One versus Two-Tier Boards –advantages and disadvantages Luke Vella Critien
When the structure and joint advantages and disadvantages of a one-tier board are compared to a two-tier board model the primary goal is to achieve a good governance among corporations (Peij & Brandjes, 2012). The most important goal of a good and sound governance system is to achieve the organizational goals whilst organizing and reconciling conflicting interest between shareholders, managers and other relevant stakeholders (PACALÁ , 2012). Larcker and Tayan (2011) call corporate governance the system in a firm of checks and balances. The effectiveness of a corporate governance system depends on the person by whom it is implemented not on the manner how this governance system is implemented. Both type of structures have their advantages and disadvantages. According to a paper by Eumedion (2011) de most suitable governance structure for a firm depends entirely on the type of activities and type of organization the system has to be present in. Comparing tiers
There are two types of corporate board models: the Anglo-Saxon one-tier board model and the European two-tier board model (Maarssen, 2002). Both models will be discussed looking at the responsibilities of employees and their functions and ultimately comparing both models with each other. One tier
The one-tier corporate board model is mainly used by Anglo-Saxon countries such as the United Kingdom, Canada and the United States. This type of model can be recognized by the fact that there are two type of directors present: the executive directors and the non-executive directors. This can be seen as a one layer board where all directors are part of one interconnected board. Another characteristic of a one-tier board is that these boards usually have other board committees for example, the audit committee, the remuneration or compensation committee, the governance committee and others (Larcker & Tayan, 2011). According...
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