A Dual Board or Two Tier system is a

corporate structure A typical corporate structure consists of various departments that contribute to the company's overall mission and goals. Common departments include Marketing, Finance, Operations management, Human Resource, and IT. These five divisions represent ...

system that consists of two bodies i.e. the Council of Delegates to govern the

Board of Director A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...

s and the

s to manage a corporation. The roles and relationships between the two bodies vary across countries. The structure is composed of two bodies, the "Management Body", and the "Governance Body" each of these have different roles. In Germany, the Dual Board system is prescribed for corporations that are listed on the stock market (e.g.,

Lufthansa Deutsche Lufthansa AG (), commonly shortened to Lufthansa, is the flag carrier of Germany. When combined with its subsidiaries, it is the second- largest airline in Europe in terms of passengers carried. Lufthansa is one of the five founding ...

, and

Adidas Adidas AG (; stylized as adidas since 1949) is a German multinational corporation, founded and headquartered in Herzogenaurach, Bavaria, that designs and manufactures shoes, clothing and accessories. It is the largest sportswear manufacture ...

). It is argued that this approach results in and better serves the objectives of a social market system. Using a two tier system might also result in "more monitoring" and "less aggressive performance targets". It might also be "less efficient" from a financial market perspective. It has been suggested that financial efficiency may be impeded by reduced communication, and the higher costs of running a Dual Board.

History

The two tier system was first adopted in German companies in the 19th century, and it became compulsory after the

Second World War World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposi ...

.Proctor, Miles (2002). Corporate Governance. Cavendish publishing. Other countries that adopted a two tier approach include

Finland Finland ( fi, Suomi ; sv, Finland ), officially the Republic of Finland (; ), is a Nordic country in Northern Europe. It shares land borders with Sweden to the northwest, Norway to the north, and Russia to the east, with the Gulf of Bot ...

China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's List of countries and dependencies by population, most populous country, with a Population of China, population exceeding 1.4 billion, slig ...

, and the

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. The Singapore Manufacturing Federation, recently introduced a ''governance body'' as well. In the European Union, 10 countries require the two-tier approach, 8 countries require the single tier board approach, and 9 countries allow the use of either.

Management Body

The ''Management Body'' meets frequently (often weekly) to deal with operational issues. Some contracting decisions and strategic planning decisions may have to be approved by the ''Governance Body''. members of the ''Management Body'' are appointed by the members of the 'Governance Body'' (see below). Composition of "Management Body" Head of ''Board of Directors'' *''Chairperson cum Managing Director cum Chief Executive Officer'' shall be selected and appointed by the ''Council of Delegates'' *''Vice Chairperson cum Deputy Managing Director cum Co-Chief Executive Officer'' shall be selected and appointed by the ''Council of Delegates'' Members of ''Board of Directors'' *The number of ''Executive Director cum Chief pecialisationOfficer'' shall be decided and appointed by the ''Council of Delegates'' ''Note :- Specialisation implies finance, technology, marketing etc.''

Governance Body

The ''governance body'' is usually elected by the

Shareholders A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal ...

. Composition varies across jurisdictions; its members are usually independent of the executive but it can include employee representatives in some countries. Generally, the ''governance body'' guides and monitors the ''management body''. Composition of "Governance Body" Head of ''Council of Delegates'' *''Active Delegate'' shall be elected by the ''equity shareholders'' *''Co-Active Delegate'' shall be elected by the ''equity shareholders'' Members of ''Council of Delegates'' *''Executive Delegates'' shall be elected by the ''equity shareholders'' *''Non Executive Delegates'' shall be elected by equity shareholders and nominated by the ''national government'', ''provincial government'', ''officers union'' of that ''corporate establishment'' and ''employees union'' of that ''corporate establishment'' Types of Delegates'' *''Residential Delegate'' *''Whole time Delegate'' *''Independent Delegate'' *''Alternate Delegate'' *''Women Delegate'' *''Additional Delegate'' *''Nominee Delegate'' *''Small Shareholder Delegate'' *''Shadow Delegate'' *''Casual Vaccancy Delegate'' *''Any other type of "Delegate" to be included'' The ''governance body'' is involved in long term strategic planning. Another task that the ''Governance Body'' is in charge of is the selection, dismissal, and designation of the members in the ''Management Body'', to "ensure a long term succession planning".

Cooperation Between bodies

The ''Management Body'' has to closely cooperate with the ''Governance Body'' to develop the

business strategy In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessmen ...

, this is done by creating a steady flow of information between the two. The information flow would include risk management,

business development Business development entails tasks and processes to develop and implement growth opportunities within and between organizations. It is a subset of the fields of business, commerce and organizational theory. Business development is the creation of l ...

and any differences of the development of the business compared to the initial plan. Open discussions between members of the boards are also key to the functionality of the business under a Two Tier System, because these must exchange information frequently.

Country systems

Countries with two-tier boards include: *Germany *Austria *Poland *Indonesia *China Countries where the option of a two-tier board is provided by law include: *Belgium *Italy *France *Romania

References