No CTO at the Table, No Growth on the Balance Sheet

Why DACH companies destroy value without IT/technology in core executive leadership – and what boards, supervisory boards, and investors must change now.

01 The DACH Governance Gap

The pattern is always the same: an executive board consisting of CEO, CFO, and COO – and a CTO or CIO reporting one level below. Technology has a budget, but no seat at the decision-making table. What appears to be a pragmatic organizational structure is, in reality, a strategic design flaw.

In the DACH region, this setup is standard. The CTO is part of the extended management team, but not part of core executive leadership. He or she may advise, but not decide - and IT is managed as an operational necessity, not as a strategic driver of growth. The result: technology investments are evaluated through a CFO lens rather than competitiveness. Digital initiatives must fight through hierarchical layers before reaching the board agenda - and when the market moves faster than the organizational structure, the board lacks the person who can assess technological risks and opportunities in real time.

The two-tier system exacerbates the issue. In US one-tier boards, the CIO often sits directly at the table. In the German management board–supervisory board model, the hurdle is doubled: neither the management board nor the supervisory board systematically includes technological expertise. This is not a governance detail - it is a structural blind spot that impacts P&L and enterprise value.

02 The Numbers: What IT Representation Means for Growth, Valuation, and Resilience

This is not a consultant’s opinion but empirically proven research - published in leading Tier-1 journals such as MIS Quarterly, JAIS, and the European Journal of Information Systems, all part of the renowned “AIS Basket of Eight,” with consistent findings. In our view, three impact dimensions stand out:

First: Capital markets reward IT representation - immediately and sustainably.
When companies create a CIO position at top management level, markets respond with measurable stock gains: +1.16% cumulative abnormal returns on average, up to +2.97% in IT-intensive industries (Chatterjee et al., 2001). This is not theoretical - it is reflected in stock performance in the days following the announcement.

More recently, a 2022 study (Bandodkar & Grover, JAIS) confirmed that CIOs/CTOs as board directors significantly increase Tobin’s Q - not just as a short-term signal, but as a sustained increase in firm valuation over years. (Tobin’s Q measures market value relative to asset value - the higher it is, the greater the market’s confidence.)

Second: More digital innovation - measurable in patents and products.
An analysis of 2,852 firm-years in the S&P 500 shows that companies with a CIO in the top management team generate 4.3 percentage points more digital patents (Bendig et al., 2023). The mechanism is clear: “who sits at the table sets the agenda.” IT leadership shifts attention and resources toward digital value creation - not as a project, but as a strategic priority. Additionally, board-level IT governance significantly improves organizational performance, especially in innovation-dependent business models (Turel & Bart, 2014).

Third: Fewer security incidents, better governance.
Companies with IT executive involvement in leadership show about a 35% lower breach probability (Kwon et al., 2013). Improved overall performance - from accounting metrics to market performance - has also been demonstrated across more than 32,000 firm-years (Joshi et al., 2019).

The expectation effect - and why it is a quality signal.
Companies with IT-competent boards are penalized more strongly by capital markets during IT failures. While this seems contradictory, it is logical: investors expect more. Signaling IT competence raises the performance bar. This is not an argument against IT at board level - it is an argument for genuine IT governance rather than cosmetic titles (Benaroch et al., 2021).

03 The Cost-Center Paradigm Is Obsolete

Empirical evidence disproves the dominant DACH narrative: technology as a cost center to be managed efficiently. In an economy where digital products, platform models, and AI-driven processes define value creation, this perspective is not just outdated - it destroys value.

Technology is not support - technology is the business. When the CIO reports to the COO or CFO, technology is inevitably managed according to their logic: efficiency optimization, budget control, risk minimization. These are necessary functions - but insufficient for digital value creation. That requires strategic decision-making power at the highest level - not advisory input from the second tier.

The distinction between IT presence and IT power is critical. Studies show: a CIO title alone has little impact. Positive effects on innovation, firm value, and resilience occur only when IT leadership has real decision-making authority - over budgets, strategy, and investment priorities.

04 What Boards and CEOs Must Do Now

Research shows the correlation. Implementation lies with decision-makers. Three levers can be activated immediately:

First: Elevate tech competence into core executive leadership.
This does not necessarily mean creating a new board position. It means giving the CTO or CIO full voting rights, direct access to the supervisory board, and equal decision-making power alongside CEO, CFO, and COO. Reporting lines must go to the CEO - not the COO.

Second: Anchor IT competence in the supervisory board.
If the supervisory board oversees digital strategy, it must include members capable of evaluating it. Establishing a technology committee or appointing board members with deep tech experience is not optional - it is a governance requirement in a digital economy.

Third: Manage technology investments with a value-creation logic.
As long as IT budgets are evaluated solely on TCO and payback, technology will remain structurally underfunded. Boards should also assess investments against strategic KPIs: digital revenue share, time-to-market, platform capability, and cyber resilience.
 

BOARD DIAGNOSIS: Five Questions That Reveal the Need for Action

• Does your CTO/CIO have full voting rights in the top decision-making body, with a direct reporting line to the CEO?
• Does your supervisory board include at least one member with operational C-level technology experience?
• Are technology investments evaluated based on value creation - beyond TCO and payback?
• Is digital strategy a standalone item on the board agenda - at least quarterly?
• Could your board assess a technological disruption in your market within 48 hours - without external advisors?

A “no” is not a failure - it is an indication of untapped value potential. We support you in analyzing your board structure and tech governance, identifying critical gaps, and developing prioritized measures with measurable impact on company valuation and strategic capability.