Know yourself. That was already the motto in ancient Greece 3000 years ago. It is engraved in the entrance hall of the temple of Apollo in Athens. The motto still fully applies everywhere in 2014. It has meaning in relationships, in families, and in companies. The person that does not know himself sufficiently will not be able to enter into good relationships, either of a personal or of a business nature. And yet, looking in the mirror is difficult. Everyone likes to think of himself as quite intelligent, ethical, nice, attractive, hard-working and funny. The harsh reality is that others sometimes have a completely different opinion. Sometimes rightly, sometimes not rightly. Sometimes these others express it, sometimes they do not. The more someone is willing to look at himself, the more open he will be to (justified and constructive) criticism. The reward is that he or she can then function more effectively. Quite funny, points of criticism are called “points for improvement” these days, just like problems have become “challenges”.

Assessments are necessary
Performance reviews and assessment interviews are a normal part of the relationship between employer and employee. Most companies have a hierarchic structure. This is why such interviews normally are quite straight-forward. The employee has to submit himself or herself to the employer’s assessment. There is no choice. For management boards and supervisory boards this is much more complicated. And therefore it is interesting from a corporate governance perspective.

It seems in our country that performance reviews and assessment interviews are not held often in management boards and supervisory boards. This is all the more remarkable because the Code Corporate Governance prescribes an extensive system of mutual assessment for government bodies. The Code leaves the possibility open not to apply certain provisions, it is true, but in that case the annual report has to explain why this is not done (“comply or explain”). It seems to me to be very hard to find a good reason why supervisory directors and management boards do not want to assess themselves. How do you explain why you do not want to? So these performance reviews and assessment interviews are a must, also for managing directors and supervisory directors.

Why is it not done and how should it be done?
At least two interesting questions now arise. First: why is it not done (or not sufficiently) if it is a requirement according to the Code? And secondly: how should it be done, what is an appropriate assessment system?

With regard to the first question, one can only guess. I think that mutual assessments in management boards and supervisory boards rarely take place because of at least three special complications (“challenges”!). First, the hierarchy in the relationship between managing directors and supervisory directors is less clear than in a relationship between employer and employee. For management boards and supervisory boards each have their own duties and responsibilities. There is no mutual structure of authority. This applies even stronger within a management board or within a supervisory board itself. According to the law, these bodies are colleagues: you work together. In principle, no-one is the other party’s boss. Secondly, managing directors and supervisory directors are often experienced ladies and gentlemen. They have climbed to the top of the social and organizational ladder. They have “won their spurs”, as it is called. In that case, one is not so happy anymore with being assessed as a “little boy”. At any rate, I presume that is how one feels. Thirdly, the relationship within management boards and supervisory boards is fully based on mutual trust. If there is not sufficient trust within a management board or supervisory board, by definition, a storm is brewing in the company. Trust is a vulnerable thing. I presume that the fear to harm this relationship of trust also is a reason for the hesitation to hold mutual assessments. I will discuss the second question asked above, how to break through this situation and reach a properly functioning system of mutual assessments, in the next column.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it and perhaps your question will be discussed in the next column!

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