Efficiency Review in Committee Support and Supervisory Board Work

The German Corporate Governance Code (DCGK) recommends, and Section 25d of the German Banking Act (KWG) requires, a regular review of the efficiency of the supervisory body. Those who approach this review wisely stand to gain more than mere compliance: a more effective supervisory body and more professional committee management.

Some obligations are simply ticked off. Then there are obligations that offer opportunities. In many companies and financial institutions, the efficiency review of the Supervisory Board still falls into the first category: a regular, formal procedure that is documented, signed off and filed away. Anyone who approaches it in this way is missing out on a valuable opportunity, both for the board itself and for those who organise and support its work.

A carefully designed efficiency review is neither a stress test nor a tribunal. It is a structured tool for reflection – and as such, it can achieve extraordinary results. It provides a safe environment in which Supervisory Board members can address issues that tend to be overlooked in the day-to-day running of the board: information asymmetries, time constraints, underlying role conflicts or communication deficits between committees and the plenum.

This gives committee coordinators a special role: they prepare, structure and often chair or accompany this process. The efficiency review therefore becomes a key means of systematically improving the quality of the committee's work, as well as evolving their role from an organisational support function to a governance partner.

Specifically, a thorough efficiency review can provide answers to questions such as: are we, as a governing body, receiving the right information at the right time and in sufficient detail? What is the balance between strategic guidance and operational control? Are meetings used in a way that allows for genuine discussion – or are they mainly used for reporting? And: in which areas do individual members need support – in terms of expertise, methodology or better resources?

In the financial sector in particular, efficiency reviews and suitability assessments are closely linked from a regulatory perspective. The aim of both is to ensure that the board meets the increasing requirements in terms of its structure and as a whole.

In practice, efficiency reviews and suitability assessments are often treated as two separate burdens. However, they are two sides of the same coin – and can be combined into a single, integrated tool that strengthens the Supervisory Board rather than burdening it.

However, these two issues are often dealt with separately in practice – resulting in an additional workload for Supervisory Boards and the people responsible for supporting these bodies. However, they are two sides of the same coin. There is considerable overlap in the database, and intelligent interaction – for instance, via shared survey tools, structured interviews or integrated action plans – not only leads to efficiency gains, it also significantly improves the quality of the content.

For Supervisory Board members, this means less bureaucracy and more genuine added value for their own work. For board support teams, it means the opportunity to not only organise processes but also to actively shape them and act as the central point of contact for governance topics.

The key factor here is shifting from a compliance-based approach to a development-based one. The efficiency review then becomes a tool for the continuous improvement of the committee, its members and its work as a whole rather than merely serving as proof of compliance with regulatory obligations. Companies that take this step will benefit from clearer roles, more structured processes as well as more effective collaboration between the Executive Board, the Supervisory Board and the committee advisory team. 

Certificate programme: Certified Committee Advisor

Professional committee work is becoming increasingly important in times of regulation, transformation and geopolitical uncertainty. Supervisory Boards and Executive Boards are facing growing demands in terms of governance, strategy and accountability.

Seminar: Efficiency reviews as an opportunity for performance-oriented Supervisory Board work

For members of supervisory bodies in the financial sector. With a sound regulatory basis and concrete methodologies – featuring an integrated approach to efficiency reviews and eligibility assessments in accordance with § 25d of the German Banking Act (KWG).

The Frankfurt School of Finance and Management offers relevant forums as part of its open further education programmes, where participants can not only share up-to-date practical experience but also discuss their own specific requirements. Find out more about the certificate programme: Certified Board Advisor and the seminar: Efficiency Review for Supervisory Boards.