thumb|right|Visual representation of a Dual Board system
A Dual Board or Two Tier system is a corporate structure system that consists of two bodies i.e. the Council of Delegates to govern the Board of Directors and the Board of Directors to manage a corporation. The roles and relationships between the two bodies vary across countries. The structure is composed of two bodies, one focused on management and the other on governance.
In Germany, the Dual Board system is prescribed for corporations that are listed on the stock market (e.g., Lufthansa, and Adidas). It is argued that this approach 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. Other countries that adopted a two tier approach include Finland, China, and the Netherlands. 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 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.
Cooperation Between bodies
The Management Body has to closely cooperate with the Governance Body to develop the business strategy, this is done by creating a steady flow of information between the two.
- China
Countries where the option of a two-tier board is provided by law include:
- Belgium
- Italy
- France
- Romania
See also
- European Company Statute
- Supervisory Board
- Executive Director