Pauline van der Meer Mohr: ‘A Virtual Colleague On The Board, Why Not?’

You have extensive experience in Supervisory Boards. Looking back on your career on the Supervisory Board, what has been the biggest change as far as you are concerned?
‘First of all, the agenda of the Supervisory Board has become far broader. If I go back 15 years, the agenda was usually limited to finance, strategy and the appointment, assessment and remuneration of the Management Board. Now there is much more focus on other topics, on themes around ESG and stakeholders, on issues like cybercrime, artificial intelligence and geopolitics. There is also a significantly different view of the responsibilities of a Supervisory Board these days. 15 years ago, these were largely limited to what was legally expected of a Supervisory Board, but nowadays it is more about the role a company plays in society and the social responsibility of Directors and Supervisory Board members that goes with it. Previously, the shareholder was paramount in many companies, now it generally tends to be the stakeholder.
Of course, there was also something called corporate social responsibility 15 years ago. But it was all on a much smaller scale. Some social initiatives were supported: an event at a school or the sponsorship of the local football club. Things that helped maintain the license to operate. Now it is more about the impact a company has on people, the environment and society, and questions about purpose, the raison d’être of the organization. 15 years ago, we were talking about financial reporting, now we are talking about integrated reporting. The emphasis to a far greater extent is on creating sustainable value for the longer term. And that is not just financial value, but value for all stakeholders.’

And what has changed in the past 15 years when looking at the individuals selected for the Supervisory Board?
‘What is immediately discernable is that the diversity at the table has greatly improved. This is not just about the male-female ratio, but more about inclusion and the presence of different competences, experience, knowledge and skills. I myself am an example of this: 15 years ago, I had a quite different profile from the usual Supervisory Board member. I was not exactly the prototype former CEO or CFO that used mostly to be found in Supervisory Boards. Now, fortunately, there is far greater diversity at the board table. There is a better balance between the traditional CEO/CFO profile and other roles. This has changed and improved the quality of conversation at the table. It has had an impact on the culture in the boardroom and on the quality of supervision.’

Do you also see shifts on intergenerational diversity?
‘That is less noticeable. The average age of a Supervisory Director is still relatively high, unfortunately. I would like to change that. But accomplishing that is quite complex. You are looking for people with enough breadth, depth and experience to be able to contribute to the complexity of issues that arise in a Supervisory Board. Young people are often at a different point in their careers. They are still specializing and do not always have the knowledge or ambition to be able to accept a Supervisory Board position at that point in their career. But I do not see why a certain scientific discipline, for example, could not be very valuable in a Supervisory Board, and that knowledge is not age-related.’

Traditionally, the Supervisory Board has three roles: that of supervisor, employer and advisor. The roles of advisor and employer are at risk of clashing. One role is supportive, the other can be diametrically opposed to the wishes of the Board of Directors. How do you assess the trend there?
‘That tension has always been there. In fact, it has not changed in the past 15 years. I do not experience it as a considerable problem. Mainly because basically everyone on a board is aware of the tasks and possible tensions. I do notice that individual Supervisory Directors sometimes have trouble finding the right balance. Young, inexperienced Supervisory Directors in particular tend to want to prove themselves. Then they give a bit more advice than what management needs. Experienced Supervisory Directors generally manage to keep the right balance.’

Some boards are considering dividing the roles, where the Supervisory Board Chairman can be a trusted advisor to the CEO and the Chairman of the Nomination Committee concentrates on the employer part. What do you think of such a division of roles?
‘It is an interesting thought, but I am not in favor of it. I think the Supervisory Board has a common interest and common responsibilities. I think a Supervisory Board should act unambiguously in its feedback to the Board of Directors. It does not seem right to me to leave the giving of critical feedback to a single Supervisory Director. At most, this is an extra task for the Chairman, who is the natural point of contact for the management. Incidentally, you do see that every Supervisory Board member will naturally fulfil a certain role. For that reason alone, diversity within the Supervisory Board is very important. The Board needs different skills and temperaments.’

The Supervisory Board is responsible for the CEO and the succession of the CEO. Yet in practice, I notice that the departing CEO is, at the least, asked for advice on his own succession. Is that not strange?
‘That is an interesting issue. I have tasted different flavors in my time as a supervisor. Again, this depends on the circumstances. In my experience, the Chairman plays a decisive role here. Some Chairmen think the outgoing CEO should put forward a proposal on potential successors. Other Chairmen are more principled and feel that a departing CEO has no say in the matter.
What is also interesting: 15 years ago, a Supervisory Board mainly looked at the succession of Board members. Now it is much broader: the Supervisory Board pays more attention to what profiles the management team in its entirety needs and there is much more attention to talent scouting and development.’

Jim Collins’ classic management book Good to Great cites an example of a CEO asking more questions of non-executives than the other way around. To what extent is it a two-way street, and to what extent is the executive allowed to be vulnerable to a Supervisory Board?
‘I am a strong advocate of an open and vulnerable attitude, in both directions. Nobody has all the answers, let alone simple answers. In complex times like these, most answers to questions asked in the boardroom will start with the phrase ‘that depends’. A boardroom has no use for people with big egos who think they have all the answers. Both the Board of Directors and the Supervisory Board benefit from all questions being allowed to be asked. An open, vulnerable attitude is then an absolute must, and starts with mutual trust. That is why the culture in the boardroom is so important.’

I also regularly hear about tensions around strategy. Whose responsibility is that? Should a CEO or the Supervisory Board take the lead? Is that sufficiently balanced?
‘I think there is a substantial difference between two-tier boards and one-tier boards in this regard. In a one-tier board, strategy formation is a joint responsibility. If you are dealing with an Executive Board and a Supervisory Board, as in the Netherlands, it is usually the case that the management puts forward a proposal that is assessed and approved by the Supervisory Board. You then have a different dialogue. But I do see a trend that in two-tier boards too, there is a growing need for more time for the strategic process. I believe that strategy should in fact be discussed at every board meeting. A Supervisory Director who can move the conversation from tactical to strategic is more valuable to a board than one who is only concerned with problem solving, advice or dissent.’

I increasingly notice the inclusion of an empty slot in Supervisory Board agendas…
‘I try to do that at the Supervisory Board I chair. I prefer to start the first hour without an agenda. We then talk about things that concern us, what we noticed in the news, how we view certain social or political developments, all in the context of the company and the upcoming Supervisory Board agenda. This is quite difficult, by the way, because a Supervisory Board agenda quickly becomes jam-packed. In fact, you should ensure that every meeting is steeped in strategy as well as reflection.’

Speaking of reflection, what trends do you see around evaluation and self-evaluation?
‘The self-evaluation process is taken immensely seriously these days. In the past, at most there was a survey you filled out. Now a considerable amount of time is spent on whether we are focusing on the right things and what we can do to increase our effectiveness. What I think is new is that investors are becoming more and more interested in the evaluation process. I think shareholders will also increasingly demand disclosure of these reports. Substantively meaningful reporting has also been a recurring theme in corporate governance code and compliance reports for years.’

In recent years, artificial intelligence (AI) has also been on the rise. To what extent does that influence your work as supervisor?
‘I notice that all boards are fully engaged in this. Almost everywhere there are extra sessions or training sessions on this subject. Primarily, that revolves around what AI means or can mean for the company. How it is already leading to greater efficiency and will soon create value in many ways. About the possibilities, the costs and the risks of AI. If you look at board work itself, we are really only at the beginning of the possibilities that AI has to offer. I suspect that board work will be completely different in five to 10 years, although it is still hard to predict exactly which way it will go. But AI alone will completely change the work of the Corporate Secretary. AI will play a major role in reporting, information gathering and quality of available analyses and scenarios.’

A thought: could an AI device also function as a board member? A Supervisory Board would then not consist of four people, for example, but of three flesh-and-blood Supervisory Board members and an AI device....
‘That is an interesting, fascinating question. I am not ruling it out at all and am not afraid of it, per se. From a board perspective, it could be very valuable, for example, to get quick answers to complex questions. A virtual colleague, why not? I do not see AI as a threat at all, although of course we will have to ensure clear rules, for example regarding ethical use.’

Is it still attractive to be a Supervisory Director in 2023? The requirements for a Supervisory Board member are becoming increasingly stringent. Moreover, there is intense discussion about joint and several liability. Do you not think that many potential Supervisory Board members might decline the honor?
‘Oh yes, but I already see that happening. The pool of experienced Supervisory Directors in the Netherlands currently is not at all large. Many potential Supervisory Directors do not even answer the phone when the headhunter calls. For various reasons, they do not find becoming a Supervisory Director an appealing idea at all. The time commitment, the responsibilities and the risks are increasing, while the remuneration is not in proportion to remuneration in management positions or other areas.’

Do you think we should reduce risk or increase reward?
‘Risk and responsibility go hand in hand. The more responsibility, the more risk. But what is different now from in the past is that activists are increasingly calling for personal, sometimes even criminal liability of Directors and Supervisory Directors. That has increased the risk, and I see several potential Supervisory Directors simply no longer willing to take that risk. They are concerned about the ongoing legalization of society and, frankly, I do not think you can buy off that risk by raising the board fee. If you fear ending your fine career in prison, an extra board fee of 50,000 euros will probably not convince you.
But somewhere we did miss an opportunity. I think there should be more appreciation for the energy, knowledge, experience and judgment of directors and supervisory directors who take joint responsibility for the major complex problems of our time. But that is preaching to the choir, I realize only too well.’

This interview was published in Management Scope 01 2024.