Willem Cramer: 'Underboarding is a Danger'

You sat on both sides of the boardroom table. What do you think is the biggest change in the way the board and Supervisory Board members function?
‘Directors and Supervisory Board members today are aware of increased liability. That is a development I regret. When I was CEO of a small bank in 2004, I saw the Supervisory Board members as partners with whom it was pleasant to spar. I always found that very valuable. But that changed in the years that followed as more rules and obligations arose. Both directors and Supervisory Board members became more risk averse as a result. Conversations became more guarded.’

To what extent has the role of the Supervisory Board Chairman changed? Has he or she become the figurehead of a company?
‘That depends on the type of company. In the Chairman roles I held, I tried to be as invisible as possible. In the two-tier management model, as it exists in the Netherlands, the CEO is the person who has to shine. The Chairman of the Supervisory Board only makes himself heard when something exceptional happens.’

And how do you see the Chairman’s Role within the Supervisory Board?
‘I see my main task as creating an open and free discussion. I want to give everyone room to express their opinions. The personality of the Supervisory Board Chairman can be very decisive. An alpha male or female would not fit well in this role. The resultant behavior would soon cause Supervisory Board members to look to the Chairman to hear his point of view. When that happens, a Supervisory Board Chairman is not doing well. As Chairman, I keep a low profile for as long as possible, even if one of the Supervisory Board members has a strongly dissenting opinion - I do not want to influence others unintentionally. I want to get all arguments on the table to examine them together.’

Some Supervisory Board Chairmen believe that the Supervisory Board should consist partly of people with industry knowledge and partly of former CEOs with the experience to run a large company. In this scenario, there is a danger that the Supervisory Board will have too many egos at the table. Is that true?
Laughs: ‘In the profile of a new CEO, a big ego will not be mentioned as such. But it is true: many CEOs have big egos. So, I do see that risk. There is something else that comes into play with former CEOs that can be both positive and negative. A former CEO knows how difficult the Supervisory Board members can be. Because imagine you are CEO, you have worked out a good strategy with the board and then you are endlessly questioned on all points by a bunch of Supervisory Board members who are further removed from the business. A good Supervisory Board member who has been a CEO himself understands this. While he or she will ask critical questions, he or she will mostly support the board. A bad supervisory director - often a dominant former CEO - mainly wants to show off his knowledge but does not help the board move forward.’

In your opinion, what are the most important tasks of the Supervisory Board Chairman?
‘According to the Dutch corporate governance code, the tasks of the Supervisory Board are to supervise the board, provide the board with advice and act as the board’s employer. That leads to several important responsibilities for the Supervisory Board Chairman. First, he or she must pay close attention to the composition of the board. Not only knowledge and experience are decisive, but the personalities must also be balanced. In addition, the Chairman must ensure that the advice given is of such value that it supports the board in making high-quality decisions.
However, I see a fourth task for the Chairman. He or she and his fellow Supervisory Board members should be the antennae of society. Personally, I experience it as an advantage that I sit on six different Supervisory Boards. I take the insights of one company, within confidentiality limits, to the other.’

How do you prevent over boarding? With many directorships, it becomes more difficult to free up the time to fulfill supervisory responsibilities.
‘Assuming a normal workflow, I want to retain a third of my time open. Why? When there is a problem within a company, a Supervisory Board member needs to spend more time. It could be a board conflict, a dispute with the union or a data breach. For a full-time non-Executive, four to six directorships are acceptable. But in addition to the danger of over boarding, I also see the danger of underboarding. As a Supervisory Board member, you can be too focused on a single company and this can contribute to missing the external antennae.’

You were both a director and member of the Supervisory Board at many different companies. In what ways do the boards of listed companies, family-owned companies and cooperatives differ?
‘Let me start with the publicly traded software company Exact, where I was vice Chairman from 2012. At Exact, shareholder interest was the main driver, but that did not always go well with the Dutch corporate governance culture in which the stakeholder model is leading. That was quite a balancing act for the Supervisory Board. To give an example: when a private equity party made a takeover bid, we were critical of the conditions and financing structure. Under Dutch law, we were obliged, from a stakeholder perspective, to examine the interests of customers, employees, and the company properly. I think that is a good thing too, I believe in the stakeholder model. But this was not well understood by private equity. We would leave as Supervisory Board members after the acquisition. What were we doing that was tough but necessary? It led to some friction.
Totally different from a highly capital-driven, publicly traded company is the cooperative. Here there is a danger that capital becomes lazy if there is no active ownership incentive in the form of control. Equity growth is not the decisive factor; what matters is the continuity of the company. As Chairman of the Supervisory Board at a cooperative, you must therefore guard against the board being too nonchalant. There is sometimes no incentive to grow: what looks like stability may in actual fact be underperformance.
Family businesses are in a class by themselves. Most measure their success in generations. I am currently a Supervisory Board member at cleaning company Vebego and Supervisory Board Chairman at logistics service provider Koopman. At both companies - 80 and 100 years old respectively - the family shareholders never talk primarily about profits or growth. They are predominantly interested in continuity and the interests of employees and customers. Vebego is particularly aware of the effects of inflation on the purchasing power of lower-paid cleaning colleagues and has responded by introducing support measures such as debt relief in addition to controlled purchasing power adjustments. That is appealing, but I do warn against complacency. I try to activate managers: come on guys, be sharp on the financial result as well, can we perhaps increase that without short-changing the other stakeholders?’

The board is responsible for the strategy, while Supervisory Board members are partly responsible for it. As a Supervisory Board, how can you be sure you have a good idea of what the board is doing?
‘In a two-tier system, the Supervisory Board members have to work on the basis of trust. You must assume that you have a good team, that you have appointed capable directors, and that in your advisory role you have a good dialogue. Only when you notice that the board very frequently wants to adjust on the strategic level, should the Supervisory Board assume its responsibility. There is a danger in this, however. Ultimately, you do not want to take over the director’s chair.’

Currently, companies must both steer for financial results and achieve social ambitions. Sometimes these interests clash; how do the board and the Supervisory Board deal with this?
‘It means balancing. In the Dutch polder landscape, society grants companies a certain bandwidth within which they can move freely. But you must constantly watch out when that bandwidth shifts due to social developments. What helps here is to turn negative arguments - such as reducing CO2 emissions - into a positive story: cleaner air. As a board, ask yourself how the company benefits from social challenges. The Supervisory Board can provide support here.
With major challenges, such as the nitrogen issue or energy transition, some decisions are harder for companies to explain. But the board plays an important role here. It has a duty to inform its shareholders that it is considering a sustainable course of action. In the case of the stakeholder model, the board should say to the shareholders: we are acting in the interest of society, and this is also good for the continuity of the company. Whether you like it or not: we persevere. That requires courage, of course; after all, the shareholder can disband the board. In that respect, the Anglo-Saxon shareholder model is easier for directors. There, the thinking quickly becomes: if it is not illegal, then it is allowed. Fortunately, in our Rhineland stakeholder model, morality also plays an important role.’

How do you keep your stakeholders happy now and in the future?
‘I see that many boards are concerned about how decisions made today will be viewed in the future. That worries me because it makes companies very cautious.’

Companies must respond to conditions that are constantly changing. How do boards and Supervisory Boards do that?
‘We live in a world with the idea that we have control over many things. But that is a wrong impression. First, you cannot cover everything with laws and regulations. Good people sometimes do the wrong things. In addition, unexpected things do happen. It means you must navigate and anticipate well. And sometimes it also means that you have to take some risks.
The Netherlands has an annoying streak in this regard. We like to applaud entrepreneurs when they are successful. But when circumstances change - when they run into headwinds - that opinion quickly turns around. Then the entrepreneurs in question are suddenly bad sailors. Even if that accusation is untrue, members of the boards must be mindful of such social noise. It is important to keep telling the honest story.’

Many boards appoint younger board members who have no industry knowledge but specialize in cybersecurity or digitization. How do you view this?
‘Knowledge of important subfields such as IT within the Supervisory Board is necessary. At the same time, Supervisory Board members must be able to oversee the entire business model integrally. Not every specialized Supervisory Board member can do that yet.’

Do you think good governance will look different in 20 years?
‘I hope that directors and Supervisory Board members will then communicate honestly and transparently about their real ambitions. This transparency is difficult for some companies and presents them with dilemmas which have no quick solution - think of large oil companies, for example. Yet it is in fact simple: you either go exclusively for financial returns, or you sail a different social course. People use diplomatic language to get around this in statements, but society is increasingly seeing through this. I should hope that in 20 years this will no longer be necessary.’

This interview was published in Management Scope 04 2023.