In addition to the diversity of board roles in the governance of corporations, differences in the leadership structure, the organization structure and the composition of boards provide a wide range of prototypes of corporate board models in Western countries. Regional and international developments have resulted in two leading approaches to the organization of corporate boards: the Anglo-Saxon one-tier board model and the continental European two-tier board model.
In general, Anglo-Saxon countries such as the US, the UK and Canada have adopted variants of the one-tier board model. In this model, executive directors and non-executive directors operate together in one organizational layer (the so-called one-tier board). Some one-tier boards are dominated by a majority of executive directors while others are composed of a majority of non-executive directors. In addition, one-tier boards can have a board leadership structure that separates the CEO and chair positions of the board. One-tier boards can also operate with a board leadership structure that combines the roles of the CEO and the chairman.
This is called CEO-duality. One-tier boards also make often use of board committees like audit, remuneration and nomination committees. Continental European countries such as Germany, Finland and the Netherlands have adopted variants of the two-tier board model. In this model, an additional organizational layer has been designed to separate the executive function of the board from its monitoring function.
The supervisory board (the upper layer) is entirely composed of non-executive supervisory directors who may represent labor, the government and/or institutional investors. The management board (the lower layer) is usually composed of executive managing directors. It is generally not accepted by corporation laws that corporate statutes foresee in the possibility that directors combine the CEO and chairman roles in two-tier boards. Because the CEO has no seat in the supervisory board, its board leadership structure is formally independent from the executive function of the board. This is particularly the case in two-tier boards in the Netherlands and Germany.
In variants of the two-tier board model in these countries, executive managing directors are not entitled to have a position in the supervisory board of the corporation. Part II of this study presents a more detailed overview of the characteristics of one-tier boards in the US and the UK and those of two-tier boards in the Netherlands.
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- 1.7 Conclusion
- 1.6 The Research Approach of This Study
- 1.5 The Organization of This Study
- 1.4 Research Questions on the Formal Independence of Corporate Board Models
- 1.3 Alternative Approaches to the Formal Independence of Corporate Boards of Directors