Two-Tier Boards
These boards are constituted of a supervisory board whose members are all nonexecutive and a management board made up of executive directors. The management board is responsible for strategy as well as for running the business. The supervisory board appoints and can dismiss the management board, and no one can be on both boards. The legal responsibilities of the two boards and of their directors are different, whereas with a unitary board all directors have the same legal duties however the board is structured.
Since supervisory boards may have employee members, this raises the question of their role on boards.2 My own view is that employees can most effectively participate at levels below the board, where the decisions are taken that affect them most directly and to which they can contribute knowledgeably.
The Chairman’s Role
Chairmen are responsible for the effectiveness of their boards. This responsibility rests with chairmen whatever their other duties. It leads on to the point that all companies are different and the issues they face are constantly changing. Individual boards have to follow accepted board principles, but in ways which meet their particular circumstances. It is chairmen who have the responsibility of ensuring that the make-up of their boards is appropriate for the challenges ahead. Similarly, it is chairmen who have the task of welding their directors into an effective team. Effective boards are not brought into being simply by sitting competent individuals around a board table. Creating effective boards requires effort by their members, but above all coaching and leadership by their chairmen. This is an argument for chairmen not also being chief executives.
Chairmen are responsible for the running of their boards. Their responsibilities include the agenda, the provision of adequate and timely information to all directors, and the actual conduct of board meetings. They are also, provided they are not chief executives, responsible for putting in place a means by which their boards can evaluate their own performance.
Where chairmen are also chief executives, their duties in relation to their boards remain the same, but the senior independent nonexecutive director would be responsible for the appraisal of the chief executive and for the review of the board’s performance.
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