4.5 Summary

In chapter three, the association between board attributes and board independence has been approached from a conflict perspective of board organization. Due to the assumed diverging interests of principals and agents, legislators, stock exchanges and other reformers promote independent board models that separate decision management from decision control. To formalize the independence of board models, and to build a theoretical model on board model convergence, assumptions have been introduced in chapter three on the composition, the leadership structure, the committees and the organization of one-tier and two-tier boards. In general, the assumptions suggest a negative association between one-tier board attributes and board independence (see cell A in table 4.3).

This implies that the structure and the composition of one-tier boards are dual in nature. Duality means that board structures facilitate the concentration of power and authority in the hands of management through the integration of decision management with decision control (Davis, 1991; Boyd, 1995). In contrast to the duality of one-tier boards, chapter three suggests a positive relationship between two-tier board attributes and the separation of decision management from decision control (see cell B). This implies that two-tier boards are independent in nature due to the binary structure of the board (the supervisory and management boards), the formal separation of CEO and chairman roles and the absence of executive positions in supervisory boards.

 

Table 4.3

Conflict and Consensus Perspectives of Board Independence,

Board Duality and Board Model Design

 

 

 

One-tier board attributes.

 

Two-tier board attributes.

 

The separation of

decision management from decision control:

(independent structure).

 

-

Agency theory.

(conflict).

cell A

+

Agency theory.

(conflict)

cell B

 

The integration of decision management with decision control: (dual structure).

 

+

Stewardship theory.

(consensus)

cell C

-

Stewardship theory.

(consensus)

cell D

 

 

Chapter four further built on a consensus perspective of board organization. As part of the theoretical model on board convergence in this research, it explored assumptions related to the structure of one-tier and two-tier boards and the integration of board roles. Three assumptions (assumptions A.3a, A.3b and A.3d) suggest a positive association between the composition, the leadership structure and the organization of one-tier boards and the duality of one-tier boards. In line with the observations in chapter three, a negative association is suggested between the formation of independent oversight board committees and the duality of one-tier boards (assumption A.3c). In general, the assumptions suggest that the integration of decision management with decision control is supported by one-tier boards composed of executive directors who operate with a combined board leadership structure (see cell C in table 4.3).

 

This chapter also sought to find support for the assumption that a negative relationship can be found between two-tier board attributes and the integration of decision management with decision control (cell D in table 4.3). Seen from a consensus perspective of board organization, the composition of supervisory boards is negatively associated with the integration of decision management with decision control (assumption A.4a). Assumption A.4b suggests a negative relationship between the leadership structures of two-tier boards and the integration of board roles. In a similar vein, the binary structure of two-tier boards is negatively associated with the integration of decision management with decision control (assumption A.4d). Board committees of supervisory boards are positively associated with the integration of board roles (assumption A.4c). See also figures 4.1 and 4.2 for an overview of assumptions related to board model attributes and board duality.

Figure 4.1

The Duality of One-Tier Boards

 

Figure 4.2

The Duality of Two-Tier Boards

Part II of this research further explores the organization and composition of boards in the US, the UK and the Netherlands. First, chapter five presents an integrative model on board independence, board duality and the convergence of board models based on the assumptions developed in this chapter and chapter three of this study.


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Maassen, G.F. (2002). An International Comparison of Corporate Governance Models. A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands.

Maassen, G.F. (2002). An International Comparison of Corporate Governance Models. A Study on the Formal Independence and Convergence of One-Tier and Two-Tier Corporate Boards of Directors in the United States of America, the United Kingdom and the Netherlands. Amsterdam: Spencer Stuart Executive Search.