Noerr Compliance Day – Focus on internal investigations by supervisory boards

"An internal investigation initiated by a company's supervisory board does not mean a no-confidence vote for the management board." This was emphasised by Dr Torsten Fett, partner in the law firm Noerr and head of the practice group Compliance & Internal Investigations. He is one of the moderators of Noerr’s Compliance Day, a well-established specialised conference for compliance experts from Germany and abroad. One of the main topics: internal investigation as one of the duties of a supervisory board.

In the public eye, a supervisory board conducting its own investigation is often interpreted as evidence of a crisis in trust between a company's management board and supervisory board. "In some cases, there may indeed be friction between the executive and supervising boards," says Fett. However, he continues, what is often overlooked is that supervisory boards initiate their own internal investigations according to established standards, which means that in doing so the supervisory board is practicing good corporate governance.

This was also emphasised by Dr Sophia Habbe in her speech on the same topic. "The fact that an investigation has been initiated does not yet automatically mean that management board members must have violated the company's compliance policy," says the Noerr partner from Frankfurt. Rather, she continues, today's good corporate governance requires a supervisory board to make an independent assessment of facts if there are reasonable grounds for suspicion. Investigation of its own is necessary for this, according to Habbe: "The supervisory board must take an active role; it cannot limit itself to passively receiving information in crisis situations."

At what point the threshold from a passively to an actively supervising body has been crossed can be determined using objective criteria. "If the supervisory board doesn't act then, it not only weakens corporate governance but also exposes itself to liability risks," Habbe explained. "This is why a supervisory board opening its own investigation is not yet an indication of distrust on the part of the supervisors toward management." On the contrary, the two governing bodies should share an interest in fact-finding. "Legally speaking, both the management board and the supervisory board are obligated to investigate the situation independently and separately from one another. "In practice, we are noticing increasingly professional and calm conduct in dealing with the situation," Habbe notes.

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