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What Is a Supervisory Board?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 02 November 2016
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A supervisory board is a group of elected or appointed officials charged with overseeing certain aspects of government within a company. These boards may be required by law for certain types of businesses, though companies free from legal requirements may choose to adopt a board structure as well. Some of the tasks that may be handled by a supervisory board include the election of managers or company officials, assessment of the company and its goals, and the creation of strategies for future performance improvement.

The number of supervisory board members and their election procedures, may be based on law and company policy. In Germany, a corporation is required by law to have a two-level board system, a non-executive level board, and an executive level management board. The United States, by contrast, generally uses a one-level structure in which both executives and non-executives share supervisory duties. In France, certain companies, such as energy corporations, must also have representatives of the French government on the board. Many corporations opt to split board membership between representatives elected by the shareholders, and those elected by workers.

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The legal and ethical purpose of the supervisory board is to oversee managerial decisions and ensure that management and executives are operating in the best interests of company shareholders and employees. By allowing shareholders and workers to elect supervisory board members, misuse of power by non-elected company officials can be checked. Caution is often taken to ensure that board members operate fairly independently from the company itself; they are usually subject to term limits and cannot have conflicting business interests that might affect voting decisions. One-tier systems are sometimes criticized, since they allow company executives to take part in voting and decisions made by the board which, in essence, allows the people being regulated by the board to have a strong say in the board's actions.

A supervisory board may have many strategic and supervisory tasks in addition to ensuring legal and ethical business practices. Some boards break down into smaller committees in order to direct research and assess data in each area of interest. For instance, a board might have a committee for nominating executives, a financial review committee, and a corporate social responsibility committee. While all board members can usually vote on all issues, the committee is responsible for gathering and reviewing facts pertaining to a specific issue, in order to present the board with an educated strategy.

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