supervisoryboard

A supervisory board is a governing body in a two-tier corporate governance system, responsible for supervising and advising the management board. It exists mainly in certain European jurisdictions, notably Germany and the Netherlands, as opposed to unitary boards where a single board handles governance and management.

Composition: The supervisory board consists of non-executive members, often elected by shareholders, with possible employee representation in some jurisdictions. Size typically ranges from a few to about twenty members. The chair leads meetings and acts as a liaison with the management board.

Duties and powers: It appoints and can dismiss the members of the management board, approves major corporate actions, and monitors performance. It reviews and approves the annual report and financial statements, oversees internal control and risk management, and ensures compliance with laws and corporate objectives. It has the right to information from the management board and may call extraordinary meetings.

Relationship: The supervisory board does not engage in day-to-day operations; its role is oversight, governance, and strategic guidance, while the management board executes operations under its direction. The two boards are distinct and must coordinate to fulfill corporate aims.

Regulatory context: The exact powers, composition, and procedures vary by jurisdiction. For example, in many German-speaking companies, co-determination laws require employee representation on the supervisory board in large firms; in other systems, the board is solely composed of shareholder representatives. Committees such as audit, nomination, and remuneration are commonly established to handle specialized tasks.