When Board Terms Depend on the Articles
The term of office of board members is a central element of corporate governance and organizational stability. In this decision, the Swiss Federal Supreme Court clarifies that, in non-listed companies, the articles of association may validly extend the mandate of board members until the next effectively held shareholders’ meeting. The judgment refines the Court’s earlier case law and highlights the importance of precise drafting of corporate statutes.
Background
A. and D., both shareholders and former or current board members of B. SA, had been involved in a long-standing dispute. The articles of association provided that the shareholders’ meeting must be held within six months after the end of the financial year and that board members are elected until the next ordinary shareholders’ meeting. A. challenged the validity of board re-elections adopted at the shareholders’ meetings of 5 November 2021 and 20 September 2022. The key issue before the Swiss Federal Supreme Court was how the wording “for a term of one year until the next ordinary shareholders’ meeting” should be interpreted in light of earlier case law, particularly BGE 148 III 69.
Court Decision
The Swiss Federal Supreme Court held that the articles of association of B. SA did not limit the board members’ term of office to a strict one-year period. Since the statutory six-month period for holding the ordinary shareholders’ meeting under Art. 699 para. 2 CO is merely an administrative deadline, the mandate of the board members could validly continue until the next effectively held ordinary shareholders’ meeting.
The Court further confirmed that the wording “for one year until the next ordinary shareholders’ meeting” meant that the mandate lasted either until the first anniversary of the election meeting or, if earlier, until the next shareholders’ meeting at which the board members were re-elected. Consequently, the company did not suffer from an organizational deficiency under Art. 731b CO.
Implications
The judgment provides important clarification regarding the flexibility of board terms in non-listed companies. The Swiss Federal Supreme Court confirmed that companies may structure the duration of board mandates in their articles of association, provided the maximum statutory duration is respected.
At the same time, the decision partially revises and softens the earlier approach established in BGE 148 III 69. However, the judgment also demonstrates that legal uncertainty remains where articles of association are drafted ambiguously. The case therefore highlights the practical importance of clearly drafted provisions governing the term of office of board members.
Board ViewsEvery Strategy Needs an Owner Strategy
Who ultimately determines the strategic direction of a corporation? The board, the CEO, the strategy department, the strategy consultants, or perhaps even artificial intelligence?
The obvious answers are tempting, but incomplete. Not the board alone, even though it carries central responsibility for strategic direction and oversight. Not the CEO, although management typically develops and implements strategy. Not the strategy department, although it may structure the process. Not the consultants, although they may sharpen the analysis. And not artificial intelligence, although it is playing an increasingly important role in the strategy process.
All of these actors may shape strategy, refine it, and translate it into decisions and action. Yet the most fundamental strategic expectations should originate one level higher: with the owners.
Whether the owner is a family, the state, a foundation, a private equity investor, or a dispersed group of shareholders, ownership inevitably carries expectations. Owners have views, explicit or implicit, about why they hold the company, what they expect from it, how long they intend to remain invested, which risks they are willing to accept, how much capital they are prepared to provide, and what they ultimately understand by value creation. These expectations form what can be described as an owner strategy.
Board ViewsDebunking Ten Common Board Myths
Boards love simple formulas. “Nose in, hands off.” “Boards set strategy.” “Independence matters.” “Ask questions, don’t provide answers.” They are memorable, easy to teach, and often directionally right. They are also dangerous when taken too literally.
Most governance myths are not wrong because they are false. They are wrong because they are incomplete. They capture one side of a tension while ignoring the other. Yet board effectiveness rarely comes from choosing one side. It comes from understanding both.
Here are ten board myths worth debunking.
Board ViewsAgentic Governance: Is It Time to Rethink Principal-Agent Theory?
Artificial intelligence is beginning to reshape not only how organizations make decisions, but also how governance itself is exercised. Much of the current discussion focuses on the extent to which artificial intelligence can support, augment, or automate human decision-making. Yet the emergence of agentic intelligence raises a more fundamental question: What happens when artificial systems increasingly interact, negotiate, decide, and act autonomously with other artificial systems?
Board ViewsThe Thinking Board in the Age of AI
Boards today confront a paradox. On the one hand, they operate in an environment of radical complexity. On the other hand, directors remain human bounded in their rationality, limited in their ability to process information, and prone to biases that shape judgment in systematic ways. Artificial intelligence (AI) promises to change this equation. By extending the reach of human cognition, they enable boards to move from a world of structural information asymmetry toward one of intelligence symmetry. Yet technology alone cannot guarantee better governance. What is needed, therefore, is the thinking board that debates assumptions, grounds itself in data, deliberates inclusively, and sustains dialogue with its stakeholders.
Board ViewsFrom Information Asymmetry to Intelligence Symmetry: How AI Will Reshape Corporate Governance
Information asymmetry has long been a central challenge in corporate governance, leading to misaligned incentives, agency problems, and reduced organizational efficiency. This article explores the transformative potential of artificial intelligence (AI) in shifting corporate governance from regimes dominated by information asymmetries to new paradigms characterized by "intelligence symmetries." By enhancing transparency, automating oversight, and enabling predictive analytics, AI can realign stakeholder relationships and improve governance outcomes. The article provides a theoretical framework, examines real-world implementations, and discusses the limitations and ethical concerns associated with AI-driven governance. Ultimately, it argues that AI holds the power not only to improve the efficiency of governance mechanisms but also to democratize corporate oversight by making intelligence accessible and actionable across the corporate hierarchy.
Board CasesWhen Governance Ends through Inaction
Boards of Directors face a structural tension regarding mandate duration. While legal requirements clearly define the role of the general meeting and term limits, in practice these rules are not always consistently applied, leading to uncertainty and de facto extensions. The Federal Supreme Court decision clarifies that governance cannot be prolonged through inaction and that the general meeting must actively exercise its authority. Effective governance depends on clear accountability and functioning institutional processes, not on habit.
Board ViewsFrom Corporate Governance of Sustainability to Sustainable Corporate Governance
What is the best way to integrate sustainability into the corporate governance framework? Boards of directors have chosen two distinct paths: the functional way, which focuses on corporate governance of sustainability, and the foundational approach, which leads to sustainable corporate governance. This article assesses the merits and limitations of both approaches and calls for a transition to sustainable governance. This requires board members to engage regularly with stakeholders and to continuously debate the underlying assumptions to further develop the governance framework as required.
Board ViewsThe Multipurpose Corporation as a Driver for Sustainable Value Creation
The nature of the debate on the role of business in society strongly suggests a cyclical nature, with constant attempts to balance different interests and perspectives. To overcome the illusion of solving this conundrum, this article proposes an alternative approach, multipurpose capitalism. It posits that companies should compete not only on their products and services, but also on their different purpose profiles. It is left to consumers, workers, and investors to decide where to shop, work, and invest. The article offers a framework and methodology to create a comprehensive ecosystem that enables this matching process and suggests ways to overcome the challenges along the way.
