Which of the following statements best describes 'supervisory board'?

Which of the following statements best describes 'supervisory board'?

• A. A board with no executive powers
• B. A board that acts as the primary governing body
• C. A board that includes only shareholders
• D. A board responsible for daily business decisions

Answer: (A)

The statement that describes a 'supervisory board' as a board with no executive powers captures the essence of its role in governance structures, especially in a two-tier system often seen in countries like Germany. A supervisory board typically oversees the management of the company but does not engage in the day-to-day operations or make executive decisions. This separation of powers is intended to provide a checks-and-balances mechanism where the supervisory board ensures accountability and compliance while leaving the execution of business strategies and day-to-day management to the executive board. In contrast, the other statements do not accurately reflect the function of a supervisory board. While one might think it could act as a primary governing body, in systems with a dual board structure, that role is usually assigned to the executive board. The idea that the supervisory board consists only of shareholders is not correct, as it can include independent directors and experts who provide valuable oversight without necessarily having a stake in the company. Lastly, claiming that it is responsible for daily business decisions misrepresents its function, as that responsibility lies with the executive board instead.

The statement that describes a 'supervisory board' as a board with no executive powers captures the essence of its role in governance structures, especially in a two-tier system often seen in countries like Germany. A supervisory board typically oversees the management of the company but does not engage in the day-to-day operations or make executive decisions. This separation of powers is intended to provide a checks-and-balances mechanism where the supervisory board ensures accountability and compliance while leaving the execution of business strategies and day-to-day management to the executive board.

In contrast, the other statements do not accurately reflect the function of a supervisory board. While one might think it could act as a primary governing body, in systems with a dual board structure, that role is usually assigned to the executive board. The idea that the supervisory board consists only of shareholders is not correct, as it can include independent directors and experts who provide valuable oversight without necessarily having a stake in the company. Lastly, claiming that it is responsible for daily business decisions misrepresents its function, as that responsibility lies with the executive board instead.