Crisis communication: What can, should and may the supervisory board do?

Noerr, Hering Schuppener and Professor Axel v. Werder present first interdisciplinary study.

Especially in times of crisis, investors, employees, business partners, shareholders, the public and the media expect companies to be willing to communicate – not only via their management boards, but increasingly also through their supervisory boards. The chairpersons of supervisory boards can no longer argue that German stock corporation law prohibits them from playing a role in external communication in addition to or in place of their management board. This is one of the key findings of a new, interdisciplinary study on the “Role of the Supervisory Board in Crisis Communication”, which the law firm Noerr, together with Hering Schuppener Consulting and Professor Axel v. Werder (Technische Universität Berlin), have published.

The results are based on interviews with select supervisory board chairpersons of a total of 15 DAX, MDAX and SDAX companies. Additionally, interviews with the supervisory board chairpersons of listed German companies that appeared in the German business media in 2016 and 2017 were evaluated.

Ingo Theusinger, partner at Noerr in Düsseldorf, explains: “Our basic assumption was that the expectation that supervisory board members should make public statements would continue to rise, especially in times of crisis. However, in academia and in practice, the question if and how the supervisory board can and should get involved in communication remains a controversial one.” The study therefore focused on the questions of whether supervisory board members are willing to play a greater role in communication and whether they feel sufficiently prepared for this task. Alongside this practical analysis, the experts also reviewed the relevant communicative and current legal framework.

The investigation showed that there is a considerable grey area in terms of communication of supervisory board members, both with regard to the legal basis and the interpretation of the German Corporate Governance Code. “The chairperson of the supervisory board should always carefully consider whether a subject really falls within his or her competence before making a statement,” says Ralph Schilha, partner at Noerr in Munich. In general, however, especially in times of crisis, there are predominantly arguments in favour of the supervisory board having the competence to communicate. The legal basis for communication by supervisory board chairpersons has by no means been conclusively clarified, even though the majority of the respondents felt generally comfortable operating within the applicable legal framework. “For greater legal certainty, we recommend establishing rules that are as clear as possible for internal board communication competencies, for example through a communication policy for the supervisory board,” says Ralph Schilha.

“There are increasing expectations on the supervisory board and members of management related to their ability to communicate well and effectively," says Dirk von Manikowsky, partner at Hering Schuppener in Düsseldorf. “Supervisory board members, especially those of listed companies, should therefore proactively prepare for their role as potential communicators both in regular business communications, as well as in times of crisis.”

The majority of supervisory board members also appear to be prepared to communicate in general, attests Axel v. Werder of Technische Universität Berlin: “We have to distinguish between two groups. While one group assessed its own communication role very cautiously, even outside of a crisis, the majority of respondents showed a more open approach both generally and also in crisis situations. Also, whether and how the supervisory board communicates should be determined by the severity of the crisis, i.e. in particular by whether there is a consensus or dissent with the management board.” He added that all participants believed that having the right preparation was indispensable. Werder also stated that along with the topics of conversation and the contents of the communication, internal coordination of the communication in crisis situations is also extremely important.

Although it is generally the responsibility of the management board to take care of building the company's reputation, in certain cases it may also be the task of the supervisory board and its chairperson. If the chairperson of the supervisory board fails to carefully prepare for this challenge in good times, there is a danger that he or she will not feel or be perceived by the media as sufficiently confident in times of crisis. "In times of crisis, the company's reputation can act as a fortress wall. Strategic communication helps to build reputation, especially in ‘quiet times’ – and to protect it in stormy times,” explains Dirk von Manikowsky.