Supervisory Board

Introduction

The supervisory board is a central body in the structure of many companies, especially stock corporations. It has the task of monitoring the management and advising on certain matters. In this article, we will take an in-depth look at the role, duties and importance of the Supervisory Board.

Definition

The supervisory board is a body that acts independently of the management of a company and monitors its activities. It is found in particular in corporations such as the stock corporation (AG) or the limited liability company (GmbH), provided they meet certain size criteria.

Legal basis

In Germany, the tasks and duties of the Supervisory Board are governed by the German Stock Corporation Act (AktG). For limited liability companies, regulations can be found in the GmbH Act, although the supervisory board is not mandatory here.

Composition

The composition of the Supervisory Board varies depending on the form and size of the company. As a rule, it is composed of representatives of the shareholders and, in certain cases, of the employees. The members of the Supervisory Board are generally elected by the Annual General Meeting.

Tasks and duties

Monitoring

One of the main tasks of the Supervisory Board is to monitor the management of the company. Its purpose is to ensure that the company is managed in the best interests of shareholders and other stakeholders.

Advice

The Supervisory Board also has an advisory function. Its purpose is to support and advise the management in strategic matters.

Personnel decisions

The Supervisory Board is often responsible for appointing and dismissing members of the Executive Board. It may also decide on matters relating to the compensation of Executive Board members.

Transactions subject to approval

In certain cases, the Executive Board must obtain the approval of the Supervisory Board before entering into certain transactions. This usually relates to transactions of particular importance or with high risk.

Liability

The members of the Supervisory Board have a duty of loyalty to the Company and must exercise the care of a prudent and conscientious Supervisory Board member in their activities. In the event of breaches of duty, they may be liable to pay damages to the company.

Remuneration

The members of the Supervisory Board generally receive compensation for their activities, which is determined by the Annual General Meeting.

Difference to the advisory board

In contrast to the supervisory board, the advisory board generally has no legally defined supervisory duties and is more of an advisory body. The advisory board is often used in smaller companies to leverage expertise and networks without the formal requirements of a supervisory board.

Significance for the company

The Supervisory Board plays a crucial role in ensuring corporate governance and safeguarding the interests of a company’s stakeholders. By providing effective monitoring and advice, he helps to strengthen risk management and support the strategic direction of the company.

Challenges and criticism

The supervisory board is often faced with the challenge of striking a balance between monitoring management and supporting management. Critics sometimes complain that supervisory boards are not independent enough or do not perform their role effectively enough.

Conclusion

The supervisory board is an essential element in the structure of many companies. It helps safeguard corporate governance and protects the interests of shareholders and other stakeholders. The members of the Supervisory Board must perform their role with care and a sense of responsibility in order to support the long-term success of the company.