"Corporate governance starts with the board of directors"

Gn accordance with the label's co-founder, Silvan Felder, Best Board Practice (BBP) helps to ensure legal compliance, continuously improves corporate governance, reduces liability and accountability issues, creates transparency and ensures the professionalism of top management. What has been vbl's experience with BBP? Chairman Yvonne Hunkeler and CEO Dr. Norbert Schmassmann answer our questions here.

You were the first company in Switzerland to obtain BBP. How did it come about?

Norbert Schmassmann: "Corporate governance begins with the Board of Directors. It was with this conviction that Konrad Graber, then Chairman of the Board of Directors of vbl and now a member of the Council of States, approached the CEO in 2003 with the idea of the newly created "Best Board Practice" label. I recognized the opportunity and the benefit of such a label to be able to "stand out" positively from other stock corporations in terms of governance. Even today, many board members are not elected on the basis of their suitability, but on the basis of "acquaintances". In practice, the interaction between the board of directors and the executive board is often strained because competencies are not clearly delineated or roles are not properly defined.

What are the leadership considerations behind this?

Yvonne Hunkeler: Good interaction between the board of directors and the management depends on various factors. On the one hand, the board of directors must function well as a team; on the other hand, tasks and competencies between the board of directors and the management must be clearly defined and delineated. The board of directors must concentrate on its strategic management tasks, while the executive management must focus on the operational management of the company. This in turn only works if the board of directors does not "interfere" in the operational business. However, this refraining is only possible if the trust between the two bodies is intact. The right composition of the executive board is therefore the responsibility of the board of directors. Crucially, for the "Best Board Practice" label to be effective, it must be lived in practice. Only such board practice deserves the adjective "best".

What does the BBP label bring to the vbl shareholder?

Yvonne Hunkeler: BBP brings indirect, but quite direct advantages for the shareholder. Trust can be gained from shareholders first of all if they know exactly what the responsibilities of the BoD and the GM are and are familiar with the rules of cooperation between the bodies. When it comes to filling vacant board positions, shareholders also benefit if the recruitment and nomination process is based on transparent criteria.

How does the Board of Directors benefit?

Yvonne Hunkeler: The advantage of BBP for the members of the Board of Directors is that they are more aware of their role and responsibility. Strategic and managerial responsibility is emphasised; it is laid down in processes that are reviewed annually via SQS audits. In addition, the annual self-evaluation strengthens the team spirit within the Board of Directors. The individual members of the Board of Directors see themselves as part of the team, in which different specialist skills and opinions come together and should lead to good decisions through dialogue. This limits "head-nodding" in favour of the Chairman's Office.

And the management?

Norbert Schmassmann: For the CEO, the label has the advantage that certain business and agenda items are "automatically" placed on the BoD agenda without the CEO having to draw the BoD's attention to the fact that there are

"BBP ensures professionalism in VR".

"It would actually be time to discuss certain matters once again. For example, according to the BBP label, the organizational regulations "ex officio" and the remuneration of the BoD and the GM must be reviewed annually. BBP gives the CEO more support; he knows where he stands in board practice and what the rules of the game are. The GM has been given broader, but clearly defined competencies. This creates trust.

Are the auditors also affected?

Yvonne Hunkeler and Norbert Schmassmann agree: Yes, the cooperation is positively supported thanks to BBP. The auditors can "rely" on certain practices and benefit from the fact that good governance between the BoD and the GM is exemplified. The cooperation with the auditors is delegated to a BoD committee in accordance with the regulations. The processes and interfaces are thus defined. Proposals are submitted to the full Board of Directors.

Is the company feeling the change in governance?

Norbert Schmassmann: Reliable delimitations of tasks and competencies are of great advantage for both the strategic level (BoD) and the operational level (GM). The "separation of powers" cannot be made as clear as day. If there is any ambiguity, we sometimes refer to a set of regulations or a function diagram. But practice shows that not everything can be written down. Good governance must be part of the self-image of the Board of Directors and the Management Board. Since we have been "living" this label at vbl AG, a form of governance has been established that all those involved consider to be very purposeful and pleasant.

Yvonne Hunkeler: Certainly, some changes might have been made even without this label - because of changes in the environment, general developments, changes in the legal basis or our own findings. Not everything we do today can be attributed one-to-one to BBP alone. But the BBP label has supported us in each case and made us aware of certain things.

How has BBP influenced risk policy?

Yvonne Hunkeler and Norbert Schmassmann agree: A member of the Management Board designated by the Board of Directors is entrusted with the task of Risk Manager. The Risk Manager prepares an annual risk report - independently of the CEO - for the attention of the Board of Directors. The report contains an overview of all strategic and operational risks.

"Good governance is part of who we are"

and provides information on changes in the assessment of the various risks in a risk matrix. This makes it easier for the Board of Directors to decide on any risk-reducing measures. Within the framework of risk management, an emergency organization with an emergency staff has also been set up. Its head is the Risk Manager. This is intended to ensure that operations can continue as smoothly as possible in an emergency situation. For minor incidents - including operational incidents and, unfortunately, minor accidents on an almost daily basis - there are well-established responsibilities.

And the session mode?

Yvonne Hunkeler: The Board of Directors meets four to five times a year. The annual schedule determines which standard agenda items are scheduled and when, so that important matters are not forgotten. The agenda items of the Board of Directors are of a strategic nature. In the operational area, the CEO has an obligation to provide information upwards: the BoD, and certainly the Chairman of the BoD, is informed proactively and on an ongoing basis about important business transactions or events. She decides on a case-by-case basis whether the BoD as a whole should be informed or whether a circular resolution should be obtained.

How does BBP regulate communication?

Yvonne Hunkeler: Strategic and operational communication must be clearly separated. In the event of a crisis, it is particularly useful if it is clear who is communicating what. At vbl, communication is basically the responsibility of the CEO, supported by his communications officer. The Chairman's Office, on the other hand, communicates matters relating to the relationship between the Board of Directors and the shareholders - the City of Lucerne.