An entrepreneur who is going to partner with an investor in exchange for shares may have to deal with a supervisory board (SB). That this board has a supervisory role is well known to most. But there are a number of other roles that a SB fulfills. In this article, we look at those different roles and review the usefulness and necessity of a SB.
Supervisors
The most well-known function of a SB is that of a supervisory body. They supervise the policies you implement as a business owner, possibly along with the rest of a board of directors. The SB must keep the interests of all stakeholders in mind. That goes beyond the interests of shareholders. Consider employees and suppliers as well, for example. In some companies, even the environment is considered a shareholder. The question here is always asked: is the policy pursued beneficial to the stakeholder?
Vote on weighty decisions
The articles of association or shareholder agreement also define a SB's role in decision-making. In most companies, they have a vote when making weighty decisions. In fact, in many cases a company must obtain approval for such decisions. These include, for example, expanding business activities or entering into new funding.
Employer role for the entrepreneur
For many entrepreneurs who are dealing with an SB for the first time, this is a difficult role to digest. Because left or right, you will have to answer to your SB from now on. This is not just about the weighty decisions we discussed above. Think, for example, of your own remuneration, which you can no longer determine yourself.
Annual discussions are also often held between entrepreneur and SB. Although this takes place at a different level than for employees, it is similar in scope. For example, agreements are made at the beginning of the year about focus areas for the entrepreneur, such as thinking about future strategy, the development of new technologies or sustainability policy. At the end of the year, progress is discussed.
Of course, this is not about getting one more or less scale as a business owner. For the SB, it's about keeping certain topics alive over the course of a year. Because in the delusion of the day, these kinds of issues can quickly slip in.
Advice for the entrepreneur
You can choose the composition of your SB yourself, together with your shareholders. This is important because your SB also has an important advisory role. Therefore, it makes sense to choose supervisory directors with specific knowledge and experience that you do not yet have, for example in the field of exports.
As an entrepreneur, you can be quite lonely at times. You have, before dealing with investors, often figured out and built up a lot on your own. But that doesn't mean that you don't regularly have to deal with doubts or uncertainties. You may not always be able to deal with them at home, and entrepreneurs do not always dare to be vulnerable among themselves. Even in your management team, they are often inclined to put their money where their mouth is. That's where a supervisory board comes in handy.
After all, if it's good, the SB dares to tell you the truth in confidence. It is a club of people with useful knowledge and experience with whom you can always spar. They are ready with advice that, if it is good, is a valuable addition to that of your managers, partner or fellow entrepreneurs.
But for that, there has to be a lot of mutual trust.
Trust is the foundation
The bond of trust between you as an entrepreneur and the commissioners on your SB is absolutely essential. The SB must be a safe environment for you. A place where you can lay down your doubts, about how something should be proceeded or handled.
Especially when success goes to your head, the need for a SB is enormous. It is very human to start floating a little then. And it won't be the first time that an entrepreneur who has successfully sold his company has lost everything in his second attempt. Simply because there is no one to keep you on track. How nice it is then that you have a forum that, thanks to mutual trust, keeps you grounded.
In conclusion
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Funding helps to get your business off to a fast start or to grow it further. But getting funding is not necessarily easy; there is a lot involved. For example, what kind of funding do you need? And what about equity?
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