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Composition:: Hiring

The document contrasts the unitary and dual board systems. The unitary system has a single board that includes both executive and non-executive directors, while the dual system separates governance and management into two boards. The unitary system allows for faster decision making but lacks separation of roles. The dual system clearly separates oversight and management duties but can slow decisions. Both systems provide value depending on a company's needs - the unitary system avoids conflicts of interest while the dual system enhances accountability and efficiency. The appropriate system also depends on the country.

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249 views4 pages

Composition:: Hiring

The document contrasts the unitary and dual board systems. The unitary system has a single board that includes both executive and non-executive directors, while the dual system separates governance and management into two boards. The unitary system allows for faster decision making but lacks separation of roles. The dual system clearly separates oversight and management duties but can slow decisions. Both systems provide value depending on a company's needs - the unitary system avoids conflicts of interest while the dual system enhances accountability and efficiency. The appropriate system also depends on the country.

Uploaded by

John James
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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QUESTION:

Contrast the unitary board system from dual board system. Do you think there is any added value
of either system? Why or why not.
INTRODUCRION:
Unitary board system also know as single or one tier board system. Therefore unitary board
system is common used in US, UK, and other commonwealth. Unitary board system is a single
body of directors that makes strategic decisions of a company. It includes both executive
directors and non-executive directors. Strategic decisions means “are the decisions that are
concerned with whole environment in which the company operates, the entire resources and the
people who form the company and the interface between the two.
Dual board system also know as two-timer board of directors, is a system in which a company
is governed two distinct boards of directors. Includes Management board and Supervisory board.
The management board is accountable to supervisory board and makes decisions related to
operational and tactical direction of the company. The supervisory board makes decisions about
long-term strategic direction of the business. The dual board system used in Asia and countries in
EU.
According to the question, the following are the comparison or differences between unitary
board of directors and dual/one board of directors as below.

Composition:
The unitary board of directors is composed of executive directors (employees of the company)
and non-executive directors (independent external directors). Both these directors sit on a single
board. In a two-tier system, the supervisory board is directly elected by the shareholders and
includes senior board members and/or employee representatives. The supervisory is responsible
for the hiring and firing of the management board.
Segregation of roles:
In a one-tier or unitary board of management there is no clear separation of duties as both the
executive and non-executive directors sit on the same board. While in a two-tier board, two
different boards are present, with one clearly responsible for undertaking management roles and
the other for the purposes of check and balance and policy making.

Decision-making:
The process of decision-making in a unitary board is faster because all the decisions are made
and approved by a single board. Whereas, decisions made by the management board in a two-tier
system have to be approved by the supervisory board for implementation which, therefore, can
take time. This delay can prolong if the management and supervisory board disagree on a certain
agenda.

Stakeholder Indulgence:
The composition of unitary board of directors does not allow for different kinds of stakeholder
representation. This is because a single board cannot accommodate a large number of directors
and therefore non-executive directors are the only independent input in a unitary board.
However, in a two-tier system, as the management board and supervisory boards are different, it
provides a chance to add representatives of more stakeholders especially representatives of
employees.

Role of chairman and CEO:


In a one-tier board, the Chairman of board and the CEO (chief executive officer) sit on a single
board. While in a two-tier board system, the supervisory board is led by the Chairman of the
company and the management board is led by the CEO of the company.
Communication and supervision:
In a unitary board, the executives and non-executives sit on a single board. Therefore, all the
decisions have an ongoing input of both of these directors. In this way, the non-executive
directors who are primarily responsible for the supervision of executive directors can actively
seek their duty. In a two-tier system as the two boards meet separately, the supervisory board
cannot actively hold management board accountable and only gets the information which
management board disseminates to them.

(b) Do you think there is any added value of either system? Why or why.

Yes there is a value of such systems between the unitary board system and dual board system but
it depends on the nature and corporate governance risks that a business is facing, because of the
following reasons for both unitary board system and dual board system as below.

IN UNITARY BOARD SYSTEM:


Ensure faster decision making as the single board presents to approve the proposals.
Simply because all directors ( executive directors and non-executive directors sit on a single
board rather than in two tier board system, so every decisions are decided in a single board.

Helps to avoid conflicts of interest, in unitary or single board system there is an equal power
and responsibility between executive and non-executive directors that enable to avoid conflicts
of interest that may be occur between executive and non-executive directors within the company.

It may create close relationships between the directors, executive directors and non-executive
directors work as team by sharing their experience, attitudes, skills and knowledge together but
also power and responsibility effectively that leads to create and improve good relations among
of them also to shareholders inside the company.

IN DUAL OR TWO TIER BOARD SYSTEM:

Clear line of responsibility and accountability, this means that, in two tier board system there
are two different of boards, with one clearly responsible for undertaken management
roles( Management board) and the other for the purposes of check and balance but also it’s
responsible for policy making process.

Separated roles of CEO and chairman, in dual board system there is separation of roles
between a chief executive officer( CEO) and chairman of the board that facilitates in avoiding
conflicts of interest among of them to ensure better achievement of company goals.

Enhance efficiency/ easy to operates, in dual board system allowed segregation of roles and
duties among the various departments within the company that enable to avoid interaction of
roles in the company but also helps in avoiding conflicts inside the company or organization.

Conclusively, the composition of the board of directors depends on the nature and corporate
governance risks that a business is facing. It also varies based on the jurisdiction in which a
business is established. One-tier or unitary board system is normally adopted in countries like
Australia, America, United Kingdom, Hong Kong, Singapore etc. Countries like, China,
Indonesia, Russia, South Africa and most of the Europe including Germany have adopted a two-
tier system. Some countries like Japan adopt a hybrid system of board, which includes particulars
of both systems

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