Dual board
Encyclopedia
Dual board structure, common in Germany
and also used in other Europe
an and Asia
n countries, is a structure of corporate governance
in which shareholder
s (and often workers) elect members of a Supervisory board
, which then appoints and supervises a Management board.
There are two separate boards, one executive board for the day-to-day business and one supervisory board
for control purposes (elected by the shareholders). In these countries, the CEO presides over the executive board and the chairman presides over the supervisory board, and these two roles will always be held by different people. This ensures a distinction between management
by the executive board and governance
by the supervisory board. This allows for clear lines of authority. The aim is to prevent a conflict of interest and too much power being concentrated in the hands of one person. There is a strong parallel here with the structure of government, which tends to separate the political cabinet
from the management civil service
.
In the United States, the board of directors (elected by the shareholders) is often equivalent to the supervisory board, while the mangement/executive board may often be known as the executive committee or executive council, composed of the division/subsidiary heads and C-level officers that report directly to the CEO.
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
and also used in other Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
an and Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...
n countries, is a structure of corporate governance
Corporate governance
Corporate governance is a number of processes, customs, policies, laws, and institutions which have impact on the way a company is controlled...
in which shareholder
Shareholder
A shareholder or stockholder is an individual or institution that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself ....
s (and often workers) elect members of a Supervisory board
Supervisory board
A supervisory board or supervisory committee, often called board of directors, is a group of individuals chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and supervise the executive directors and CEO.Corporate governance varies...
, which then appoints and supervises a Management board.
There are two separate boards, one executive board for the day-to-day business and one supervisory board
Board of directors
A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
for control purposes (elected by the shareholders). In these countries, the CEO presides over the executive board and the chairman presides over the supervisory board, and these two roles will always be held by different people. This ensures a distinction between management
Management
Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...
by the executive board and governance
Governance
Governance is the act of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists of either a separate process or part of management or leadership processes...
by the supervisory board. This allows for clear lines of authority. The aim is to prevent a conflict of interest and too much power being concentrated in the hands of one person. There is a strong parallel here with the structure of government, which tends to separate the political cabinet
Cabinet (government)
A Cabinet is a body of high ranking government officials, typically representing the executive branch. It can also sometimes be referred to as the Council of Ministers, an Executive Council, or an Executive Committee.- Overview :...
from the management civil service
Civil service
The term civil service has two distinct meanings:* A branch of governmental service in which individuals are employed on the basis of professional merit as proven by competitive examinations....
.
In the United States, the board of directors (elected by the shareholders) is often equivalent to the supervisory board, while the mangement/executive board may often be known as the executive committee or executive council, composed of the division/subsidiary heads and C-level officers that report directly to the CEO.