12 questions to:

Ewa Radkowska-Świętoń, CFA, FRM

CEO of Association of Independent Supervisory Board Members

The icon of the Polish capital market – institutional investor, President of the Management Board, independent Supervisory Boards member – a real 'role model' for women interested in capital markets and finance. Designated with two international certificates: CFA (Chartered Financial Analyst) and FRM (Financial Risk Manager). A woman who has been an inspiration for me since the early days of my professional career on the Polish capital market – Ewa Radkowska-Świętoń.

Ewa, thank you for accepting the invitation to the project, it means a lot to me!

You are one of the few women who serve as independent supervisory board members. Please explain what a supervisory board does and how to understand the word 'independent'?

The supervisory board is the company’s supervisory body that monitors the activities of the management board. Supervisory board appoints members of the company’s management board, gives opinions on the company’s financial statements and proposals for profit distribution, assesses the internal control systems, also from the point of view of the most significant risks. Board members are elected by the company’s shareholders at general meetings.

Independence of supervisory board members is an important concept – it means appointing to the board persons who are not related to the company itself and its key shareholders. They can thus objectively look at its activities and plans. Supervisory board decisions should take into account the welfare of various stakeholders, including all shareholders.

I encourage everyone who invests on his/her own behalf to check how many independent members of the supervisory board the company has and who they are.

Is the supervisory board a homogeneous body or does it represent different ways of looking at business, its future and value creation?

Supervisory board members are usually persons with different education, professional experience, varied levels of knowledge of the industry and the company and often different views on business, its main goals and values it should pursue. Such diversity is, in my opinion, very stimulating and gives the management board and managerial personnel a chance to look at specific business decisions from many perspectives. In my opinion, due to its bird’s eye view and lesser focus on short-term results, supervisory board may offer space in which different visions for development and future of the company can be discussed. These differences may be fundamental, yet often it is also possible to reach a compromise.

Supervisory board also operates through committees, including Audit Committees on which you sit. What are the roles of such committee members and is their work important from the point of view of capital market participants?

The audit committee is a particularly distinguished committee of the supervisory board, one could say such a special task force for financial reporting and risk management. It is the audit committee that monitors and supervises the entire process of creating financial statements. Its role is to assure that the financial statements prepared by the management board offer a true and fair view of the company and contain all the information relevant to investors (current and potential).

The audit committee must consist of at least three people and these persons must have additional qualifications. At least one of them should possess knowledge and skills in the field of accounting or auditing, and at least one should be distinguished by knowledge of the industry in which the company operates. By law, most members – including the chairman of such a committee – should be independent.

The committee regularly cooperates not only with the company’s financial department, but also with the statutory auditor. The second area of particular interest of the audit committee is the internal control system operating in the company. Hence, regular meetings with persons responsible in the company for risk management, compliance (i.e. acting in accordance with the law) or cybersecurity, and above all internal audit. An efficiently operating audit committee pays attention to risks that may have the greatest impact on the company’s operations and urges the management to mitigate them.

From the point of view of an outsider, supervisory board may seem like a bit of a 'mysterious body'. It does not communicate as often with shareholders as the management board and does not vote as openly as shareholders at general meetings. However, it publishes reports – what is there worth paying attention to?

The Report of the Supervisory Board shows which issues are most important for the board in the company’s operations and from the point of view of its results. It is worth reviewing such reports to be aware not only of what the organization focuses on, but also how often the supervisory board meets – is it just the statutory minimum or is the board an active body, also between meetings.

It is worth paying attention to the reports on the works of committees, especially the audit committee. For me, the report on the assessment of the company’s situation is also interesting, especially in the area of internal control systems. Still, many listed companies do not have an internal audit unit, i.e. an internal policeman who would verify its activities. This is a more demanding situation for the audit committee, which we can also read about in such a report.

What qualifications and skills are needed to start a career as an independent supervisory board member? Is it a job for everyone? It is commonly believed that supervisory board meetings are so-called discussions over coffee – how much truth is there?

I do not like coffee;) so rather over tea, and for the last year rather at the monitor. More seriously, to work on the supervisory board, in my opinion, you need both some hard and soft skills and commitment.

At least basic knowledge of accounting and finance, the Code of Commercial Companies and industry regulations is important. Knowledge of risk management is also very useful. Experience in business is also key, not necessarily in the sector in which the company operates. Therefore, in supervisory boards, I would envisage people who have seen a lot in their lives and are able to draw general conclusions from these experiences.

The key factor, however, is the independence in thinking, which for me means not relying only on the opinion of the management board or other board members, but drawing conclusions based on own analysis of data or documents. It also stands for courage in expressing these opinions while remaining open to changing one’s mind. During the work on the board, soft skills are also useful, such as the ability to establish relationships, run discussions and cooperate with a group of diverse opinions.

Coming back to the coffee discussion, if you take the role of a supervisory board member seriously, board meetings are just part of the job. Engaged supervisory board members follow the activities of the company and events in the industry in which the company operates on an ongoing basis, carefully study the materials prepared for the meetings and maintain contacts with the company’s representatives, the auditor or shareholders.

We both belong to a prestigious association – the Association of Independent Supervisory Board Members – what is our mission and vision and who can join us?

The Association of Independent Supervisory Board Members aims to spread awareness of the role of independent members of supervisory boards and to professionalize this profession. We believe that exchange of experiences, expanding our knowledge and influencing the shape of regulations are the best means to achieve this goal.

We have a lot of success, although we are a young Association. Many of our comments were taken into account in the process of developing the Polish FSA (Polish Financial Supervision Authority) guidelines for companies regarding the appointment and operations of audit committees. We care about high quality, so only persons recommended by current members who are or have served as independent board members in companies listed on the WSE (Warsaw Stock Exchange) can join us.

Your professional career includes not only supervisory boards, but also being the President of the Management Board (CEO) of a listed company. How working on the management board differs from working on the supervisory board?

In almost everything;) The CEO is responsible for everything that happens in the company, monitors the most important indicators and results every day, is involved in solving problems and is on the look-out for new opportunities for the company’s development. He/she lives through every success, but also every failure. A CEO devotes one hundred percent of his/her time and energy to the company’s affairs. He/she must reconcile the interests of customers, employees and shareholders.

On the supervisory board, these burdens are lesser, because the decision-making power is incomparably smaller. There is more space here for advice, pointing to potential problems and opportunities, yet the emphasis is on risks. In the work of a management board member, opportunities come first.

Women remain a minority on boards of listed companies in Poland, both on management and on supervisory boards. What are the reasons behind it and how could it be changed?

This is probably a topic for a separate discussion. Unfortunately, the problem of women’s participation on company boards does not apply only to listed companies. Where does this glass ceiling come from? Probably largely due to the fact that it is women who devote their time to caring for children and these few years “taken out” from professional life mean that men climb the next career ladder faster.

The issues of stereotypes instilled (both in boys and girls) from an early age are also important, that women are more emotional, have problems with making decisions, are „too soft”, which is to be an obstacle in being an effective manager. Fortunately, we know today how far from the truth these statements are, as shown by your research „Women on boards and company performance”.

How to change it? Of course, building awareness and showing that institutions with diverse boards perform better is one way. In my opinion, however, the best way is through systemic solutions, i.e. regulations improving the situation of women in the labour market, and in the case of the authorities of listed companies, more or less categorical determination of their minimum participation on boards. Shareholders, paying an increasing attention to ESG (environmental, social, governance) issues, may also have some influence on the situation.

For many years you have been a portfolio manager at both a mutual and pension fund and an investment director. You have experience at all three levels of corporate governance. How does an institutional investor perceive the composition of the management and supervisory board – competence and diversity of its members?

In the case of management boards, the investor’s first priority are competencies that ensure the company is led by a group of people with experience and success in most important areas. The person responsible for finance (CFO) plays a very important role for fund managers. He/she is often responsible for investor relations.

In the case of the supervisory board, an adequate share of truly independent members is important. It seems to me that diversity issues are still not very present in the minds of domestic investors.

You touched on ESG. Capital markets are changing, non-financial indicators are increasingly important. How do you think these trends will develop in the coming years?

In my opinion, we are only at the beginning of the wave of interest in ESG issues and we are just starting to understand that the so-called non-financial factors have a real impact on the financial situation of companies.

I am following the discussions on shareholders vs. stakeholders value, i.e. what should be the goal of enterprises – increasing value for shareholders or for the wider stakeholder group. The latter is increasingly more appealing to me.

The climate crisis and the pandemic show, in my opinion, that focusing only on short-term profits is not enough to ensure the company has a relatively stable future. Legal regulations forcing financial institutions to take into account ESG risks have a significant impact on the strength of these trends.

Could shareholder activism, i.e. an active approach of mutual and pension funds, help in enforcing greater commitment from companies to sustainable growth and the inclusiveness of their boards?

Of course, if only those elements found their place in investment policies and rules of exercising the rights of shareholders by fund management institutions. It seems that this approach is still an exception rather than a rule on our market. Fortunately, the EU regulations somehow force investors to pay more attention to the issues of sustainable development, which may force us to change our approach.

What advice would you give women who are considering embarking on a career on the capital market?

First of all, I would like to tell them – do not be afraid, be brave! This job is for you.

And from more specific advice – of course, as everywhere, knowledge is very important, but practice is even more crucial. So, apart from valuation methods, excel, time value of money, reading financial statements, it is worth getting to know as many companies and their business models as possible, both those that have been successful and those that have not. It is very helpful, especially in the beginning, to find a „mentor” willing to share knowledge and experience.

What else? Don’t limit yourself to our local backyard. Look for knowledge and examples of companies also outside of Poland. Be interested in what is popular and on top in developed markets, e.g. ESG, algorithms. And don’t worry if you think the capital market is a male environment. From experience I can say that we can be successful everywhere, here too;)

Ewa, thank you very much for a huge dose of knowledge, experience and practical advice.

Advisory services

We help companies build value for stakeholders by supporting them in decision making and communication of those decisions.

Support in taking decisions that build value for stakeholders.
Organic versus acquisitive growth. Equity versus debt financing.
Corporate strategy and valuation.

Support in relations with shareholders.
Perception studies, Investors’ Days, quarterly presentations.
Dividend and buy-back policies. Creation and valuation of stock option programmes.

Building of financial models and valuation of companies.
Streamlining of the reporting process, creation of controlling and managerial accounting sheets.