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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 management, Human Resource, and Informatio ...
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 A committee or commission is a body of one or more persons subordinate to a deliberative assembly. A committee is not itself considered to be a form of ...
s and the
Board of Director A board of directors (commonly referred simply as the board) is an executive committee A committee or commission is a body of one or more persons subordinate to a deliberative assembly. A committee is not itself considered to be a form of ...
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 Aktiengesellschaft, AG (), commonly shortened to Lufthansa, is the flag carrier of Germany. When combined with its subsidiaries, it is the second-List of largest airlines in Europe, largest airline in Europe in terms of passe ...
, and
Adidas Adidas Aktiengesellschaft, AG (; stylized as adidas since 1949) is a Germany, German multinational corporation, founded and headquartered in Herzogenaurach, Bavaria, that designs and manufactures shoes, clothing and accessories. It is the lar ...
). 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 World War II by country, vast majority of the world's countries—including all of the great power ...
.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 Russia (, , ), or the Ru ...
,
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
Netherlands ) , anthem = ( en, "William of Nassau") , image_map = , map_caption = , subdivision_type = Sovereign state , subdivision_name = Kingdom of the Netherlands , established_title = Before independence , established_date = Spanish Neth ...
. 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 law, trust or partnership) that is registered by the corporation as the ...
. 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 Management (or managing) is the administration of an organization, whether it is a business, a nonprofit organization, or a government body. It is the art and science of managing resources of the business. Man ...
, this is done by creating a steady flow of information between the two. The information flow would include
risk management Risk management is the identification, evaluation, and prioritization of risks (defined in ISO 31000 as ''the effect of uncertainty on objectives'') followed by coordinated and economical application of resources to minimize, monitor, and con ...
,
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 Business is the practice of making one's living or making money by produc ...
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


See also

*
European Company Statute A ''societas Europaea'' (, ; "European society" or "company"; plural: ; abbr. SE) is a public company A public company is a company whose ownership is organized via shares of share capital, stock which are intended to be freely traded on ...
*
Supervisory Board In corporate governance, a governance board also known as committee#Nominating committee, council of delegates are chosen by the stockholders of a corporation, company to promote their interests through the governance of the company and to hire ...
*
Executive Director Executive director is commonly the title of the chief executive officer of a non-profit organization, government agency or international organization. The title is widely used in North American and European not-for-profit organizations, though ...


References

{{DEFAULTSORT:Dual Board Board of directors