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What is the role of the board of directors in the Swiss context?

Posted by
Swiss Finance Institute
on
Thursday, January 5, 2017 - 08:00

A peculiarity of the Swiss board is its positioning between shareholders and stakeholders. While shareholders elect board members, the Swiss legal framework requires the board of directors to act in the best interests of the whole company, which is in stark contrast to the situation in the US where the board is required to act in the best interests of the company’s shareholders only.

The board generally delegates operational business to an executive management layer, but is responsible for setting the strategy (mainly through incentives) and the boundaries within which management is supposed to act, and ultimately monitors management to ensure it works in the best interests of the company.

 

So, what are the recommendations for boards of directors and what are the recent trends in board composition?

  • The board of directors should proactively seek engagement with investors to explain the company-specific governance framework and, thereby, avoid market judgments that may be based on undifferentiated, rules-based analyses.
  • The board of directors should make the work it carries out for the company as tangible as possible for shareholders while preserving legitimate confidentiality levels. This builds trust and allows shareholders to better understand the board’s decisions.
  • The proportion of foreign directors has risen, from 36 percent in 2008 to 43 percent in 2016. So has the proportion of female board members—now at 17 percent, up from 7 percent in 2008. Of newly elected board members, in 2014 30 percent were women and in 2015 and 2016 more than 20 percent were women.

Interested to find out more?

Read the latest SFI White Paper and learn whether it makes sense to limit the tenure of board members to a maximum number of years, how to deal with shareholders who use a checklist approach to annual meeting votes, and about the scientific evidence regarding the economic effects of gender quotas.

 

Read other related posts on this topic:
How does the corporate governance cycle of companies work?
How active are the shareholders of Swiss listed companies and what is their role?