Lino Ballof, research assistant at the Department of Accounting headed by Prof. Michael Stich at TUM Campus Heilbronn, also enjoys the advantages of working remotely, from the increased convenience and the time saved to the smaller carbon footprint. “Even before restrictions were introduced during the pandemic, I was a big fan of virtual meetings because they allow more flexibility in my academic and my personal life. Today, I am much more skeptical about whether these presumed convenient formats actually lead to optimal results for me and for others. After many meetings, I think that physical meetings would have been the better option,” says the junior researcher at the TUM School of Management.
The main reason for Ballof’s shift in perspective is that now he has scientific proof of his initial doubts because he has conducted extensive research into the motives for and consequences of diverse communication and meeting formats – virtual, hybrid, and in person.
Research on Supervisory Board Meeting Formats
As part of his current research project, Ballof investigates the influence of technology-based forms of communication and meetings of supervisory boards of companies in Germany on the effectiveness of these powerful control committees. He focuses on the deliberate manipulation by CEOs of business figures, such as sales and annual net profit – or, in Ballof’s words “accounting policy measures that do not necessarily constitute illegal or ethically reprehensible practices.”
In addition to parameters defined in a targeted manner for the accounting department such as a deliberately overstated useful life of a machine, measures include project design and business relationships, for example, deliberately delaying promising research projects. The question is whether supervisory boards holding virtual or hybrid meetings can counter this type of manipulation as effectively as when meeting in person.
Through meticulous and detailed work, Ballof has collected large quantities of data from non-standardized corporate documents which provide an in-depth view of the composition and workstyles of supervisory boards that meet in person. Because Germany is a leader in supervisory board transparency in Western countries, an ostensibly unique data treasure trove has been compiled at TUM Campus Heilbronn over the past few years. The data stems from information published by companies according to the German Corporate Governance Code (GCGC) regarding the format of their supervisory board meetings.
Balance Between Flexibility and Effectiveness
Ballof’s main finding is that several empirical clues indicate a connection between the formats of supervisory board meetings and the extent of accounting manipulations of balance sheets. Supervisory boards meeting in virtual rooms tend to be able to counter this manipulation less effectively than those that meet on-site. “There is no doubt that group dynamics and discussion
culture differ among virtual, hybrid, and physical meetings. We all have been in situations where we prepare differently for interactive presentations than for monologs followed by Q&A sessions in virtual rooms. Also, we have found significant differences between the challenges of leading meetings productively and the meaning of non-verbal communication,” Ballof explains.
Another noteworthy finding is that meeting exclusively in person is not optimal for any supervisory board as well. The empirical data suggests that strategically combining physical and virtual meetings and allowing individuals to participate remotely in justified exceptions is the most effective way to curb earnings management practices.
For this reason, Ballof advocates for a flexible approach between flexibility and effectiveness: “Direct personal dialog is paramount to effective supervision. Even though members of supervisory boards tend to be busy people working in an international arena, it is plausible that you can get and motivate the best talent if you don’t complicate participation in meetings unnecessarily.”
Only Strategic Combinations Promise Long-Term Success
“My primary goal was to use the results of my research to spark an open discussion about strategic work formats for the future,” says Ballof. So how do his findings affect the ongoing discussion about working remotely? Should working from home be banned immediately as many company owners demand? “Of course not,” says Ballof, “trying to revert to outdated practices and taking a binary approach surely will not bring about the desired results. Instead, companies need to take an honest and unbiased look at their processes and use the strengths of both approaches and use them purposefully.”