directors?
‘It certainly takes more time outside of the normal meeting cycle. In all my boards there are separate break away days, deep dives, study sessions, talent days.... all to make sure that you as supervisory director have the right context to perform your duties well. Moreover, more and more of the ‘mandatory’ work, for example in remuneration or audit and risk, is being delegated to committees in order to create more space on the agenda of the supervisory board itself for discussions about the future.’

We find that discussions about the future on many boards and supervisory boards are mostly about strategy for the next five years. Do they spend enough time fundamentally discussing the future in a complex and rapidly changing world?
‘That does indeed not happen often enough, although I think most supervisory directors do think they should schedule more time for it. On the one hand, the cycle most boards are in makes creating mental thinking space difficult. What also does not help is that such discussions are difficult to structure. They, by definition, deal with a very broad spectrum of possible scenarios. You can bring in the outside perspective, for example by having experts from consulting firms, technology companies or banks spout their craziest ideas and thoughts about the future of the world, your sector or your company. The question is what you then do with the findings and conclusions from all these scenarios. In practice, that turns out to be quite a challenge.’

Do you agree with supervisory boards, particularly in finance, who argue that all the focus on regulation comes at the expense of those fundamental discussions about the future?
‘I think it is too simplistic to say that without those regulations we would get around to ‘more important’ things more. After all, your house must be in order and the input from regulations is almost always spot-on and indicates precisely what it takes to run a good and solid bank or insurer. Moreover, as a board of a financial institution, you spend much more time together than the average. You really do have to budget 70 to 90 days a year for it, so that you eventually really can find the time to look ahead.’

Is the remuneration of supervisors still in line with the increased time commitment and perhaps responsibility?
‘This is sensitive, of course, but I do think that there sometimes indeed is a mismatch. Of course, every company must be aware of the social context. Extreme compensation in a world with such great economic differences cannot be explained, and it is right that we in Europe or the Netherlands do not tolerate the salaries we sometimes see in the United States. At the same time, you have to be somewhat pragmatic. A multinational with Dutch headquarters, which generates only 5 percent of its turnover in the Netherlands, significantly reduces its pool of potential talent by sticking to our Calvinist standards. It sometimes worries me that discussion about this leads to a downward spiral in quality. After all, the difference between a good and a very well-functioning and driven management team can be critical to a company’s long-term value creation.
You do have to be able to explain why you make what choices. The feedback I get from investors on this issue is that they especially do not want rewards on failure, they do not want retrospective policy changes, and they are critical of cash bonuses under short-term incentive plans. Anything that goes toward long-term incentives is mostly acceptable to them. If a management team does extremely well and adds sustainable value, many investors accept that this also leads to the associated wealth creation.’

Supervisory directors are both employers and advisors to executives. In the former role, they must sometimes engage in spirited discussions, while for the advisory role, a relationship of trust is especially important. What do you think of the plea for a division of labor within the supervisory board, in which, for example, the chairman fulfils the role of trusted advisor and the deputy chairman the role of employer?
‘I would find that very odd. If you are transparent, direct and honest and do not surprise each other, those two roles need not clash. My relations with executives are very good, but it is also very clear that as a supervisory director you can dismiss a director in extremis. That does not mean they cannot trust me when I advise them. Anyway, by now almost all discussions you have with executives have an advisory aspect. I really like that, because for me that advice comes very naturally. I am a pretty good listener and I really try to put myself in the other person’s shoes and think along with them about developments and problems that arise.’

Is the CEO succession process within supervisory boards organized well enough?
‘In the supervisory boards I sit on, yes, although we do not have a concrete profile in mind. We deliberately postpone drawing it up, because we realize that the CEO of the future may need to have completely different characteristics than the current CEO. In the meantime, we collect a lot of data and perspectives on internal candidates and, together with search agencies, we think about what external potential is available.
To assess the development of internal candidates, we give them, for example, a number of challenging projects, send them on training sessions from which we obtain feedback, or have them present to investors once to see how they approach it. That journey of discovery is valuable to themselves as well. I have experienced that someone, after going through such a process, discovered that they in fact did not want to be CEO at all but had other ambitions. It is infinitely preferable to realize that before the appointment.’

Sustainability has become a major agenda item for companies. How mature is the discussion? Is there not too much focus on reporting, rather than on strategic decisions?
‘Indeed, many companies are still primarily concerned with the data needed to report under the Corporate Sustainability Reporting Directive. At a company like Arcadis, where sustainability is at the core of operations, sustainability is already firmly woven into the strategy. There, the challenge is monitoring and auditing data, so that in the annual report you can report what you are doing in a substantiated way. Arcadis uses the Sustainalytics index and reports on its improvements in that, but the definition of what is measured in the index changes annually. That makes it challenging.
I am particularly fascinated by the role of banks in the development towards more sustainability. After all, banks act as a kind of gatekeeper. As the industry itself is under increasing pressure to reduce the emissions intensity of its portfolio, customers who want to (re)finance projects will be judged through the lens of new criteria in this area. Banks will thus play a major and productive role in beginning and accelerating the transition to a less emissions-intensive economy and industry, with a smaller carbon footprint.’

Technology has already fundamentally changed financial services. Do you think supervisory boards are adequately equipped to properly oversee these developments?
‘We have to realize that the technological issues we face are so broad and complex that you will never appoint the ideal candidate who is adepts at all the aspects. Supervisory directors need to especially be informed enough to be able to ask the right questions so that you can assess whether you are not overlooking key issues. You have to understand what you want to use technology for, what the key questions you need to ask are, and then ask them, but it is impossible for a supervisory board to be completely proficient in this area.’

You are the son of a Philips expat and spent your youth mostly outside the Netherlands, particularly in a number of African countries and in Singapore. You studied in the United States, worked in London and traveled extensively. How has your international background influenced your view of leadership and your role on supervisory boards?
‘It is difficult to see that in yourself. I think that lifestyle has mostly taught me to adapt. You are always the new kid in the class, always looking for how to fit in. Because of that, your first inclination is to observe and explore how best to relate to others. That may have shaped my personality, and so I have carried that into my working life. At Arcadis, as chairman of the Supervisory Board, I try to create an atmosphere of mutual trust, openness and transparency, because only then can we get the best out of everyone at the table. I want to entice people not to censor themselves but to give their unique input, even if it is divergent and seemingly not constructive. If the meeting is overly friendly, I sometimes deliberately insist on a break and call on my colleagues to afterwards take a different point of view for a moment, as an exercise. That helps to get a considered discussion, in which all aspects of the topic on the table are addressed and acknowledged.’

This interview was published in Management Scope 02 2024.