The Best Practices of Top Non-Executive Director Jeroen van der Veer
On a dull and dreary Sunday afternoon, Jeroen van der Veer drew up a tally of how many good supervisory board members he had worked with as CEO and in his multiple chairmanship roles. As Van der Veer knows from experience, members of the supervisory board mainly come into their own when the company finds itself in a difficult situation. He quickly formulated three categories based on the list he had in front of him. ‘The first category of supervisory board member is the one who, when a crisis occurs, “remains at arm’s length” – someone who is of no benefit to you but is of no trouble to you either. The second category of supervisory board member proceeds to ask lots of questions, but only so that later on, they can say how active a supervisory board member they have been. Supervisory board members of that type do cause you problems, because answering all of those questions uses up a lot of the board's valuable time and energy. The third category of supervisory board member, on the other hand, understands that a speedy response is absolutely paramount, even if you only have 70 percent of the information. That is the type of supervisory board member a senior team needs when faced with a crisis. While carrying out my analysis, I made a striking discovery – all of the supervisory board members who had been CEOs themselves fell into that third category.’ He then added: ‘Just to be clear, some of the supervisory board members also included in that category had not actually been a CEO.’
Knowing which doors to knock on in Brussels
This is something which Van der Veer himself refers to, with a wink, as “Jeroen’s science”. That science forms the basis of his firm conviction that in order to be effective, at least half of the members of a supervisory board must be former CEOs or senior directors. Another rule of thumb is that two thirds of the members of a supervisory board should ideally have experience in the relevant sector. The remaining third will be generalists, who will bring learning experiences from other sectors to the table, provide input from society itself and take an interest in stakeholder management. Van der Veer: “During the financial crisis, ING’s relationship with the European Commission was fraught with complications. As bankers, they did not know which doors to knock on in Brussels, but the generalists on the supervisory board on the other hand, including myself as Chairman, were actually able to provide experience and contacts that proved useful in that regard.’
Company supervision within manageable proportions
If we set out to apply the typology he devised himself, Van der Veer belongs without doubt in the third category of supervisory board members. After stepping down as the CEO of Shell in 2009, he began a second career as a supervisory board chairman. Alongside his position as Chairman of the Supervisory Board at ING, he also fulfilled that role at Philips. During his time at Shell, he also served two terms as a non-executive director at Unilever, before later serving one term in that same role for his former employer. At the moment, Van der Veer is Chairman of the Supervisory Board of the offshore group Boskalis (for which the investment company HAL recently issued a bid). He is also Vice-Chairman of the Norwegian company Equinor (formerly Statoil). Methodical as he is, Van der Veer has managed to cut the complexity of company supervision down to manageable proportions. He does so by implementing clearly defined processes to determine strategic direction, succession planning and evaluation, and by adopting a systematic approach with regard to topics such as sustainability. While he is generous when it comes to sharing best practices, we also asked him to take a brief look back at his own career, which now spans half a century.
What was your greatest challenge as CEO?
‘I became CEO at Shell at a time when the company was going through a crisis (due to issues concerning the company’s reserves, ed.) My job was to make sure that I steered the company back into calmer waters, both internally and externally. A major competitor had Shell in its sights and was looking to profit from our situation. Looking back, I am extremely pleased with the way that we ultimately got through that period. If we had not done so, it would have meant the end of Shell.’
What was the most difficult decision you faced in your role as Chairman of various companies?
‘At ING, we had to divide the company up, and that was a challenging task. The most difficult decision, however, involved selecting the right portfolio at Philips in order to carve out the Lighting division in the run-up to its stock market flotation. The first reason why that decision was so complex had to do with the history of the company, as the Lighting division was where the company first began. You also need to bear in mind that when you divide a company up, the two parts become more vulnerable to a hostile takeover. If a company remains sufficiently large, its size gives it a measure of protection. Carving out the Lighting division was therefore not without risks. The decision itself was taken by the entire team and we took our time, but it was still something that I had to take a while to ponder.’
Did you lose sleep at night?
Van der Veer laughs: “You are more likely to find me pacing the room.”
Until last year, you were the Chairman of the Supervisory Board at Philips. Since then, the Company has been involved in the sleep apnea affair. What lessons must the Supervisory Board draw from this?
‘If something major is going wrong inside the company, if it has possibly been going on for some time, and if you failed to pick up on it as a supervisory board, you obviously need to perform a rigorous evaluation. Would we have been able to prevent it? Could we have known about it sooner? Can similar things still occur within the company? Those are the questions you need to ask. You need to dig deep and learn lessons from what has happened. In my opinion, the quality of the supervisory board at Philips is unparalleled. What is more, many of its members are people with excellent operational experience. Even then, things can happen that the members of the Supervisory Board may not have noticed, so as a board, you need to learn as many lessons from such situations as you can. I have the utmost confidence that those lessons are also being learned.’
What lessons did you personally learn as a supervisory board member?
‘Executive directors and non-executive directors of banks are under pressure from the regulatory and supervisory authorities to apply a zero-tolerance policy with regard to failings within the money laundering domain. As a supervisory board member at a bank, I found that very difficult. After all, the transactions you have to deal with run into billions of euros! In the Port of Rotterdam, the customs authorities are unable to prevent cocaine entering the country, despite the many checks that take place. It is something you simply accept. Banks, however, can be required to pay a significant fine if it turns out that monies have been laundered despite the checks that were put in place. What is more, people working in the financial sector are true professionals, who know only too well how to shield their practices effectively from prying eyes. And when examining how money laundering is being addressed, the authorities still expect to see zero errors. As a supervisory board member of a bank, you suddenly realize: “My goodness, I actually have to take responsibility for completing a task and I am not sure whether the organization is ever going to have enough tools to do that.” For me, that was something of a dilemma.’
Are supervisory board members actually paid enough in return for the obligations they are required to take on?
‘It is difficult to explain to society why top managers earn so much more money than a good professional or a teacher. Even though their role is only part-time, members of a supervisory board are often paid more than a professional or teacher. So if you take that into consideration, a member of a supervisory board is actually relatively well paid. Having said that, the position of supervisory board members is increasingly being affected by growing legal requirements and social pressure. Unless they receive adequate remuneration, people may not be prepared to become a member of a supervisory board, as they feel the risks are too great. That is a personal choice. In my case, remuneration played no part whatsoever when deciding whether or not to accept a position on a supervisory board.’
Since the coronavirus pandemic, the discussion about climate has suddenly taken off. What approach must companies adopt in response to this?
‘For energy companies such as Shell, sustainability has already been an issue for the past 30 years. Other companies are only now waking up to the extent of the problem, however. For example, banks thought for many years that sustainably was simply a matter of making their offices CO2-free, but now, they are suddenly discovering that the world outside is saying: Should you really be lending money to fossil fuel companies? The problem is therefore a complex one, and one which as a company, you need to approach in a holistic way. One of the ways Shell does that is in the approach it adopts with regard to safety. You see the topic of safety in every situation, right down to the way in which people hold onto the handrail when walking up and down stairs. Making things more sustainable is therefore something that must be embedded within all aspects of the company, but you can only achieve that if you adopt a systematic approach. What you need is a driving force – a staff department that encourages first-line management to ensure sustainability, that shares best practices and that formulates KPIs and monitors them. The Director of Sustainability must have access to the CEO and deliver regular presentations to the Supervisory Board – for example, is the company behind its competitors in terms of its sustainability achievements or is it ahead of them? The only way you will make progress is if you make it part of a system.’
When asked whether companies will be able to be CO2-neutral by 2050, the supervisory board members of raw materials companies often appear more optimistic than their directors. Is that creating tensions in the boardroom?
‘On the boards I am a member of, we have a lot of discussions about this. Both executive-and non-executive directors need to realize that a company cannot achieve its objective to become CO2-neutral on its own. First of all, government backing is needed in order to create new regulations, new standards and a level playing field. You also need to work together with the chain and with your competitors to develop sustainability solutions. Consumers too need to change their behavior – after all, people cannot say they are living in the most environmentally friendly way possible, while still jumping on a plane a few times a year to go on vacation. As a company, you are therefore dependent on others. Nevertheless, you always feel uneasy if you do not have full control when it comes to realizing your ambitions. That is something that makes company leaders nervous and justifiably so. But that need not be any reason to give up on that ambition. The answer is to initiate a discussion about it in the boardroom – how will we approach that collaboration and how will progress be measured? Will we wait until 2049 before asking – “Are we going too slowly?” Or will we already be asking that question in 2030?’
What is your view of the court decision that Shell needs to accelerate its sustainability ambitions and of the attempt to hold Shell’s directors personally liable because they are allegedly not complying with that decision?
‘The only thing I want to say about that is this: In the area of sustainability, Dutch multinationals are performing considerably better than their global competitors. Within their sectors, AkzoNobel, Unilever and even Shell appear in a high position on the most important sustainability indices. This is down to the management culture in the Netherlands and the early realization that sustainability will benefit if you adopt a systematic approach. Nevertheless, there are always people who think that what you are doing is not good enough.’
If the Supervisory Board’s agenda could consist of only two items, what would they be?
‘Supervision is basically all about two related matters – the long-term strategy and selecting the senior team that is capable of implementing the strategy. As Chairman, I lead the strategic planning process in the same way – by diverging, then converging. Every other year after the annual results have been released, the Head of Strategy conducts interviews with each of the members of the supervisory board individually – What are their thoughts regarding the current strategy and what alternatives do they see for the future? Once their annual reports have been published, you also analyze the strategies being adopted by your competitors. You then place the summaries side by side and discuss them at the next meeting of the Supervisory Board. The Board of Directors will then submit a new or revised strategic plan to the Supervisory Board. After the summer, this can then be translated into the budgeting cycle. The good thing about this is that you can concentrate the strategy process into a period of two to three months and can be very explicit about that. It also means that members of the Supervisory Board will be aware that they cannot raise matters relating to strategy for discussion at every meeting. That provides the Board with a sense of reassurance and calm.’
And what about selecting the senior team? In my experience, something that many supervisory boards struggle with is succession planning.
‘That too is something which, as Chairman, I use a structured process for. As a supervisory board, you must first ask yourselves the question: What are the strategic needs of the company? We need to know what we want. What you do then is look to identify the best internal candidates. After that, you look and see what external candidates are available. After all, they must have experience in the relevant sector or in a related area. The likelihood that the number 2 at Unilever would be capable of leading Shell is therefore extremely low, while on the other hand, you can be sure that the number 2 at Shell is not sufficiently familiar with Dove to be capable of managing Unilever.
It then becomes a two-horse race – between the internal candidate and the external candidate, or between two internal candidates. People from outside more often focus on the broad strategy and the portfolio, while CEOs who are promoted internally generally seek to bring about effective operational improvements and cost-savings within the existing portfolio. As Chairman, I always ask candidates to answer two open-ended questions: “If you were the CEO, what strategy would the company then adopt? And how would you organize your senior team in order to achieve that strategy?” You cannot have one without the other. Even though I do not expect to be on the receiving end of a McKinsey presentation, a future CEO must definitely have a vision. As Chairman, it is also important to make sure that a new CEO is not selected by you alone. I always put together a selection panel. First and foremost, this will consist of the appointment panel, to which I always immediately add a female member, in order to avoid a situation in which directors are only selected by men. The selection panel will also include the chairpersons of the Audit Committee and the Remuneration Committee. That way, the new CEO will know that once appointed, he or she has the support of the key people on the Supervisory Board. Selecting a CEO or CFO is the most difficult task that members of a supervisory board are required to perform. Making mistakes is easy and even if you have put in place an entire selection process, a chairman must always take responsibility if something goes wrong.’
What is the ideal term of office of a CEO?
‘When you appoint a CEO, you hope that in principle, he or she will remain in post for eight years. In most cases, that is the amount of time that is needed to turn a company around. Before extending a CEO’s contract, it is important to carry out an evaluation of sorts. This could be a discussion about the company’s strategic needs and the organizational measures that will be needed in order to fulfill them. In many cases, the matter comes up for discussion within the Supervisory Board itself. Some members of the Supervisory Board will want to see a new face at the helm, while others will take the view that the company will be better served by the cumulative experience of its current CEO.’
Peter Berdowski has now been the CEO of Boskalis since 2006 and has therefore already been in post for two eight-year periods.
‘Let me say first of all that the senior team at Boskalis is relatively small. The majority of people at the company are involved in implementation. The company also operates in a specific sector, where you need a large amount of knowledge to be successful. Cumulative experience is therefore important. And we also must bear in mind that Boskalis actually has a strong CEO, who has demonstrated his ability to adapt and develop as a leader. Those are the factors that have enabled him to remain in post for so long. The company itself is also performing well. Within their sector, Boskalis has undergone a remarkable transformation. As a Supervisory Board, we do still hold a four-yearly evaluation discussion, even with Mr. Berdowski. The external environment is changing significantly, so if CEOs take the view that all their outdated insights will still work today, they should think again.’
What is your own personal style as Chairman and what do the other members of the Supervisory Board say about it in their evaluations?
‘The feedback I have received from various boards shows that they appreciate the way in which I chair meetings. I am not in favor of pre-empting the decision-making process. I also do not immediately give my own opinion about matters. People cannot read me. My preferred approach is to allow the most recently appointed members of the Supervisory Board to give their opinion first. After that, it is the turn of the more experienced members and finally of the Deputy Chair. If you did things the other way around, the younger members of the Board would not have the courage to express a different opinion and would stay silent. What is more, running things in that order puts me, as Chairman, in a comfortable position. If I see that everyone’s opinions are tending in a particular direction that I agree with, I conclude discussions within a short time. But if that direction is one I do not wish to take, I have all the time I need to think about what I should do. I can then bring in a new and strong argument to convince the other members. Or, as is often the case, I ask whether as Chairman, I may be allowed to sleep on the matter and come back to it later.’ Van der Veer laughs: ‘By now, my fellow supervisory board members know: when Jeroen says that, he does not agree with what is being proposed.’
This article was published in Management Scope 05 2022.
This article was last changed on 25-05-2022