UNIVERSITY OF GHENT
FACULTY OF ECONOMICS AND BUSINESS
ADMINISTRATION
ACADEMIC YEAR 2013 – 2014
Board effectiveness: one-tier versus
two-tier boards
Master dissertation submitted to obtain the degree of
Master of Science in Business Economics
Charlotte De Moor
under the supervision of
Prof. Gerrit Sarens
UNIVERSITY OF GHENT
FACULTY OF ECONOMICS AND BUSINESS
ADMINISTRATION
ACADEMIC YEAR 2013 – 2014
Board effectiveness: one-tier versus
two-tier boards
Master dissertation submitted to obtain the degree of
Master of Science in Business Economics
Charlotte De Moor
under the supervision of
Prof. Gerrit Sarens
PERMISSION
The undersigned declares that the content of this master dissertation may be consulted and/or
reproduced, provided the source is acknowledged.
Ondergetekende verklaart dat de inhoud van deze masterproef mag geraadpleegd en/of
geproduceerd worden, mits bronvermelding.
Charlotte De Moor
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I!
NEDERLANDSTALIGE SAMENVATTING
In deze dissertatie wordt nagegaan of de effectiviteit van de Raad van Bestuur, zijnde de mate
waarin ze haar rollen adequaat kan uitvoeren, verschillend is in het one-tier en two-tier model.
In het one-tier model worden uitvoerende en niet-uitvoerende bestuurders verenigd in één
groep, terwijl het two-tier model een formele splitsing van beide types bestuurders en hun
respectievelijke rollen voorschrijft.
De literatuurstudie gaat eerst in op de Raad van Bestuur zelf. Dit onderdeel behandelt de
bijdragen van de verschillende types van bestuurders (uitvoerende versus niet-uitvoerende
bestuurders, chairman) en de rollen van de Raad van Bestuur (controle, strategie en service).
Daarna worden de one-tier en two-tier structuur besproken en vergeleken. De modellen
verschillen in vier aspecten, zijnde (1) de formele structuur, (2) de leiderschapstructuur, (3) de
rolverdeling en (4) de stakeholdervertegenwoordiging. Het laatste onderdeel van de
literatuurstudie gaat in op de determinanten, al dan niet structuur-gerelateerd, van de
effectiviteit van de Raad van Bestuur.
In het volgende luik, het empirisch onderzoek, wordt de link gemaakt tussen de effectiviteit
van de Raad van Bestuur en de beide bestuursmodellen. Volgende onderzoeksvraag staat
centraal: “Is de one-tier structuur effectiever dan de two-tier structuur?”. Het empirisch
onderzoek bestaat uit een reeks van kwalitatieve interviews, afgenomen bij bestuurders van
Nederlandse bedrijven. In Nederland bestaan beide bestuursmodellen naast elkaar, in
tegenstelling tot België waarbij de Corporate Governance wetgeving gestoeld is op het onetier model. De voornaamste bevindingen waren dat (1) de integratie van strategie en controle
in het one-tier model kan leiden tot een hogere effectiviteit voor zowel de strategie als
controle rol, dat (2) de grootte van de board niet significant verschilt, dat (3) de competentie
en skills van de leider belangrijker zijn dan hoe het leiderschap is gestructureerd, dat (4)
diversiteit in beide modellen veel aandacht krijgt, en dat (5) de onafhankelijkheid van de
bestuurders moeilijker gewaarborgd kan worden in het one-tier dan in het two-tier model.
Echter is het onmogelijk om een van beide structuren superieur te verklaren.
De studie sluit af met een persoonlijke reflectie, waarbij ik concludeer dat (1) de operationele
verschillen tussen beide modellen in de praktijk niet zo groot zijn als de theorie suggereert, en
dat (2) human capital, of de competentie, skills en ervaring van de bestuurders, geldt als een
basisvoorwaarde voor een effectieve Raad van Bestuur.
II! !
PREFACE
First of all, my gratitude goes out to Prof. Sarens, for guiding me in the process of writing my
master dissertation. I would like to thank him for his scientific insight and suggestions, and
aid in reading and correcting my thesis.
Moreover none of my empirical research would have been realised without the input of the
interviewed board members. I highly appreciate their time devotion, professional insights and
suggestions. Furthermore I am grateful for the helpful suggestions of Prof. Levrau from
Guberna (Instituut voor Bestuurders, Belgium) and the Dean of the Nyenrode Business
University (the Netherlands), Leen Paape, for his efforts to connect me with Dutch board
members.
Lastly, I would like to thank my family and friends for their support, patience and care. The
language, design and content of this work have improved substantially due to their
suggestions and encouragement.
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III!
TABLE OF CONTENTS
1. Introduction .......................................................................................................................... 1
2. The Board of Directors ........................................................................................................ 2
2.1)
Members of the board ........................................................................................................... 2
2.1.1) Inside directors ..................................................................................................................... 2
2.1.2) Outside directors ................................................................................................................... 3
2.1.3) Chairman .............................................................................................................................. 4
2.2)
Roles of the board .................................................................................................................. 4
2.2.1) Control role ........................................................................................................................... 5
2.2.2) Strategy role .......................................................................................................................... 6
2.2.3) Service role ........................................................................................................................... 7
3. Board Structure .................................................................................................................... 8
3.1) One-Tier Board .......................................................................................................................... 9
3.2) Two-Tier Board .......................................................................................................................... 9
3.3) Comparison between one-tier boards and two-tier boards .................................................. 10
3.3.1) Formal structure .................................................................................................................. 10
3.3.2) Leadership structure ........................................................................................................... 11
3.3.3) Board organization ............................................................................................................. 11
3.3.4) Stakeholder representation ................................................................................................. 12
4. Board Effectiveness ............................................................................................................ 12
4.1) Board composition ................................................................................................................... 13
4.1.1) Board size ........................................................................................................................... 13
4.1.2) Leadership structure ........................................................................................................... 14
4.1.3) Board diversity ................................................................................................................... 14
4.1.4) Outsiders versus insiders .................................................................................................... 15
4.1.5) Independence of board members ........................................................................................ 15
4.2) Other determinants .................................................................................................................. 16
4.2.1) Board culture ...................................................................................................................... 16
4.2.2) Interpersonal relationships .................................................................................................. 16
4.2.3) Board operation: information provision and timing ........................................................... 16
4.2.4) Board committees ............................................................................................................... 17
IV! !
5. Empirical research ............................................................................................................. 18
5.1)
Research question ................................................................................................................ 18
5.2)
Data collection ...................................................................................................................... 20
5.3)
Data analysis and interpretation ........................................................................................ 22
5.3.1) Method ................................................................................................................................ 22
5.3.2) Within-case analysis ........................................................................................................... 23
5.3.3) Cross-case analysis ............................................................................................................. 33
6. Conclusion ........................................................................................................................... 38
6.1)
Summary .............................................................................................................................. 38
6.2)
Personal reflection ............................................................................................................... 40
6.3)
Avenues for future research ............................................................................................... 41
6.4)
Recommendations for board members .............................................................................. 42
7. Bibliography ......................................................................................................................... I
8. Appendices ..........................................................................................................................IV
Appendix 1 – Interview Protocol ..................................................................................................... IV
Appendix 2 – Interview Transcripts (in Dutch) ................................................................................ V
Appendix 3 – Conceptually clustered matrix ................................................................................ XVI
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V!
1. Introduction
For a company to be successful it must be well governed. A well functioning and effective
board of directors is the Holy Grail sought by every ambitious company (Solomon, 2013).
Nevertheless, recent financial scandals have shed a light on the shortcomings of the board of
directors and corporate governance in general. Addressing those shortcomings may benefit
shareholders, board members, management, employees, and society in general (Anand, 2008).
This paper focuses on board effectiveness, defined as the extent to which boards are able to
fulfill their roles. Understanding the role of boards is vital both for our understanding of
corporate behavior and for setting policies that regulate corporate activities (Adams,
Hermalin, Weisbach, 2010). More specifically, this paper zooms in on how board
effectiveness might differ across different board structures. At present, two prevalent board
structures exist: a one-tier board (unitary model) and a two-tier board (dual model). Yet,
scholars have been inconclusive about favoring one model over the other and have
traditionally based their arguments on theoretical approaches (Jungmann, 2006).
This paper aims to outline the characteristics of both board systems, with emphasis on their
differences, and assess the effectiveness of the distinct board systems empirically.
Board effectiveness has attracted increased attention over the past years by legislators as well.
For instance, the Cadbury Report in the UK (1992) emphasized the need for the board of
directors within listed companies to be effective and reviewed board structure as well as the
responsibilities of the board’s directors (Solomon, 2013). More recently, the European
Commission has started a Green Book with the goal of starting a debate around corporate
governance and evaluating the effectiveness of monitoring and enforcement systems that
member states have put in place.
The remainder of this paper is structured as follows. The next chapter (section 2) discusses
who is on the board and what kinds of roles the board members fulfill. Section 3 addresses the
topic of board structure and gives an overview of the characteristics of one-tier boards and
two-tier boards, with emphasis on the differences between both kinds of board structures. The
paper then proceeds to defining board effectiveness and outlines the determinants of board
effectiveness. Section 5 entails the empirical study in which board effectiveness is linked to
the distinct types of board structures. The paper ends with a conclusion, personal reflection
and practical recommendations for board members.
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1!
2. The Board of Directors
Corporate governance refers to the system of checks and balances, both internal and external
to companies, which ensures that companies discharge their accountability to all their
stakeholders and act in a socially responsible way in all areas (Solomon, 2013). Solomon’s
definition of corporate governance reflects a broad, stakeholder-oriented perspective. More
narrowly defined, corporate governance deals with the ways in which suppliers of finance to
corporations assure themselves of getting a return on their investment (Schleifer and Vishny,
1997). Parties associated with corporate governance are management, the board of directors,
shareholders, and other stakeholders such as the government and public opinion (Cadbury,
1999) (Tricker, 1994). The focus of this paper is on the board of directors, which serves as a
bridge between shareholders on the one hand, and management on the other hand (Cadbury,
1999). The following sections first give an overview of the types of directors on the board and
the board’s roles.
2.1)
Members of the board
A member of the board can be classified either as inside director or outside director (Anand,
2008) (Tricker, 1994). Company law tends not to discriminate between the roles of the
distinct types of directors, holding them all equally responsible for governing the company.
However, in practice there are significant differences in the contributions of the different
types of directors (Tricker, 1994) (Spira and Bender, 2004). Both types of directors bring
different and essential skills to the board (Solomon, 2013). A good balance of inside and
outside directors tends to be preferred by the majority of literature; as such a balance provides
a mix of expertise, independence and legal power (Bryd and Hickman, 1992) (Solomon,
2013).
2.1.1) Inside directors
Inside directors, also called executive directors, are directors who are both member of the
board and an executive of the company (Hermalin & Weisbach, 1988) (Boeker & Goodstein,
1991). Such directors are, as executives, involved in the daily management of the company
(du Plessis, Saenger, Sandrok, 2012). Inside directors supply the board with valuable
information about the firm’s activities, history and background (Solomon, 2013) (Anand,
2008). Moreover, inside directors have relationships and lines of communication with other
management members and corporate staff (Anand, 2008).
2! !
Although inside directors supply the board with valuable firm-specific information and
connections, the appropriateness of having insiders on the board can be questioned for various
reasons, including conflicts of interest and potentially ineffective monitoring (Johnson, Daily,
Elstrand, 1996) (Weisbach, 1988) (Rosenstein and Wyatt, 1997). Conflicts of interest may
arise concerning executive compensation or evaluation (Anand, 2008). Ineffective monitoring
may occur because of the subordinate position of inside directors, relative to their CEO
(Tricker, 1994). Consequentially, inside directors are not likely to aggressively oversee the
CEO, which can constitute a threat in insider-dominated boards (Tricker, 1994).
2.1.2) Outside directors
A director whose primary employment is not with the firm is classified as an outside director,
also called non-executive director (Adams et al., 2010). They are non-management members
of the board and have no executive responsibilities in the company nor are they involved in
the day-to-day running of the company’s business activities (Goodstein et al., 1994)
(Rosenstein et al., 1994). This type of directors may provide relevant knowledge,
complementary to that of management (Fama and Jensen, 1983), and expertise and objectivity
in evaluating management (Solomon, 2013).
Investors increasingly expect outside directors to form the majority of the board (Cadbury,
1999). One of the major reasons for including outside directors on the board is their
independence, which should increase objective monitoring of management and reduce
conflicts of interest (Tricker, 1994) (John and Senbet, 1998) (Fama and Jensen, 1983).
Legally and commercially, independent outside directors are seen as an important guarantee
of the integrity and accountability of companies (Clarke, 1998).
Although boards are presumed to be more independent as the number of outside directors
increases (John and Senbet, 1998), the independence of those directors may in fact be
questionable (Adams et al., 2010). In some instances it is straightforward whether a director is
independent or not, but there often is a significant grey area in between (Adams et al., 2010)
(Cadbury, 1999). Outside directors who are not entirely independent are, for instance, former
executives of the company or representatives of certain stakeholder groups (Tricker, 1994).
The Belgian Code of Corporate Governance (2009) prescribes that at least half of the board
members should be outside directors, and that at least three of them should be entirely
independent. This issue of independence features in practically all governance codes
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3!
(Cadbury, 1999). Overall, there is universal agreement on the need for, preferably
independent, outside directors to be involved in the board of directors, whether as equal
members of a unitary board or as members of a separate board in a two-tier structure (Clarke,
1998).
2.1.3) Chairman
The chairman is responsible for the leadership of the board and governs the board’s activities
(Anand, 2008). His power and influence may vary widely between companies, from only
chairing the board meetings to exercising considerable power and influence (Tricker, 1994).
The role of chairman is different from that of the CEO, which involves leading corporate
operations and is in charge of the activities of the executive (Anand, 2008). The tasks of the
chairman on the other hand include setting clear objectives for the board meetings, time
management during board meetings, monitoring and controlling interaction between board
members and fostering an open climate in which different viewpoints can be established
(Tricker, 1994).
2.2)
Roles of the board
The board serves as a bridge between shareholders and management, and its main
responsibility is to shareholders (Cadbury, 1999). The role of the board, however, is not
concerned with the running of the business of the company per se, but with giving overall
direction to the enterprise, with overseeing and controlling the executive actions of
management and with satisfying legitimate expectations of accountability and regulation by
interest beyond the corporate boundaries (Tricker, 1994). Even the mere existence of a board
of directors can incentivize management to act less sloppy and pay more attention to
shareholder concerns (Demb and Neubauer, 1990).
The board’s roles are typically classified in three categories: control, strategy and service
roles. Although there still is some disagreement about the specific roles of the board, literature
tends to agree on this typology (Zahra and Pearce, 1989) (Johnson et al., 1996) (Chaganti,
Mahajan, Sharma, 1985) (Humphry and Hung 1998). This distinct typology, however, does
not imply that these roles are mutually exclusive. Boards may fulfill a combination of all three
roles and tasks. The following sections elaborate on the specific content of the control,
strategy and service roles of the board and present the underlying theoretic perspectives
related to these roles.
4! !
2.2.1) Control role
Control and monitoring by management is perceived both necessary and valuable (Demb and
Neubauer, 1990) (Zahra and Pearce, 1989) (Mizruchi, 1983). Through monitoring and
supervising management, the board ensures conformance to policies, identifies divergences
and the underlying reasons, takes action to bring ongoing activities in line with the company’s
plans or adapt the plans when external conditions change (Tricker, 1994) (Demb and
Neubauer, 1990). The control role of the board furthermore entails tasks such as selecting the
CEO, monitoring the performance of the CEO and top management, and ratifying executive
decisions (Zahra and Pearce, 1989).
The board attempts to protect shareholder interests and maintain a high level of shareholder
value through controlling and monitoring management (Johnson et al., 1996). This function of
the board is also described as ‘watchdog’ (Tricker, 1994). Shareholders have certain rights,
such as the election of directors. In many countries, shareholders cannot vote by mail and
actually need to be present at the shareholders meeting to vote, but shareholders typically do
not attend annual meetings (Levrau and Van Den Berghe, 2007). This virtually guarantees
nonvoting by small investors (Schleifer and Vishny, 1997). Instead those investors may grant
management the right to cast their vote, through proxy cards. In this way management can
potentially abuse its extended power. Control by the board is thus required to ensure that
management still acts in the best interest of the firm’s shareholders (Johnson et al., 1996).
Agency theory
Agency theory clarifies the need for control by the board of directors. Central to agency
theory is that, as corporations have grown in size, shareholders (the principals) have lost
control; professional managers (the agents) are “the only ones with specialized knowledge to
operate the company and they gradually gained control” (Mizruchi, 1983). This separation of
ownership and control creates opportunities for management to take advantage of their power
at the expense of the shareholders’ wealth (Fama and Jensen, 1983) (Muth and Donalson,
1998) (Solomon, 2013).
Corporations need boards of directors, independent of management, to control management
and protect shareholders against such opportunistic behavior (Mizruchi, 1983) (Hillman and
Daziel, 2003) (Davis, Schoorman, Donaldson, 1997). Without control, management may not
act in the best interest of the firm. Agency problems, which occur when the interest of
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5!
principals and their agents diverge, can be reduced when the board monitors the management
team, since the agents are being ‘watched’ (Tricker, 1994) (Tosi et al., 2003).
2.2.2) Strategy role
Boards may also be involved in the corporation’s strategy development and implementation
process. Literature tends to support the importance of the strategic role: Sadtler (1994)
strongly agrees with the importance of the board’s involvement in strategy, stating it should
be on the agenda of every board; Demb and Neubauer (1990) conclude that boards can add
value through strategic involvement, allowing them to play a more forward-looking role and
utilizing the director’s experience; Zahra (1990) adds that there also is an increasing need for
strategic involvement by the board as they serve as boundary spanners to the increasingly
complex environment, and because of increasing shareholder activism. Nevertheless,
literature tends to disagree on the nature of the board’s strategic involvement; the strategic
role of the board ranges from rubber-stamping management’s strategic proposals to working
closely with management to develop strategies (Schmidt and Brauer, 2006) (Solomon, 2013).
Involving the board in the strategic thinking can serve several purposes, according to Demb
and Neubauer (1990); (1) it helps non-executives move down the learning curve, providing
them knowledge about the company, market, industry and technology, (2) it prepares the
board for implementation actions, (3) it develops a sense of ownership and commitment to the
strategy among board members. Furthermore strategic involvement by the board may also be
considered ‘a precondition to perform their fiduciary monitoring duties’, as monitoring
management’s decisions requires to understand the decisions made first (Schmidt and Brauer,
2006).
Stewardship theory
Stewardship theory recognizes the board’s role in strategy (Donaldson and Davis, 1991)
(Boyd, 1995). While agency theory assumes agents need to be controlled or they will not act
in the best interest of the principal, stewardship theory conversely assumes agents will act in
the best interest of the principal with few or no control (Davis et al., 1997). According to
stewardship theory, management can be motivated to contribute to the organization’s
profitability and wants to be a good steward of the corporate assets (Donaldson and Davis
1991). Managers are interested in achieving high performance and are capable of using a high
level of discretion to act for the benefit of shareholders (Donaldson & Davis 1991).
6! !
Stewardship theory implies that the separation of ownership and control can be a positive
development toward managing the complexity of the modern corporation (Muth and
Donaldson, 1998). Rather than controlling management, stewardship theory encourages
empowerment of the management team. Giving control to management allows them to use
their in-depth knowledge, experience and commitment to maximize organizational
profitability (Davis et al., 1997) (Muth and Donaldson, 1998).
2.2.3) Service role
The board can fulfill four service roles, according to Mintzberg (1983): (1) co-opting external
influencers, (2) establishing contacts, (3) enhancing the firm’s reputation and (4) giving
advice to organizations. Overall, board members can supply the company with resources
critical to the firm’s survival and success. Especially young and entrepreneurial firms may
benefit from the human and social capital of their board’s outside directors (Kor and
Misanghyi, 2008).
First, co-opting external influencers refers to the board as a link to the external environment.
Through adopting directors with connections or linkages to various stakeholders it attempts to
weaken the power of external stakeholders, such as suppliers or customers (Mintzberg, 1983).
Second, the company benefits from the board members’ network, which includes access to
people possessing external resources, such as financial institutions (Mintzberg, 1983)
(Tricker, 1994). A mechanism often used for this purpose is board interlocks. For example,
board interlocks with financial institutions can facilitate the firm’s access to funds (Johnson et
al., 1996). Such interlocks might be especially important for small and new firms that
experience difficulties in securing critical resources (Pfeffer and Salancik, 1978).
Third, board members can enhance the reputation of the corporation, as the board represents
the firm at several important events such as the annual meeting of shareholders (Demb and
Neubauer, 1990). Moreover, prestigious board members might be able to secure favorable
transactions for the firm (Zahra and Pearce, 1989).
Fourth, boards may also be involved in providing advice and counsel to the board. Many
directors seem to consider this as their key role and spend considerable amounts of time on
advising the CEO (Johnson et al., 1996). Advice of the board is most important in
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organizations with less experience, or where the control role is less prominent because
external mechanisms, such as labor markets, serve as an effective source of control (Fama and
Jensen, 1983) (Johnson et al., 1996).
Resource dependence theory
From a resource dependence theory perspective, boards are important boundary spanners;
they provide links to the external environment (Pfeffer, 1972) (Muth and Donaldson, 1998).
Organizations attempt to exert control over that environment by co-opting the resources they
require to survive (Muth & Donaldson 1998). In this case those resources are the directors of
the board, who are appointed to make use of, for instance, their network connections. Through
the board of directors firms can minimize their dependence of the environment or gain
resources (Pfeffer, 1972). The role of the board, based on resource dependence theory, is
providing legitimacy, expertise, advice and counsel, network connections, facilitating access
to resources and enhancing company reputation (Mintzberg, 1983) (Muth and Donaldson,
1998) (Pfeffer and Salancik, 1978). This conforms to the service role that is outlined above.
3. Board Structure
Different board structures exist because companies around the world operate in different
business contexts (Maassen and van den Bosch, 1999) (Dehaene, De Vuyst and Ooghe,
2001). Two types of board structures are prevalent: the one-tier board (also called unitary
board) and the two-tier board (also called dual board). Also boards with 3 or more board
layers exist, as is the case in Japan for instance (Solomon, 2013) (Tricker, 1994). Within the
European Union, 8 countries recommend a one-tier approach while 10 countries recommend a
two-tier approach. The remaining countries make use of hybrid systems, in which companies
are allowed to choose between a unitary or dual board system1. One-tier systems are more
likely, but not exclusively, to be found in an Anglo-Saxon context, while two-tier systems are
more common in continental Europe (Dehaene, De Vuyst, Ooghe, 2001) (Solomon, 2013).
Board structure, which is concerned with the balance of power, affiliations and positions of
members, is a foundation for an effective board and is at the heart of board performance and
accountability (Tricker, 1994).
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1!European!Commission,!January!2013!!
<http://ec.europa.eu/justice/genderFequality/files/womenonboards/womenonboardsFfactsheetF
dk_en.pdf>!
8! !
Before discussing board effectiveness, I zoom in on the characteristics of the distinct types of
board structures and the differences between them in particular.
3.1) One-Tier Board
The one-tier board is a single board system, compromised of both executive directors and
non-executive directors (Jungmann, 2006). The one-tier board gathers both types of directors
in one unified group. Still it remains possible to differentiate non-executive directors from
executive directors (Solomon, 2013). Yet the distinction is not as ‘black and white’ or formal
as in the two-tier board (Jungmann, 2006).
The leadership of the one-tier board is in the hands of the chairman, who may also be the
CEO of the company. The practice in which the same person fulfils the role of CEO and
chairman is called CEO duality (Anand, 2008). In literature and among practitioners there is
growing consensus opposing this practice (Cadbury Report, 1992) (Higgs Report, 2003)
(Solomon, 2013). The leadership structure of the board is discussed in detail in section 3.3.2.
The one-tier board structure is most common in countries influenced by the Anglo-Saxon
style of corporate governance (Solomon, 2013). Examples include the United Kingdom,
Ireland, the United States and Canada but also Belgium, Sweden, Spain, Portugal, Greece,
Singapore and India.
3.2) Two-Tier Board
The two-tier board is a dual board system, consisting of a management board and a
supervisory board, that both act autonomously (Jungmann, 2006). Simultaneous membership
of the management board and the supervisory board is prohibited (Solomon, 2013)
(Jungmann, 2006). The management board is compromised of executive directors only, while
the supervisory board consists exclusively of non-executive directors. Consequentially, there
is a formal separation between executive directors and non-executive directors, and their
respective tasks and responsibilities (Jungmann, 2006).
The management board consists of inside directors and is concerned with all management
issues and operational issues of major importance (Solomon, 2013) (Jungmann, 2006). The
CEO heads the management board (Solomon, 2013).
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9!
The supervisory board on the other hand consists of non-executive directors and is mainly
concerned with supervision (Jungmann, 2006). The supervisory board oversees management,
appoints and dismisses members of the management board and approves the financial
accounts (Jungmann, 2006) (Solomon, 2013). In addition, the supervisory board may also
fulfil some soft functions, such as networking with stakeholders (Jungmann, 2006). The
chairman presides the supervisory board and must be a person different from the CEO
(Jungmann, 2006) (Solomon, 2013). A good working relationship between the CEO and
chairman is however crucial (Solomon, 2013).
Dual board structures feature, although not exclusively, in continental Europe (Tricker, 1994).
Examples include Austria, Bulgaria, the Czech Republic, Denmark, Finland, Germany,
Latvia, Poland, Slovakia and Switzerland.
Several other countries, such as France, allow companies to choose between a one-tier board
structure and a two-tier board structure. Since January 20132 companies in the Netherlands
can choose between the unitary and dual board structure, whereas company law only allowed
a two-tier board structure in the past.
3.3) Comparison between one-tier boards and two-tier boards
One-tier and two-tier board structures vary in several ways: (1) in their composition or formal
structure, (2) in their leadership structure, (3) in their board organization or role division, and
(4) in their stakeholder representation. These differing board attributes are described in detail
below.
3.3.1) Formal structure
Both board structures entail a combination of executive directors and non-executive directors.
In the one-tier board, both types of directors are gathered in one group, while they are
formally separated in two board layers in the two-tier board (Maassen, 2002). This dual
structure involves a physical separation of executive directors, in charge of day-to-day
management activities, and non-executive directors, in charge of monitoring management’s
actions (Solomon, 2013) (Jungmann, 2006).
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2
Wet Bestuur en Toezicht, January 1, 2013
10! !
As a consequence of this separation, several authors suggest that a dual board structure
decreases the likelihood of interaction between executive and non-executive directors, relative
to the one-tier structure (Jungmann, 2006) (Bezemer et al., 2014). Besides of the potential
influence on interpersonal relationships, board structure may also affect the information
provision to board members. Jungmann (2006) argues that a unitary board structure results in
simultaneous and faster information provision to all board members.
3.3.2) Leadership structure
While the roles of CEO and chairman are always split in the two-tier board, it is possible to
combine both roles in the one-tier board (Maassen, 2002). The situation in which one person
holds both the function of CEO and chairman is called CEO-duality (Anand, 2008). Such a
leadership structure is impossible in the two-tier board, as no director can be member of the
management board and supervisory board at the same time (Jungmann, 2006). In the one-tier
structure CEO-duality is admitted, although not recommended (Maassen, 2002) (Tricker,
1994). Furthermore, literature tends to agree that the chairman should be an independent nonexecutive director (Solomon, 2013) (Tricker, 1994) (Maassen, 2002) (Jungmann, 2006).
3.3.3) Board organization
The board may fulfil three distinct types of roles: the control, strategy and service role. Both
board structures, however, imply a different organization of these roles. The one-tier board
structure adopts a unitary board organization; one board fulfils all three roles (Maassen,
2002). In this kind of board structure, the division of board roles between executive and nonexecutive directors is theoretically less clear, as they share the same legal responsibilities and
legal liabilities (Sheridan and Kendall, 1992). Company law in the US and the UK, for
instance, do not distinguish between the roles of the respective directors (Maassen, 2002).
This potential role confusion does, however, not imply that one cannot distinguish executive
directors from non-executive directors (Solomon, 2013). This difference is only not as
tangible as in the two-tier board structure, which formally separates executive directors
(gathered in the management board) and non-executive directors (gathered in the supervisory
board) (Maassen, 2002).
The two-tier board structure on the other hand involves a dual board organization, in which
the management board exercises the strategy and service role while the supervisory board
fulfils the control role (Maassen, 2002) (Cadbury, 1995) (Zahra and Pearce, 1989). As
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11!
opposed to the one-tier board, there generally is a clear separation of legal responsibilities and
legal liabilities of executive and non-executive directors (Sheridan and Kendall, 1992).
3.3.4) Stakeholder representation
Two-tier boards allow for a greater opportunity for stakeholder inclusion than one-tier boards
(Solomon, 2013). A stakeholder-focussed model allows for interests other than those of the
shareholders, such as those of employees or the environment (Goodijk, 2000). Worker
participation is encouraged and made possible through, for instance, the Work Council
(Ondernemingsraad) in the Netherlands. The Work Council allows workers to participate in
the strategy role of the board and gives them the right to recommend members, who promote
their interests, for the supervisory board (Goodijk, 2000). The German system of corporate
governance provides more direct support for worker participation through the laws of codetermination. Co-determination implies that up to 50% of all supervisory board members are
labour representatives, who have the same rights and duties as the representatives of the
shareholders (Jungmann, 2006). Consequentially, the principles of co-determination may
strongly influence the composition of the supervisory board (Jungmann, 2006).
Summarized,
(1) Executive and non-executive directors operate in one board in the unitary board structure,
while they operate in physically separated board layers in the dual board structure.
(2) Concentrating the role of CEO and chairman in the hands of one person (so called CEOduality) is admitted in a one-tier board in the one-tier board. In the two-tier board, the CEO
cannot chair the supervisory board under any circumstances.
(3) One-tier boards are organized in a unitary way; control and supervision of management
are integrated and exercised by one group of directors while the two-tier board adopts a
binary approach; the supervisory board exercises the control role, while the formally
separated management board exercises the strategy role.
(4) The two-tier model allows for more stakeholder inclusivity than the one-tier model.
4. Board Effectiveness
Effectiveness refers to doing the right things; board effectiveness can thus be translated into
fulfilling the right roles. An effective board is successful at monitoring the company and
helping facilitate the company’s ability to meet short-term and long-term goals (Anand,
2008). In other words, an effective board professionally pursues its roles (Tricker, 1994).
12! !
There is, however, little consensus on the specific configuration of an effective corporate
board (Johnson et al., 1996). The remainder of the paper aims to provide insight into the
determinants of the board’s ability to fulfill its roles and how the board’s structure (unitary or
dual model) can facilitate the fulfillment of the board’s roles.
The following section summarizes previous research on board effectiveness, listing board
composition (including size, leadership, board diversity, outsiders vs. insiders and
independence), board culture, interpersonal relationships and the use of board committees as
prominent determinants.
4.1) Board composition
4.1.1) Board size
Boards face an optimization process regarding board size: the board must be large enough to
provide information and resources needed by the company, while it must remain small
enough to act efficiently (Boyd, 1990) (Anand, 2008).
Smaller boards, on the one hand, can benefit from increased participation, social cohesion and
smooth communication (Donaldson and Davies, 1991) (Yermack, 1996). At the same time,
smaller boards are more easily dominated and may offer less expertise to govern the company
(Van den Berghe and Levrau, 2004) (Anand, 2008).
Larger boards, on the other hand, offer a wider array of knowledge, skills and contributions
(Anand, 2008) (Tricker, 1994). Both agency theory and resource dependence theory highlight
the importance of board size; agency theory argues that the CEO will less easily dominate
larger boards, while resource dependence theory argues that larger boards are more capable of
co-opting external resources (Levrau and Van den Berghe, 2007). Nevertheless, larger boards
may also be confronted with problems of poor communication, barriers to reaching
consensus, and slower decision-making and implementation (Yermack, 1996) (Goodstein et
al., 1994) (Zahra and Pearce, 1989). Boards with more than 7 or 8 members may also
experience difficulties in establishing interpersonal relationships (Tricker, 1994). Some
scholars therefor propose to constrain board size in order to achieve a more effective board
(Solomon, 2013) (Tricker, 1994).
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13!
4.1.2) Leadership structure
The board’s leader influences the boardroom culture and steers the board’s thinking, therefor
quality of leadership at the top is crucial (Tricker, 1994). One important aspect of the board’s
leadership structure, CEO-duality, has long been discussed in corporate governance literature,
and the debate has not been put to rest yet.
Agency theory substantiates the need for splitting roles of CEO and chairman. This practice
should contribute to the system of ‘checks and balances’ and will be even more reinforced
when the chairman is entirely independent of management (Tricker, 1994). The absence of
CEO-duality reduces the risk of domination by the CEO, whereas CEO-duality eliminates to a
certain extent the independence of the board (Tricker, 1994) (Donaldson and Davies, 1991)
(Anand, 2008). Agency theory also highlights the potential danger of CEO-duality: a CEO,
who holds the function of chairman as well, may abuse this extended power to support his
self-interest and the interests of top management rather than those of the shareholders
(Solomon, 2013) (Donaldson and Davies, 1991). Moreover, regulatory bodies in nearly all
commercially advanced countries have advocated for splitting the role of CEO and that of
chairman (Solomon, 2013). The Cadbury Report (1992) and Higgs Report (2003), for
instance, have advocated strongly for splitting the roles. Also the Belgian Corporate
Governance Code (2009) addresses the need for a balance in power and authority, and
discourages CEO-duality.
Nevertheless, some boards may benefit from CEO-duality as single-minded leadership
provides unity of command, which may lead to faster decision-making, eliminates potential
conflicts between the CEO and chairman, and leaves no room for (internal or external)
confusion (Solomon, 2013) (Tricker, 1994) (Maassen, 2002) (Donaldson and Davies, 1991).
Moreover, splitting the roles of CEO and chairman involves costs such as time spent to gain
consensus and loss of momentum in compromising (Solomon, 2013). Such a unitary
leadership structure may be beneficial especially in times of financial hardship or when the
company experiences market difficulties (Tricker, 1994).
4.1.3) Board diversity
Board diversity has received increased attention throughout the world, and has been
recognized as a path to enhancing boardroom effectiveness (Solomon, 2013). Such diversity
may be interpreted in terms of age, gender, personality, professional or occupational
14! !
background, expertise, skills, connections etc. (Anand, 2008) (Tricker, 1994) (Solomon,
2013). The Tyson Report (2003), for instance, recommends diversity among non-executive
directors, stating that ‘widening diversity in the boardroom would help companies improve
their reputation and trust among stakeholders’. More diverse boards are less likely to be
narrow-minded (Kosnik, 1990). At the same time, a higher level of board diversity also
constrains the board’s ability to take decisive action (Goodstein et al., 1994).
The empirical research of Levrau and Van den Berghe (2007) highlights that effective boards
do not only offer a diverse mix of skills, those skills should also be complementary. The
interviewed directors considered complementarity a minimum requirement for effectiveness.
4.1.4) Outsiders versus insiders
Agency theory and stewardship theory represent two opposing views regarding the
effectiveness of contributions of inside directors and outside directors. Agency theory,
concerned with the potential conflicts of interest between managers and shareholders, favours
a high proportion of outsiders on the board (Zahra and Pearce, 1989) (Levrau and Van den
Berghe, 2007). Stewardship theory, considering managers good stewards of the company,
favours a high proportion of inside directors (Muth and Donaldson, 1998) (Levrau and Van
den Berghe, 2007).
Several scholars, however, tend to support that the ideal board seems to be composed of both
inside and outside directors (Tricker, 1994) (Solomon, 2013). Both types of directors make
different contributions and bring different skills to the boardroom, as outlined in section 2 of
this paper. The right balance of outside and inside directors provides a mix of expertise,
independence and legal power (Byrd and Hickman, 1992).
4.1.5) Independence of board members
The need for an independent board is widely advocated in literature and among practitioners
(Solomon, 2013). For instance, the Cadbury Report (1992) specifies the need for an
independent view on strategy, performance and resources, including the appointment of
directors and standards of conduct.
Outsiders can broaden the strategic views of the company, ensure that boards remain focused
on the interests of the company, have an important role in appointing, monitoring, evaluating
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15!
and if required replacing the CEO and top management, plus they bring awareness of the
external world and public expectations to the board (Cadbury, 1995) (Clarke, 1998).
However, to be truly effective outside directors should be impartial, free from bias and
independent (Clarke, 1998). Boards with more outsiders are presumed to be more
independent, although this is not always accurate when one considers personal, familial or
economic linkages (Maassen and van den Bosch, 1999) (Johnson et. al, 1996). For instance,
suppliers, customers and consultants are not entirely independent (Clarke, 1998).
4.2) Other determinants
4.2.1) Board culture
Board culture refers to the set of unwritten, informal rules that regulates board and director’s
behavior (Levrau and Van den Berghe, 2007). The boardroom culture should be open and
transparent, foster an environment in which directors can express different points of view and
enable discussion and debate (Solomon, 2013) (Levrau and Van den Berghe, 2007). Tricker
(1994) also stresses the importance of an open-minded attitude.
4.2.2) Interpersonal relationships
Interpersonal relationships between board members may also contribute to the board‘s
effectiveness (Levrau and Van den Berghe, 2007) (Tricker, 1994). Levrau and Van den
Berghe (2007) highlight the importance of cohesiveness, informal contacts and team spirit
among the board members. Board members should maintain ‘an adequate level of
relationships’ with their fellow directors in order to ensure smooth operation of the board
(Tricker, 1994). Moreover, relationships between executive and non-executive directors are
crucial. Although non-executive directors should keep a distance to maintain their
independence and objectivity, establishing a relationship with the executive directors may
supply them with valuable information about company affairs and allow him to take more
informed decisions (Tricker, 1994).
4.2.3) Board operation: information provision and timing
The preparation of the meetings is critical to the effectiveness of a board; sufficient
information must be provided for each point on the agenda so that directors can decide with
full knowledge of the issues (Levrau and Van den Berghe, 2007). Not only the amount and
timing of the information is important, also the quality of the information is relevant (Tricker,
1994). Directors have a right to all information they require to carry out their duties (Hilmer
16! !
and Tricker, 1990). Keeping directors informed and in touch with company developments is
likely to increase their awareness and appreciation of relevant factors in the external business
environment (Hilmer and Tricker, 1990).
Several scholars identify a better use of time as an opportunity to increase board effectiveness
(Hilmer and Tricker, 1990) (Solomon, 2013). Meetings of the boards are essential, but are
also a significant investment of the members’ time; therefor meetings should be well planned
and run (Hilmer and Tricker, 1990). Determining the purpose of the meeting, creating the
agenda, planning the agenda, handling certain matters that do not require a meeting over the
phone or via mail and ensuring all materials are well organized are means to stimulate a better
use of time during board meetings (Hilmer and Tricker, 1990).
4.2.4) Board committees
Generally speaking, there are two types of committees: operating committees, supporting
management (for example executive, strategy or finance committee) and monitoring
committees, overseeing and reviewing management’s actions independently (for example
audit, compensation or nominating committees) (Harrison, 1987). Both such board
committees may enhance the board’s effectiveness in two ways; (1) they allow to save time of
the whole board, handling issues that the board as a whole does not need to discuss, and (2)
they provide an independent check and balance, often in areas where conflicts of interest
between management and shareholders may arise, such as remuneration (Hilmer and Tricker,
1990) (Demb and Neubauer, 1992).
Remark
Nicholson and Kiel (2004) take a different approach and have developed a holistic framework
for diagnosing board effectiveness, based on board intellectual capital and define boards as “a
bundle of intellectual capital that enables it to enact a role set”. The framework proposes
several inputs, such as the organization type, legal framework, constitution, history and
strategy of the firm, which undergo a transformation process, resulting in a series of board
outputs in three areas; corporate, board and individual output. In Nicholson and Kiel’s holistic
framework, the match between the board’s intellectual capital and the required roles for the
board determines the effectiveness of the board.
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17!
5. Empirical research
This section discusses the empirical study of the effectiveness of one-tier and two-tier boards.
Section 5.1 gives an overview of the research question and specifies some particular facets of
this question. Section 5.2 explains how data were collected. The remaining sections
respectively give an overview of the data analysis, interpretation and conclusion of the results.
5.1)
Research question
As indicated above, the board of directors, either structured as a one-tier board or a two-tier
board, may fulfil three roles: control, strategy and service. The extent to which the board is
able to professionally fulfil those roles was conceptualized as board effectiveness. Board size,
leadership structure, board diversity, the roles of outsiders versus insiders and the
independence of the board members were listed as main determinants of board effectiveness.
The conducted literature review furthermore led to conclude that one-tier boards and two-tier
boards differ in various ways. The main difference between one-tier boards and two-tier
boards is whether control and strategy are concentrated in the hands of one group, or are
formally separated and exercised by two distinct groups. Yet, the literature study also reveals
that only a limited amount of research on the effectiveness of the different board structures
has been conducted. Based on the assertions made in the literature review, I question whether
one-tier board systems’ effectiveness is different from two-tier board systems’ effectiveness.
Research Question: Is there a difference in board effectiveness between one-tier board
systems and two-tier board systems?
The previous section specified several determinants of board effectiveness. The following
paragraphs discuss how these determinants relate to the different board structures and their
effectiveness.
Board size
In practice, board size differs substantially across companies (Tricker, 1994). In addition,
there appears to be no agreement on ‘the most effective size of the board’ (Tricker, 1994).
Nevertheless, it can be argued that the size of the one-tier board is generally larger than the
size of the management or supervisory board of the two-tier board. In other words, the twotier board structure is compromised of two smaller groups of directors, rather than one larger
group of directors. I consequentially hypothesize that two-tier boards are more effective; their
18! !
smaller group size may, for instance, allow for smoother communication, increased social
cohesion and participation (Donaldson and Davies, 1991) (Yermack, 1996).
Leadership structure
Two points of interest arise here: (1) the issue of unitary leadership versus dual leadership,
and (2) the possible occurrence of CEO-duality. First, the one-tier board has only one
chairman; this implies unity of command and possibly faster decision-making, relative to the
dual leadership structure of the two-tier board. Second, there is the issue of CEO-duality,
which can only occur in a one-tier board and can be considered a significant threat for the
quality of monitoring by the board. It is possible in the one-tier board that the CEO is in
charge of the board, implying that he is also in charge of monitoring management. In the twotier board, however, a person other than the CEO will always be in charge of monitoring
management. The CEO can never chair the supervisory board; this leadership structure can
potentially increase the board’s monitoring quality and board effectiveness in general. I
consequentially hypothesise that the two-tier board’s leadership structure is more effective.
Board diversity
Diversity of skills, professional backgrounds, gender, age, experience etc. may contribute to
the board’s effectiveness (Solomon, 2013). With regard to board structure, the two-tier board
structure formally separates control and strategy; consequentially it might be easier to find the
right mix of profiles (either capable of monitoring management or strategic involvement). It
can be hypothesized that two-tier boards will consequentially be more effective. One-tier
boards on the other hand may experience more difficulties in finding the right mix of profiles.
The one-tier board, integrating the role of control and that of strategy, places higher demands
on the appropriate profile of the board members. Directors should have the right skills and
experience both for monitoring management and making strategic decisions. Nevertheless,
one-tier boards may exhibit a higher level of diversity, especially in terms of mixing outside
and inside directors in one group instead of separating them in two distinct groups. I
hypothesize, with regard to board diversity, that one-tier boards are more effective.
Outsiders versus insiders: integration versus separation of control and strategy
Both insiders and outsiders make different and valuable contributions to the board (Solomon,
2013). In addition, most boards seem to maintain a mix of outside directors and inside
directors on the board (Tricker, 1994). The main issue here is the role division: whether
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19!
control and strategy are separated or whether they are integrated. In the two-tier board inside
directors are exclusively responsible for strategy and service, and outside directors for
monitoring management. This formal role distinction, however, does not exist in the one-tier
board. Both inside directors and outside directors are involved in decision-management and
decision-control. Yet, having insiders included in exercising the monitoring role may
substantially decrease the board’s effectiveness in controlling management, as management
cannot objectively monitor itself. On the other hand, outside directors may also leverage their
knowledge and inside information obtained through being part of the board to better control
management. In this way the integration of both roles in the one-tier board can be beneficial
for the board’s effectiveness. The inclusion of outside directors on the one-tier board may also
increase the effectiveness of the strategy role; outsiders may bring different external
perspectives on strategy-related decisions. In this regard, I hypothesize that one-tier board are
more effective.
Independence of board members
The independence of the board members is especially important for the effectiveness of the
control role of the board. Having inside directors involved in the control role can constitute a
significant threat to the board’s effectiveness, as is the case in the one-tier board. The two-tier
board monitors management through the supervisory board, consisting of outside directors
only, and is formally separated from the inside directors. With regard to the independence of
board members, I hypothesize that two-tier boards are more effective.
5.2)
Data collection
A vast amount of research on the board of directors is quantitative in nature (Levrau and Van
den Berghe, 2007) (Daily et al., 2003). However, data in this study were collected through
conducting qualitative interviews with directors of both one-tier and two-tier boards. The
interviews were semi-structured; interviews were conducted using a protocol as interview
guide, instead of a structured and formatted set of questions. An interview protocol, consisting
of a set of broadly defined open-ended questions, serves as a mental framework during data
collection (Yin, 2011). This approach allows for a more conversational style of interviewing,
two-way interaction between researcher and interviewee, and allows for the possibility of
discovering new insights during the data collection phase (Yin, 2011). Appendix 1 gives an
overview of the protocol employed during the interviews. Appendix 2 entails the Dutch
transcripts of the conducted interviews.
20! !
The Belgian Corporate Governance Code prescribes a one-tier board structure, although
companies are allowed to adopt a two-tier board structure through installing a directors
committee (‘Wettelijk Directiecomité’)3, which is similar to the management board. Yet, only
a limited number of companies have installed such a committee4. Moreover, the Belgian
system remains a unitary structure by its very nature. In the Netherlands, both structures are
allowed. Dutch companies have the right to choose between installing either a one-tier board
or a two-tier board, since January 1st 20135. Therefor I have opted to include only Dutch
companies with either a one-tier and two-tier board structure. I have chosen not to include
Belgian companies to eliminate differences in institutional contexts across companies.
Information on companies’ board of directors was collected from the companies’ website and
their annual reports. Directors were selected on their availability; whoever responded to the
interview invitation and was willing to participate was interviewed. Moreover, different types
of directors were interviewed. The set of interviewees includes chairmen as well as nonexecutive and executive directors to establish different points of view.
The restriction to Dutch companies imposed several significant barriers to the data collection.
Out of an extensive list of companies that were contacted via e-mail and telephone, only six
companies were willing and able to participate. I experienced three significant barriers during
the data collection phase. First, I experienced difficulties in accessing the right contact
information, which was often restricted for the public. In an effort to gather more contact
information I contacted corporate governance experts and institutes6. Second, when I was able
to find the right contact information, the potential interviewees often wished to accept the
interview invitation but could not fit an appointment in their schedule in the near future.
Third, I also experienced it was harder to get in touch with Dutch companies, of whom many
were not as familiar with Ghent University as Belgian companies.
Summarized, the topic of board effectiveness in one-tier and two-tier board structures was
empirically studied through conducting qualitative semi-structured interviews with a number
of directors of both board structures in the Netherlands. Table 1 gives an overview of the
number of interviews, categorized by the following characteristics: (1) whether the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
3
Wet 2 Augustus 2002, VB art. 54
Based on information provided by Guberna (Instituut voor Bestuurders)
5
Wet Bestuur en Toezicht
6!Guberna, Nyenrode Corporate Governance Insituut, Prof. Dr. Levrau (Universiteit Gent), Prof. Dr. Leen Paape
(Decaan Nyenrode Business Universiteit), Prof. Dr. Jaap Winter (Vrije Universiteit Amsterdam), Prof. Dr.
Harm-Jan De Kluiver (De Brauw Blackstone Westbroek – Universiteit van Amsterdam),
4
!
21!
interviewees were inside or outside directors, (2) whether they belonged to a one-tier or twotier board and (3) whether the company was listed or not.
Table 1 – Overview of interviewee characteristics
Types of directors interviewed
Total nr of interviews
Inside director
3
6
Outside director
2
Chairman
1
Board structure
One-tier
3
Two-tier
3
6
Types of companies
Listed
3
Non-listed
3
6
Remark
Board effectiveness may be interpreted in several ways. However, in order to ensure neutral
answers, free from conceptual bias, the term ‘board effectiveness’ was clearly defined
upfront. All interviewees were informed that board effectiveness was to be interpreted as ‘the
extent to which boards are able to professionally pursue their roles’. In this way, conceptual
misunderstandings about the topic of the study should not occur.
5.3)
Data analysis and interpretation
5.3.1) Method
The data analysis exists of two phases: a set of within-case analyses and a cross-case analysis.
The data collected during the interviews are analyzed at the individual level first. The first
part of the analysis thus constitutes a set of within-case analyses, in which each interview is
considered one case. Each of the topics addressed in the interviews is discussed in detail. The
second part of the analysis exists of a cross-case analysis. This analysis investigates each
topic addressed during the interviews, and compares the answers across cases. The cross-case
analysis focuses on similarities and differences between the interview responses in particular.
Validity is a key quality control issue (Yin, 2011). Therefor the following measures are taken,
during data collection and data analysis, to strengthen the validity of the study: (1) respondent
validity; feedback from the interviewees was collected to decrease the likelihood of
misinterpretation, (2) tests for rival or competing explanations, and (3) triangulation; different
types of directors were interviewed to establish different points of view.
22! !
5.3.2) Within-case analysis
The first part of the analysis constitutes in an in-depth study of each of the interviews, or
cases. Below, the interviews are analyzed in a narrative manner, and displayed in a
conceptually clustered matrix afterwards. This matrix (Appendix 3) is designed to give an
overview of the responses related to each of the topics investigated during the interviews
(Miles and Huberman, 1984). The main topics addressed in the interviews are: (1) the
integration versus separation of control and strategy, (2) board size, (3) the board’s leadership
structure, (4) board diversity and (5) the independence of the board members. The answers
corresponding to the same topic are clustered together in the same row, to facilitate the
interpretation of the responses. This matrix also serves as the basis of the second phase of the
data analysis, the cross-case analysis.
Company A
This company used to adopt a two-tier board structure. The company is in the hospitality
business and based in the Netherlands. The interviewee is an outside director. Resistance and
dissatisfaction about the board structure led to a transformation, guided by external
consultants, towards the unitary model. Personnel, as well as the shareholders, were
dissatisfied by the way the company was governed, the supervisory board was ‘too high in the
sky’ and their responsibility was limited. The involvement of the outside directors and the
decreased distance between management and supervision, as well as the increased and shared
responsibility of the directors, are considered advantages of the one-tier board by the
interviewee.
Integration versus separation of control and strategy: The company is satisfied with the
change in board structure; “What makes the one-tier board structure so attractive is the
flexibility of the unitary model. By joining inside directors and outside directors in one group,
the board fully exploits the knowledge and expertise of all members. Outside directors do
have the duty to monitor management and its decisions, yet these people possess very
valuable skills that can support management to take a better decision in the first place.”
(Outside director, Company A) The integration of control and strategy is regarded as
beneficial rather than a threat for the monitoring quality, and enforces the strategy role. The
shared responsibility of inside directors and outside directors also provides a valuable
information incentive to the directors, according to the interviewee; “We all share the
responsibility for the board’s decisions; this stimulates directors to ask for the information
!
23!
they need because we all are responsible for the decisions the board makes.” (Outside
director, Company A)
Board size: The board is made up of seven members. According to the company statutes, the
outside directors should always outnumber the inside directors. The interviewee regards seven
as a good number to spread the workload sufficiently among the board members and maintain
a high level of interaction.
Leadership structure: The board is chaired by an outside director, and is thus a person
different from the CEO. The company did not regard the leadership structure as an essential
component in the choice between the one-tier structure and the two-tier structure.
Nevertheless, the interviewee expresses that having one chairman, instead of two, sends out a
clearer message to the external world about who is in charge.
Diversity: “Diversity is important, but it is worth nothing without a sense of communality.”
(Outside director, Company A) This sense of communality should ensure that all members are
able to work together and understand each other. The interviewee mainly focuses on diversity
in terms of professional backgrounds; the board is made up of people with technical,
commercial, and other experience. Diversity is regarded as beneficial for the board’s
effectiveness. Yet, if all directors are too different and cannot build on a foundation that is
shared by all members no work will be done. Moreover, in the one-tier board inside and
outside directors are joined together in one group; this is regarded to add to the board’s
diversity by the interviewee. “This is what makes the one-tier board so strong; if you find the
right mix of profiles, the right diversity, you can be a very effective board.” (Outside director,
Company A)
Independence: “Being independent in exercising control is the biggest challenge of the onetier board, and to be honest the board never is one hundred per cent independent. How can
you be independent as an outside director if you share the responsibility of the inside
directors?” (Outside director, Company A) Inside directors and outside directors are gathered
in one group and share the responsibility of their decisions, and the interviewee experiences
that this decreases the independence of the outside directors. Being more involved and
working closer to management challenges the independence of the outside directors and the
monitoring quality. Yet, the interviewee also adds that the outside directors are better
24! !
informed and not ‘as high in the sky’ as they were before in the two-tier model. Exactly this
involvement may result in better, although possibly less independent, monitoring of
management, according to the interviewee. The benefits of involvement are expected to
exceed the risk of losing objectivity.
Company B
This company has chosen to work with a one-tier board structure. The company provides
international education programs and is based in the Netherlands. The interviewee is the
chairman of the board. The interviewee argues that the one-tier structure is most appropriate
because it corresponds with the nature of the company; “Our company is rather small, it
doesn’t make any sense for us to install a two-tier board. We need a professional board, that
fits with the nature and strategy of our company.” (Chairman, Company B) The interviewee
added to these statements that the one-tier structure also allows all board members to stay on
top of things and engage in more intense information exchange.
Integration versus separation of control and strategy: Control and strategy are closely
integrated in this board of directors; “Control and strategy need to be integrated. There is a
thin line between executive directors and non-executive directors, but that is how we stay on
top of things. This integration allows us to leverage the knowledge of all board members,
especially that of the outside directors.” (Chairman, Company B)
Board size: This one-tier board consists of five members. It was a deliberate choice of the
company to keep the board small; in order to allow all members to stay on top of what is
going on in the company, and to ensure social cohesion and a sense of ‘group feeling’. Yet,
the interviewee sometimes experiences the board is too small to cover all areas of expertise,
and is challenged in effectively pursuing its service role to the company. The board is
currently looking for one or two extra members, to add extra skills and expertise to the board
meetings.
Leadership structure: An outside director chairs the board. The interviewee, who is the
chairman of the board, argues that a unitary leadership structure provides unity of command
and sends out a clear message to the outside world. The interviewee considers himself as ‘the
face of the organization’ and also fulfills an important public relations role for the company in
that respect as well.
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25!
Diversity: “Diversity provides great perspectives, but diversity is only useful with a set of
communal principles. You need to be on the same line, and we experience this is especially
hard for outside directors.”
(Chairman, Company B) This board has adopted a set of
indisputable principles, which act as a foundation for the board’s operation. These principles
were established as a reaction to previous struggles within the board. “One of our directors
continuously questioned the basic principles that are at the core of the company’s business.
We could not move on to other, more future-oriented matters.” (Chairman, Company B) In
order to ensure more smooth operation in the future a set of basic principles was documented,
and represents the shared beliefs of all board members. The interviewee concluded that being
too diverse is a threat rather than a benefit for the board’s effectiveness.
Independence: This board of directors stresses the importance of involvement and proximity,
rather than independence, in exercising its roles. Yet, at the same time the board has taken
measures to ensure critical thinking and independence. The independence criteria are formally
documented, and the board works with an evaluation checklist that critically questions its
performance as a group.
Company C
This company adopts a one-tier board structure. The company is a large publisher with Dutch
roots. The interviewee is an executive director. Prior to the installment of the Dutch law ‘Wet
Bestuur en Toezicht’, the company worked with a two-tier board. The company statutes were
however designed to modify the two-tier model as much as legally possible with the intent of
imitating the one-tier model. The board existed of a management board and a supervisory
board, but held most, if not all, of their meetings together. As a result, the company worked
with a ‘hybrid board structure’ for a couple of years before shifting to the one-tier model in
2013. The interviewee stresses the role of the chairman, and informal happenings and events
for the effectiveness of the board. Also the use of committees is considered to contribute
substantially to the board’s effectiveness.
Integration versus separation of control and strategy: The integration of roles contributes to
the effectiveness of the board’s monitoring role; while the interviewee stresses the importance
of independence and impartiality when monitoring management, the integration allows for the
sharing of visions and a higher level of information, and provides opportunities to check and
26! !
validate whether the provided information is correct. These opportunities are considered to
contribute substantially to the board’s monitoring effectiveness.
Size: The board exists of eight non-executive directors and two executive directors, adding up
to a total of ten members. The company statutes outline a minimum of one for the number of
executive directors, and the non-executive directors must always outnumber the executive
directors. There is no maximum number of directors. With regard to board size, the
interviewee has experienced a trend towards a reduced board size, and especially towards a
smaller number of executive directors. The interviewee personally supports this trend: “A
larger board gives you more skills and expertise but a smaller board is even more important,
because the board becomes more flexible and allows for more interaction.” (Inside director,
Company C) Yet, the interviewee does not regard board size as a crucial element of the
board’s effectiveness.
Leadership structure: The role of the chairman in the one-tier board and two-tier board differs
substantially. The interviewee, who has experience as board member of one-tier boards as
well as two-tier boards, perceives this as the crucial difference between the unitary and dual
board structure. “Whereas the chairman of the supervisory board is only irregularly at the
office, the chairman of the one-tier board is much more involved. He is at the office 2 or 3
days a week and is more involved with investors and shareholders. The chairman is closer to
the company’s core business activities and pursues his strategy role more actively.” (Inside
director, Company C) The interviewee concludes that the higher time devotion and
involvement of the one-tier chairman make the one-tier board strong and more effective, and
are the basis for preferring the one-tier model to the two-tier model.
Diversity: The company attaches great importance to diversity in terms of gender, region,
expertise and age. Diversity is considered unrelated to the board’s structure. Nevertheless, the
interviewee points out that, in the two-tier structure, it is often hard to make the management
board diverse because it often exists only of two or three members. The interviewee did not
experience that the mix of outside and inside directors on the one-tier board adds an extra
dimension to the board’s diversity, because both types of directors held joint meetings in twotier structure as well.
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Independence of board members: The interviewee acknowledges that the two-tier board
structure outlines a clear separation between inside directors and outside directors. Yet, the
interviewee does not experience that the board’s impartiality has changed after changing the
board structure. The boardroom culture and atmosphere are considered more influential for
the impartiality of judgment than the board structure; “Board members must be encouraged to
engage in open discussions, allowed to support any point of view, and question management
whenever appropriate. This should result in impartial judgment of management, as opposed
to when board members are not supported to speak up and express a divergent point of
view.” (Inside director, Company C) The interviewee concludes that whereas the two-tier
structure facilitates the independence of the supervisory board members, these cultural
elements can support the board members’ independence as well.
Company D
This company adopts a two-tier board structure. The company is a global supplier of
horticultural products (plants and flowers), based in the Netherlands. The company is one of
the biggest players in the Dutch flower market. The interviewee is an executive director. A
couple of years ago the company reviewed its board structure, and moved from a three-tier
model towards its current two-tier model, which was most appropriate because of two
reasons: (1) the three-tier model was missing a clear delineation of tasks and duties and the
two-tier model provided a clear solution for that, and (2) the two-tier model offered more
opportunities for stakeholder inclusion than the one-tier model, which is central to the
company’s philosophy.
Integration versus separation of control and strategy: The roles and responsibilities of the
management board and those of the supervisory board are formally documented. The role
division is imposed to provide clarity. Yet, the company still stresses the need for a close
relationship between the members of both board layers. The management board and
supervisory board also hold joint meetings. These joint meetings are installed to enable the
supervisory board to take more informed decisions and engage in a closer relationship with
management. Nevertheless, the joint meetings always start and end with a discussion among
the members of the supervisory board only to allow the supervisory board to take its decisions
in the absence of the management board; “We hold our meetings as a one-tier board, yet we
act as a two-tier board.” (Inside director, Company D)
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Size: The management board consists of 2 members (only the CEO and CFO), whereas the
supervisory board consists of 9 members. The joint meetings are held with all 11 board
members. According to the interviewee, a bigger board would make communication and
interaction more difficult, while a smaller board would be less effective in fulfilling its service
role as it would not adequately represent the different stakeholders interests and neither would
it provide sufficient professional expertise.
Leadership structure: The management board and supervisory board are chaired by two
different persons, the CEO and an outside director respectively. The leadership structure is
not regarded as a crucial element for the board’s effectiveness by the interviewee – at least not
if the leaders are competent individuals.
Diversity: The diversity of the board members is a reflection of the company’s operations,
according to the interviewee. Board members are diverse in terms of expertise (product
knowledge etc.) and professional backgrounds (product markets, business units etc.). The
interviewee did not confirm the hypothesis that two-tier boards experience less difficulty in
creating a diverse board, compared to one-tier boards.
Independence of board members: The two-tier structure is considered the best structure to
safeguard shareholders’ and stakeholders’ interests, because of the independent position of the
supervisory board members. Nevertheless, members of the management board and the
supervisory board maintain a close relationship. “We do not regard the involvement and
closeness of the outside directors as a threat to their independence, the supervisory board still
remains an separate entity. This inclusivity rather allows them to obtain the information
needed to adequately evaluate management and its decisions.” (Inside director, Company D)
Yet, to safeguard independence the company organizes yearly conferences for the members of
the supervisory board. The performance and impartiality of the supervisory board are
addressed at these conferences.
Company E
This company adopts a two-tier board structure. The company is an international financial
group, based in the Netherlands. The group offers banking, investment, life insurance and
retirement services. The interviewee is a member of the supervisory board. The company
considers this structure most appropriate for imposing the right checks and balances within
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29!
the company. Yet, the interviewee, who has experience as board member of one-tier boards as
well, also acknowledges that the one-tier structure benefits from its simplicity, and that the
differences between one-tier and two-tier boards are not always as big as they may seem at
first sight. “Most important for the board’s effectiveness is to appoint members to the board
who are not afraid to give their opinion, know the business and are able to think critically. If
you have the right board members, it doesn’t matter whether they are part of a one-tier board
or a two-tier board.” (Outside director, Company E) From the interviewee’s perspective,
human capital rather than the board’s structure is critical to the board’s effectiveness.
Integration versus separation: The management board is held responsible for the management
of the daily operations and the long-term strategy, whereas the supervisory board is in charge
of supervising and giving advice to management. Although both board layers and their roles
are formally separated, the interviewee stresses that maintaining a close relationship between
both groups is crucial for the board’s effectiveness. To effectively pursue its roles the
supervisory board must challenge management and be able to ask questions, and to that end it
requires information. The supervisory board cannot effectively give advice to or supervise
management when it does not obtain sufficient information. Both board layers often hold joint
meetings to provide opportunities to question and challenge management. The different board
committees also play an important role in supplying the supervisory board with information.
At the same time, the interviewee also adds that there is another side to the story; information
exchange is considered a critical need of the board, but the supervisory board must not be
flooded with information. “On Friday night I receive bundles of documents up to one
thousand pages, which I am expected to read before the meeting on Monday. Management
should indeed provide information, but either they have to be more to the point or supply the
information sooner. Unfortunately, past experiences have showed the latter is not a feasible
option. The problem is that we are flooded by information, so that management cannot be
blamed for not providing a certain piece of information.” (Outside director, Company E)
Size: According to the interviewee the board should remain small; “Small is beautiful.”
(Outside director, Company E) The management board consists of 3 members: the CEO, CFO
and CRO (Chief Risk Officer). The supervisory board consists of 10 members. The
interviewee concludes that the board must remain small enough to ensure sufficient
interaction between all members, while it must also be big enough to represent different sets
of expertise and functional specialties.
30! !
Leadership structure: The CEO chairs the management board, whereas an external director
chairs the supervisory board. “It is absolutely necessary to assign authority to an outside
director to make the board effective.” (Outside director, Company E) The CEO, and
management, must be critically questioned, and someone external to the company is best
suited to do this. The interviewee also adds the following, based upon his experience as
member of a one-tier board: “CEO-duality is destructive for the effectiveness of the board and
especially for its control role”. (Outside director, Company E)
Diversity: The company has taken significant actions to make the board more diverse over the
last couple of years. Gender diversity is one aspect of this story; 4 out of 10 board members
are female. Diversity in terms of professional backgrounds is another aspect that was
addressed; the majority of non-executive directors are from different economic sectors. Yet,
the company has decided to correct this to some extent, in order to rely on more industryspecific expertise. Complementarity is also considered a crucial aspect of diversity; “The
biggest added value of the board originates in complementarity.” (Outside director, Company
E) The interviewee further explains that members with complementary skills and personalities
make the board stronger and more proficient.
Independence: All supervisory board members are considered independent, and that
independence is crucial for constructive discussions. The interviewee also states that the
independence of the outside directors is not more or less present in the two-tier structure than
in the one-tier, he regards independence as a personal trait rather than a structural issue.
Company F
This company adopts a two-tier board structure. The company is an international retailing
group, based in the Netherlands with over three thousand stores worldwide. The interviewee
is an inside director of the board. The interviewee stresses the need for competent directors to
make the board effective in pursuing its roles; “The board structure remains a paper tiger
unless the members are skilled and complement each other.” (Inside director, Company F)
Integration versus separation of control and strategy: The two-tier structure clearly outlines
the roles and responsibilities of the management board and the supervisory board, and this is
considered to provide clarity and enforce the independent attitude of the outside directors. The
interviewee points out that this role division affects not only legal matters, such as legal
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31!
responsibilities, but also how the board layers operate, such as their meeting frequency. In this
case, the outside directors hold substantially fewer meetings than the inside directors. “This
implies that the supervisory board members receive substantially less information than
management. Yet, that is not necessarily a consequence of the two-tier structure. Even in a
one-tier structure, management will always be more involved and receive more information.”
(Inside director, Company F) The interviewee thinks one-tier boards and two-tier boards are
not very different per se: “A one-tier board with a low meeting frequency can be more like a
two-tier board than another one-tier board with a high meeting frequency.” (Inside director,
Company F)
Size: The management board and supervisory board both exist of seven members. The
company has not outlined a specific maximum number of directors. The interviewee regards
the current number as a consequence of coincidental factors, such as availability, rather than a
deliberate choice. The interviewee also indicates that the board size must allow for flexibility;
“The board must not be too small, yet not too big either. Both extremes limit your flexibility.”
(Inside director, Company F) The interviewee also highlights a trend regarding board size: he
experiences that management boards become smaller and that the focus on the CEO
increases; “There is an increasing trend of CEO-centeredness; management boards become
smaller, in many companies I see management boards existing only of the CEO and CFO.
This trend asks for stronger supervision as the CEO becomes increasingly empowered. In big
listed companies, I see an evolution towards a three-tier structure: a management board, with
the CEO and CFO, an executive committee, with the other members of the C-suite, and the
supervisory board. On the other hand, we could just as well stay with a one-tier or two-tier
board, but that will require a smaller and stronger set of supervisors.” (Inside director,
Company F)
Leadership structure: The CEO chairs the management board and an external chairman chairs
the supervisory board. The interviewee considers the chairman crucial for the board’s
effectiveness. “Especially the role of chairman of the supervisory board will become
increasingly important as this trend of CEO-centeredness evolves.” (Inside director,
Company F) The interviewee consequentially strongly opposes to CEO-duality, whereas he
considers the difference between unitary and dual leadership less important for the board’s
effectiveness.
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Diversity: Diversity has received increased attention in this board, and especially establishing
the correct mix of skills is considered important; “You want to create a healthy mix of skills
and backgrounds, this creates board dynamics that add to the board’s effectiveness.” (Inside
director, Company F) The board is diverse in terms of professional backgrounds, expertise
and gender. The interviewee indicates that diversity is not a consequence of the structure, nor
does the structure limit the ability of creating diversity; “The two-tier structure is not
necessarily more or less diverse than the one-tier structure. I regard diversity as unrelated to
structure.” (Inside director, Company F)
Independence of board members: The interviewee, who is part of the management board,
states that the supervisory board members have an entirely independent attitude towards
management. This independence is enforced by the structure; “The separation of the board in
two layers clearly indicates each member’s position and role. Outside directors
consequentially adopt a marginal approach; they don’t second-guess every single aspect of
management’s decision, but critically question the decisions at a more abstract level.” (Inside
director, Company F) The interviewee, however, indicates that outside directors in the onetier board are not necessarily less independent; “Independence is not a structural issue.
Although, the board structure may support or facilitate adopting an independent attitude,
independence is much closer related to a person’s own integrity and qualities.” (Inside
director, Company F)
The findings of the within-case analysis are summarized in Appendix 3. This matrix also
serves as the basis for the next part of the data analysis: the cross-case analysis.
5.3.3) Cross-case analysis
Whereas the within-case analysis focused on analyzing the data at the individual level, the
interview responses will now be analyzed across the individual interviews, or cases. A crosscase analysis provides more potential for greater explanatory power and greater
generalizability than single-case analysis (Miles and Huberman, 1984). The aim of this
analysis is to compare the findings, and focus on the similarities and the differences between
the responses of directors of one-tier boards on the one hand, and those of two-tier boards on
the other hand.
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33!
Integration versus separation of control and strategy
The integration or separation of the control role and the strategy role is central to the
difference between one-tier boards and two-tier boards. The interviewees who belonged to
one-tier boards (Company A, B, C) considered this integration one of the major strengths of
the unitary board model. First, it may increase the effectiveness of monitoring. Integrating
both roles and types of directors brings closeness and awareness to the board and avoids a
supervisory board that is ‘high in the sky’. One interviewee (Company A) also pointed out
that the shared responsibility of the directors provides an incentive to share and exchange
information. Overall, the integration is considered to supply the outside directors with more
information and insight about management’s rationale and behaviour. Plus, the integration
provides opportunities for the non-executive directors to validate or check the correctness of
the information provided by management. On top of that, it may also increase the
effectiveness of the board in pursuing its strategy role. The integration of roles allows the
board to leverage the knowledge of all board members, especially that of the outside directors.
Including the outside directors in all meetings allows management to fully exploit the
professional advice of the outside directors, establish different perspectives on strategic issues
and consequentially increase the board’s effectiveness in pursuing its strategy role. Whereas
the outside directors exercise control after management has taken a decision in the two-tier
board, the integration in the one-tier board can allow outside directors to support management
to take a better decision in the first place, and thus exercise ex-ante rather than ex-post
control.
The interviewees who belonged to the two-tier model (Company D, E, F), in which outside
directors and inside directors and their respective roles are formally separated, indicated that
the role separation provides clarity and ensures that all directors stay within the lines of their
function. The separation avoids, for instance, that the supervisory board members engage in
managing the operations of the company. It was also considered to provide the right checks
and balances, and a means to safeguard and voice the stakeholders’ interests. The majority of
interviewees regarded the dual structure as a mechanism that facilitates the independence of
the supervisory board members; this may lead to increased efficiency in monitoring
management.
However, the two-tier board structure seems to be characterized by information asymmetry
between the board layers. One board member (Company F) pointed out that management is
34! !
always more involved and informed than the outside directors, but added that the information
asymmetry was in part due to the board structure. This interviewee (Company F) also
contributed the information asymmetry to the lower meeting frequency of the supervisory
board. All of the two-tier board interviewees stressed the need to stimulate the information
exchange between the separated board layers. The interviewees all reported that both board
layers often hold shared meetings, with the purpose of engaging in information sharing among
directors.
Overall, the separation of the roles of control and strategy was considered as a means to
provide clarity and provide the right checks and balances. Nevertheless, there appears to be a
need for more opportunities for information exchange, as the two-tier board members all
indicated the use of joint meetings for the management board and the supervisory board. It
can be questioned whether this can still be considered a pure two-tier model. It appears that in
its true nature the two-tier board’s separation of roles is less effective than the one-tier board’s
integration of roles, which allows the board to fully exploit the knowledge of the nonexecutive members in pursuing its strategy role and allow them to take more informed
decisions when monitoring management.
Size of the board
The size of the one-tier boards ranged from 5 to 10. The two-tier boards on the other hand
contained 11 to 14 members. The size of the management boards varied from 2 to 7 members,
whereas the size of the supervisory board ranged from 7 to 10 members across the
interviewed companies. All interviewees, regardless of whether they were part of a one-tier
board or two-tier board, recommended to keep the board small enough; “small is beautiful”.
Small boards allow for interaction, flexibility and social cohesion. At the same time, all
interviewees also indicated that the board must be big enough to cover different areas of
expertise, and thus allow the board to effectively pursue its service role.
I hypothesized that one-tier boards were bigger than the separate board layers of the two-tier
board, and consequentially less effective. However, to the extent that this study is a valid
representation of the population, it appeared that the differences in board size are very small.
The management boards especially were very small (two or three members) and in the one
case in which the management board consisted of seven members (Company C), the
interviewee pointed out a trend towards a decreasing size. The supervisory boards were
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35!
comparable in size to the one-tier board. In any case, the one-tier boards were smaller than the
combined board layers of the two-tier board. Nevertheless, data on board size should be
carefully interpreted and generalized, given the small size of the dataset. On top of that, the
main focus of the interviewees when discussing board effectiveness suggests that board size is
not a critical determinant of board effectiveness.
Leadership structure
None of interviewees indicated that the leadership structure was significant for the board’s
effectiveness, except for one interviewee (Company C) who considered the roles of the
chairmen the crucial difference between both board structures. The other interviewees pointed
out that the competence and skills of the leader were more important than how the leadership
itself was structured. The interviewee who considered the leadership structure significant
(Company C), indicated that the one-tier chairman is much more involved with the company,
shareholders and investors than the chairman of the supervisory board in the two-tier
structure. The one-tier chairman’s higher involvement and time devotion is considered to
increase the board’s effectiveness substantially. The other interviewees, who also belonged to
one-tier boards (Company A, B), indicated some benefits of having only one leader; unity of
command and sending out a clear message to the outside world about who is the ‘face of the
organization’, but did not consider the leadership structure crucial for the board’s
effectiveness. Yet, all of them stressed the need to assign authority to someone outside of the
company and other than the CEO. CEO-duality was strongly discouraged in any case. Twotier boards (Company D, E, F) neither considered the leadership structure as crucial for the
board’s effectiveness, although they recognized the need for an independent chairman to
critically question the CEO and management.
Diversity
All interviewees strongly advocated for a highly diverse board. Diversity is considered to
provide different perspectives, different sets of skills and expertise, and enhance the board’s
effectiveness in that way. The interviewees who belonged to one-tier boards (Company A, B,
C) did not confirm the hypothesis that one-tier boards experienced more difficulties in finding
competent directors, because the directors should be both capable of monitoring management
and executing the strategy role, than two-tier boards. Moreover, they indicated that one-tier
boards exhibit a higher level of diversity, because inside and outside directors are gathered in
one group. This integration adds an extra dimension to diversity that is not present in the pure
36! !
two-tier board. Yet, one of the interviewees (Company B) also points out that this integration
can challenge the board’s effectiveness. Outsiders may share different beliefs about the
foundational principles of the company, and that without agreement on those principles the
board cannot function. Therefor a sense of communality between inside and outside directors
is required. If the one-tier board is able to establish communality and diversity at the same
time, it is considered highly effective by the interviewees.
Also the interviewees who belonged to two-tier boards (Company D, E, F) indicated that
diversity increases the board’s effectiveness. Diversity was interpreted in terms of
professional expertise and stakeholder representation. The interviewees did not support the
hypothesis that one-tier boards experience more difficulties in creating a diverse board. One
interviewee (Company C) subscribed to the opposite of this hypothesis, stating that two-tier
boards may experience difficulties in establishing a diverse management board because of its
small size.
Independence of board members
I hypothesized that the separation of control and strategy in the two-tier board contributed to
the independence of the supervisory board members, and therefor contributed to the
effectiveness of the board, especially in pursuing its control role. Yet, the interviewees who
belonged to two-tier boards (Company D, E, F) did not subscribe to this hypothesis. One
director (Company E) indicated that outside directors are not necessarily more or less
independent in the two-tier structure. Another director (Company F) indicated that outside
directors’ independence is reinforced by the two-tier structure, but does not necessarily as a
guarantee; integrity and personal qualities were considered more important.
One-tier boards (Company A, B, C) indicated, as hypothesized, that independence is
challenged by the unitary structure. The interviewees pointed out that the shared
responsibility for inside and outside directors, as well as the closeness and involvement of the
outside directors questions the outside director’s independence. But contrary to the
hypothesis, this is not considered a threat for the board’s effectiveness. It is rather regarded as
an opportunity to make the board more effective. This closeness and involvement enables a
higher level of information exchange, and provides an opportunity for the outside directors to
exercise ex-ante rather than ex-post control. Yet, these statements do not imply that the onetier boards do not consider independence important. All interviewees indicated that
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37!
independence is checked upon regularly and stimulated through organized conferences and/or
conducting checklist evaluations. One interviewee (Company C) also pointed out that
elements, other than board structure, can contribute to the independence of board members;
an open culture characterized by trust in which directors are incentivized to express different
points of view and critically question management can support the board members to be
impartial when monitoring management.
Other: Culture, interpersonal relationships, board operation and committees
The literature study also indicated some determinants of board effectiveness that were not
related to the board’s composition: the board culture, interpersonal relationship, board
operation and committees. The interview responses did not reveal a significant difference in
the use of board committees; all companies in the study employed a number of committees,
except for one company with a unitary structure (Company A). Across board structures, a
difference in board culture was not apparent either; all interviewees indicated trust, critical
thinking and freedom to express any point of view as principal elements of an effective board
culture. Most intriguing is the accent that all interviewees put on the interpersonal
relationships, and the capabilities of the board members themselves. One interviewee
(Company C) stressed the importance of informal happenings, such as dinners, to establish
relationships between board members. Three board members (Company A, E, F) strongly
indicated that the board structure is irrelevant if the board consists of the wrong people. A
board with incompetent or inexperienced directors will neither work with a one-tier structure,
nor with a two-tier structure. Yet, if you have skilful directors, they will make any board
structure work. Furthermore, the majority of interviewees also indicated that the differences
between both board structures in practice are not as distinct as in theory. For instance,
whereas the supervisory board and management board are formally separated in theory, all
two-tier boards indicated to hold joint meetings in practice.
6. Conclusion
6.1)
Summary
The one-tier board structure and the two-tier board structure differ in various ways. Based on
the assertions made in the literature review, I questioned whether there was a difference in
board effectiveness between both structures.
38! !
First, the integration versus separation of control and strategy in the distinct board structures
was addressed. The data suggest that the one-tier board’s integration may increase the board’s
effectiveness, both in pursuing its control role and strategy role. The integration supplies
board members with more information and provides opportunities for the board to validate
whether the information supplied by management is a correct representation of the business
reality, which may contribute to the monitoring effectiveness. The integration may also allow
leveraging the knowledge of the board members, supplying the board with different points of
view on strategic matters. This may contribute to the board’s effectiveness in pursuing its
strategy role. The separation of roles (and board layers) on the other hand provides clarity, but
may create information asymmetry. To decrease this asymmetry, joint meetings can be
organized. The two-tier board structure with joint meetings, however, tilts towards the onetier structure.
Next, board size was discussed. All interviewees presented board size as a paradox: the board
should be small for social cohesion and interaction, and the board should be large for
providing skills and expertise. I hypothesized that one-tier boards were smaller than the
separate layers of the two-tier board, and are consequentially less effective. The differences in
board size were however very small. Moreover, none of the interviewees suggested that board
size is crucial for the board’s effectiveness. Overall, it appears that management boards
become increasingly small, and that one-tier boards are comparable in size to supervisory
boards.
All interviewees, except for one, stressed the importance of the competence and skills of the
leader. They considered the leader’s competence more important than how the leadership is
structured. The one interviewee who considered the leadership structure highly important
indicated that the role of chairman of the one-tier board and that of chairman of the
supervisory board differ substantially, and that the one-tier board chairman may contribute
substantially to the board’s effectiveness because of his higher involvement with shareholders
and investors, higher time devotion and more active role. All interviewees strongly opposed
to CEO-duality. Also the two-tier board interviewees recognized the need to assign authority
to an external chairman, in order to critically question and challenge management. Overall,
the interviewees’ responses suggest that the leadership structure (unitary versus dual) is not
crucial for the board’s effectiveness. Yet, a more detailed study into the roles of the chairmen
may put this conclusion into perspective.
!
39!
Both board structures pay a great deal of attention to board diversity and all interviewees
recognized diversity as a path to enhancing effectiveness. The one-tier board mixes both
inside and outside directors in one group, and can to that extent be regarded as more diverse
than the two-tier board. The interviewees of the one-tier board did not indicate difficulties,
related to finding board members that are able to pursue both the control and strategy role.
Neither did the two-tier board interviewees indicate that board structure is related to diversity.
One interviewee, however, pointed out that a two-tier board can experience difficulty in
establishing a diverse management board, when its size is small.
The interviewees who belonged to one-tier boards indicated, as hypothesized, that their
independence is challenged by the board’s structure. Yet, the involvement and shared
responsibility that potentially question the board members’ independence is considered an
opportunity to increase the board’s effectiveness. The involvement provides opportunities to
exchange and validate information, and consequentially increase the board’s effectiveness in
pursuing its control and strategy role. The interviewees of the two-tier boards however did not
subscribe to the hypothesis. Some of them indicated that outside directors are not necessarily
more or less independent in the two-tier structure, and that independence is more closely
related to integrity and personal qualities, rather than board structure. Others regarded the
board’s structure as enforcement, but not a guarantee, of the outside directors’ independence.
6.2)
Personal reflection
Two points of interest arise from this study. First of all, it appears that the operational, as
opposed to legal, differences between both board structures are not as prominent as in theory.
For instance, all two-tier boards in the study organize joint meetings. It can be questioned
whether this can still be considered the pure two-tier model. One interviewee pointed out that
a two-tier board with a high meeting frequency can be more like the one-tier structure than a
comparable two-tier board with a low meeting frequency. Second, the interview responses
also question whether board structure matters significantly. There appears to be a shared
belief among the interviewees that human capital -or the skills, experience and competence of
the directors- is more important. As one interviewee formulated this clearly: “Competent
directors will make any board structure work.”
40! !
The importance of human capital on the board should not be underestimated. Yet, I believe
that at the same time certain structural elements can contribute to the effectiveness of a board,
given that it consists of competent directors. For instance, the integration of control and
strategy in the one-tier board may provide the directors with more information and
opportunities to validate that information, and consequentially enable them to take better
decisions. Notwithstanding the positive effect on board effectiveness of some structural
elements, I also acknowledge that non-structure related elements, such as board culture,
informal gatherings etc. are highly important to establish a well-functioning board.
Consequentially my personal belief is that the primary condition to establish an effective
board is having competent directors. Based on the empirical research of this study it is
however impossible to universally prefer one structure to the other. Both board structures
have certain advantages. Yet, it is important to consider the nature and strategy of the
company itself too. For example, one company in the study adopted a strong stakeholder
philosophy. Consequentially the two-tier model, creating a strong and independent
supervisory board to voice and safeguard the interests of the stakeholders, was considered
most effective for that company.
6.3)
Avenues for future research
In the process of conducting the empirical research, several avenues for future research came
to mind.
(1) Why does the two-tier board require joint meetings? First needs to be investigated whether
this assertion can be generalized to companies outside of this study with a two-tier board
structure. If yes, why does the dual board structure require such meetings? A more detailed
insight into the process of information exchange, provision and validation in the two-tier
structure, and especially how this process is different from the one-tier structure’s process,
would be interesting.
(2) More detailed insight into the roles of the chairmen. One of the interviewees considered
difference in the roles of the chairman of the one-tier board and that of the supervisory board
in the two-tier structure the essential difference between both structures. More detailed
insights into how these roles are different, and how that can contribute to the board’s
effectiveness is required.
!
41!
(3) Furthermore it would be highly interesting to investigate Dutch companies that have
changed their board structure since the instalment of the law ‘Wet Bestuur en Toezicht’ in
January 2013. Why did they change their structure? What are the main differences in
practices? What are the perceived advantages and disadvantages? An understanding of this
rationale could add new insights and broaden the current views on board effectiveness.
6.4)
Recommendations for board members
This research highlights three recommendations for board members. First of all, the study
outlines different benefits of both structures. My personal recommendation is to consider,
given the nature and strategy of the company, which structure entails the highest benefits. I
regard the choice between the one-tier board and two-tier board as a trade-off. The one-tier
board allows the company to leverage the knowledge of all directors, provides increased
information incentives and a potentially higher level of diversity, but challenges the
independence of the board members. The two-tier board provides a clear role division and
better opportunities for stakeholder inclusion but challenges the information provision and
involvement of the outside directors. Consequentially I would, for example, recommend the
two-tier structure for a company with a stakeholder philosophy whereas I would rather
recommend a one-tier structure for a highly diversified company because it may benefit from
leveraging the diverse sets of expertise of their outside directors. Nevertheless, the one-tier
structure is not universally better than the two-tier structure, nor is this true the other way
around. Board members should also be carefull in generalizing the findings of this study,
given the qualitative nature of the research design. Second, companies should be aware of the
importance of human capital on the board. I consider the skills, competence and experience of
board members a primary condition to establish a well-functioning board. Finally, other nonstructure related elements can increase the effectiveness of the board as well; interviewees
highlighted the importance of board culture, informal gatherings and interpersonal
relationships, regardless of whether they were part of a one-tier or two-tier board structure.
42! !
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III!
8. Appendices
Appendix 1 – Interview Protocol
A. Key questions
Board structure
-Why does the company adopt a one-tier/two-tier structure? Was this a deliberate choice?
-What are, in your opinion, the advantages/disadvantages of the one-tier/two-tier board
structure? Do you have experience with both structures? Do you have a personal preference?
Integration vs. separation of control and strategy
-What are the benefits/challenges of the separation of roles in the two-tier model? How can
this separation make the board more effective? How does the board ensure that the outside
directors receive sufficient information?
-What are the benefits/challenges of the integration of roles in the one-tier model? How can
this integration make the board more effective? How does the board ensure independent
monitoring by the outside directors?
Board Size
-How many directors are on the (management/supervisory) board?
-Is there a minimum/maximum number?
-How does board size relate to the board’s effectiveness? Would the
communication/interaction on the board be smoother when the board was smaller? Is the
board large enough to provide a wide array of skills and expertise?
Leadership
-How is the leadership of the board organized?
-How does the leadership structure contribute to the board’s effectiveness? Are there any
problems/challenges/improvements?
Diversity
-Do you regard the board of which you are member diverse? (Skills, personality,
background…) What are some advantages/disadvantages of diversity?
-Does diversification make the operation of the board more difficult? Is it easier to fulfil
tasks when board members are more alike?
-Are the directors’ skills complementary? Easy to find the right mix?
-Is diversity related to the board’s structure in your opinion?
Independence
-How does the board ensure the impartiality and independence of the board members in
charge of controlling management?
-Does the two-tier (one-tier) structure facilitate (threaten) the independence?
B. Other questions (if time left and not mentioned during other questions)
Culture
-How would you describe the culture/atmosphere in the boardroom?
-Which elements are crucial for the board’s effectiveness?
Interpersonal relationships
-Are there interpersonal relationships between (inside and outside) directors?
-What about informal gatherings, or gatherings in contexts other than company?
-Do these relationships contribute to the effectiveness of the board?
Board operation
-Are the directors well briefed before the meetings? Is the information received in time?
-Are there any opportunities to make better use of time?
Board committees
-Does the board rely on board committees? Why? Value? Improvements?
IV! !
Appendix 2 – Interview Transcripts (in Dutch)
De interviews werden telkens vooraf gegaan door een korte introductie van het onderwerp,
bespreking van de gewenste anonimiteit en verklaring van de term ‘effectiviteit’.
Voorafgaand aan het interview kregen de interviewees ook een begeleidende brief met
achtergrondinformatie over het onderzoek.
Company A
Waarom hanteert het bedrijf een one-tier structuur? Was dit een bewuste keuze? Kan u
ook een aantal voor- en/of nadelen aanhalen van deze structuur?
Vroeger hadden we eigenlijk een two-tier structuur. Maar dat lokte heel wat weerstand uit bij
het personeel en onze klanten op een gegeven moment. Toen is de directie buiten functie
gesteld en hebben we een onafhankelijke commissie ingevoerd. Deze stelde vast dat de board
geen draagvlak meer had en heeft dan aanbevelingen gemaakt over een nieuwe samenstelling
en structuur voor de board. Onze raad van commissarissen was ver te zoeken, die zaten ‘hoog
in de wolken’ om het zo te zeggen. Zo zijn we uitgekomen bij onze huidige one-tier structuur.
We hebben gekozen voor de one-tier structuur omdat de betrokkenheid van de
toezichthouders hier iets nadrukkelijker is, er is minder afstand en de toezichthouders hebben
meer verantwoordelijkheid.
Naar mijn mening zijn eigenlijk beide structuren mogelijk, maar vooral belangrijk zijn de
mensen die in de board zelf zitten. De individuen zijn echt allesbepalend. En ook de cultuur
van de board kan een grote rol gaan spelen. Daarom is de keuze van de juiste personen zeer
belangrijk.
Nu, specifiek voor die one-tier structuur. Wat het moeilijk maakt is dat onze niet-uitvoerende
bestuurders dit niet doen als fulltime job. Die kleine tijdsbesteding maakt het niet simpel.
Maar in de structuur delen we wel allemaal de verantwoordelijkheid. De besluiten zijn
gemeenschappelijk en we dragen er allemaal de verantwoordelijkheid van. En dat geeft ons
een belangrijke stimulans om informatie uit te wisselen en te vragen. Het gevaar is langs de
andere kant wel dat de ene voorzichtiger is met de informatieplicht dan de andere. Het kan zo
simpel zijn als iemand eens vergeten in cc zetten op een e-mail. Maar de flexibiliteit is wat het
one-tier model zo aantrekkelijk maakt. Je zet executive en non-executive directors samen in
één groep en zo kan je alle kennis ten volle benutten. Alhoewel de non-executives de rol
hebben van toezicht over het management uitoefenen, hebben deze personen heel wat
expertise en inzichten die het management kunnen toelaten om in de eerste plaats al een
betere keuze te maken.
Hoeveel leden omvat de board? Is er een bepaald minimum of maximum aantal
vooropgesteld? In welke opzichten kan de grootte van de board (al dan niet) bijdragen
tot de effectiviteit van de structuur?
We zijn met zeven bestuursleden. We hebben geen minimum of maximum naar mijn weten,
maar het aantal niet-uitvoerende bestuurders moet wel steeds groter zijn dan het aantal
uitvoerende bestuurders. Het feit dat we met zeven zijn is eerder dat dit een voldoende
spreiding van de werklast garandeert, eerder dan dat het een bewuste keuze was. Ik vermoed
wel dat de interactie niet zo vlot zou verlopen als we met meer leden waren. Soms vergaderen
we wel eens apart, zo een ‘één-tweetje’ noemen we dat. Dat verscherpt ook de onderlinge
relaties tussen de leden.
!
V!
Hoe is het leiderschap van de board georganiseerd? Hoe beïnvloedt de leiderschap
structuur de effectiviteit van de board? Is dit element ook in rekening genomen toen
jullie de overstap naar een nieuwe structuur maakten?
We hebben één chairman, en die is een niet-uitvoerende bestuurder. De leiderschap structuur
was voor ons eigenlijk ook niet zo’n belangrijk element in de keuze tussen de one-tier board
en de two-tier board. Zoveel maakt het naar mijn mening niet uit. Het voordeel met één
chairman is wel dat je een duidelijk boegbeeld hebt. Toen we er twee hadden werd er wel veel
nadruk gelegd op goede onderlinge interactie en informatie uitwisseling. De chairman van de
supervisory board mag niet het operationele werk van de andere chairman willen overnemen.
In zo’n situatie –met twee chairmen- heb je echt een goed vertrouwen nodig om het te doen
werken.
Hoe kan de diversiteit van de board bijdragen tot een hogere graad van effectiviteit?
Kan dit ook de effectiviteit tegenwerken?
Diversiteit is zeer zeker belangrijk, maar gemeenschappelijkheid ook. Zonder dat is diversiteit
eigenlijk niets waard. We letten specifiek op vertegenwoordiging voor het technische en het
commerciële, en dan hebben we een derde categorie van ‘overschot’. Naar mijn mening
hebben de bestuurders ook echt een intrinsieke betrokkenheid nodig. En complementariteit is
er ook nog. Dat is net de kracht van het one-tier model: als je de juiste mix van skills en
profielen kan creëren, dan kan je zeer effectief zijn. Op een manier is de one-tier board ook
meer divers doordat onze executive en non-executive directors samen in één groep zitten.
Op welke manier wordt de onafhankelijkheid van het toezicht gewaarborgd? Acht u dit
ook belangrijk voor de effectiviteit van de board?
Dat is de grootste uitdaging voor de board: onafhankelijke controle uitvoeren. Eerlijk gezegd,
100% onafhankelijk zijn in een one-tier board dat gaat gewoon niet. Je kan niet verwachten
dat niet-uitvoerende bestuurders helemaal onafhankelijk zijn als ze de verantwoordelijkheid
van de uitvoerende bestuurders delen. Maar de vraag is of dat hoeft. In ons geval denk ik dat
we beter toezicht uitoefenen doordat we net zo dicht bijeen zitten.
Company B
Waarom hanteert het bedrijf een one-tier structuur? Was dit een bewuste keuze? Kan u
ook een aantal voor- en/of nadelen aanhalen?
Wij hanteren een one-tier structuur, omdat deze best past bij onze organisatie. We zijn een
vrij kleine onderneming en voor ons was het niet logisch om een two-tier board op te zetten.
We wouden echter een bestuursmodel dat professioneel is en aansluit bij de grootte en
strategie van de organisatie.
Het voordeel van de one-tier structuur is voor ons vooral dat het klein en overzichtelijk kan
gehouden worden. We hebben vijf bestuurders en door een one-tier structuur blijven we dan
ook dicht bij de zaken. Het laat ons ook toe om intens informatie onderling uit te wisselen.
In het one-tier model zijn inside en outside directors verenigd in één groep en zijn ze dus
niet formeel van elkaar gesplitst zoals in het two-tier model. Laat dit jullie toe om de
outside directors meer te betrekken in de gang van zaken? Ervaart u dit als een
mogelijke bedreiging van de onafhankelijkheid en de onpartijdigheid van deze
personen?
Bij ons zijn de niet-uitvoerende, of outside directors, zeer betrokken. Er is eigenlijk geen
grote grens tussen inside en outside directors. Door steeds zo dicht samen te zitten weet
VI! !
iedereen ook wel heel goed wat er gaande is binnen de organisatie. En we maken beter
gebruik van de kennis die deze mensen bezitten.
Wat betreft die onafhankelijkheid doen we aan evaluaties. We evalueren onszelf, de board, als
groep. We hebben hiervoor checklists, die een aantal belangrijke topics kritisch in vraag
stellen, onder andere onze onafhankelijkheid. Het is ook de taak van de voorzitter om
directors te berispen die zich onvoldoende inzetten of onvoldoende kritisch zijn.
Hoeveel leden omvat de board? Is er een bepaald maximum aantal vooropgesteld? Hoe
draagt de grootte van de board bij tot de effectiviteit?
We hebben momenteel vijf directors. Maar eerlijk gezegd is dat soms wat weinig. We willen
het bewust klein houden om allemaal bovenop de zaken te blijven, maar om alle kennis en
ervaring die nodig is bijeen te halen zijn we soms wat te klein. We zijn momenteel echter wel
op zoek naar een of twee nieuwe leden om ons bij te staan.
Hoe is het leiderschap georganiseerd? Hoe draagt de leiderschap structuur bij tot de
effectiviteit van het bestuursmodel?
Ik ben de chairman van de board, en in die rol zorg ik voor het managen van een
‘totaalproces’. Als chairman vervul ik eigenlijk ook een belangrijke PR-rol, ik functioneer als
boegbeeld van de organisatie. Bovendien denk ik ook dat het makkelijker is om maar één
chairman te hebben, eerder dan twee, dat is gewoon duidelijker naar de externe wereld. En
een andere rol die ik vervul is de agenda opstellen, samen met de secretaris.
Wordt er aandacht besteed aan de diversiteit van de board? Kan u ook expliciteren hoe
diversiteit mogelijk kan bijdragen tot de effectiviteit van de board?
Diversiteit is natuurlijk goed, maar je hebt dan wel een gemeenschappelijke basis nodig.
Diversiteit geeft je verschillende invalshoeken, maar wij hebben toch situaties gehad in het
verleden waar dat tot problemen heeft geleid. Je moet op dezelfde lijn zitten, en we ervaren
dat dit vooral een uitdaging kan zijn bij non-executive directors. We hadden even terug een
bestuurder die voortdurend de basisprincipes van de organisatie en de board werking in vraag
stelde. Het probleem is dan natuurlijk dat je als board niet vooruit geraakt als daar telkens
weer over gediscussieerd moet worden. Wat we dan gedaan hebben is een set van basis
principes opgesteld, en deze principes staan buiten discussie. Daar hoeft dus niet telkens
opnieuw weer over worden gediscussieerd, en in zekere zin schept dit dus een
gemeenschappelijke basis voor de diversiteit.
We zijn ons dus wel bewust van de voordelen van diversiteit, en we stellen daarvoor ook een
bewust profiel op. We zijn nu bijvoorbeeld aan het zoeken naar een nieuwe director, en het
profiel dat we hebben opgesteld toont ook mooi aan welke achtergrond enz. deze persoon
moet hebben.
Maken jullie gebruik van board comités? En hoe dragen deze mogelijk bij tot de
effectiviteit van de board?
We doen ook af en toe beroep op onze ex-chairman. Hij speelt voor ons de advocaat van
duivel en heeft eigenlijk de rol van onafhankelijke adviseur. Hij geeft vooral advies over
strategische zaken en beslissingen. Met comités werken we niet, we doen soms wel beroep op
externe vakspecialisten.
Zijn er, in uw ervaring, nog andere elementen die we nog niet hebben besproken die
kunnen bijdragen tot de effectiviteit van de board?
!
VII!
Effectiviteit hangt naar mijn mening heel hard samen met vertrouwen en de samenhang van
de groep, en dat hangt toch wel los van de structuur zelf denk ik. Je hoeft niet per se allemaal
op dezelfde lijn te zitten, er mag uitdaging zijn, je hebt iemand nodig die de advocaat van de
duivel durft te spelen. Maar om open discussies te kunnen voeren moeten mensen hun mening
durven uiten en daarvoor heb je echt een cultuur van vertrouwen en transparantie nodig.
Company C
Waarom hanteert de organisatie een one-tier structuur? Was dit een bewuste keuze?
Sinds mei 2013 hebben we een one-tier structuur, vroeger was dit een two-tier structuur. Maar
voor de Wet Bestuur en Toezicht hadden we onze statuten zodanig ingericht om te werken in
een one-tier structuur. We hadden eigenlijk meer een hybride structuur zoals ik dat noem; een
raad van bestuur en een raad van commissarissen, maar ook een gecombineerde raad met
beide groepen erin.
Waarom kozen jullie dan specifiek voor die one-tier structuur? Kan u een aantal vooren/of nadelen aanhalen? Heeft u ook ervaring met de two-tier structuur?
Ik heb in het verleden vooral gewerkt in de ‘echte’ two-tier structuur eigenlijk, en het verschil
situeert zich volgens mij vooral op vlak van de rol van de chairman. In het geval van een twotier board is de chairman van de raad van commissarissen slechts accidenteel op kantoor,
terwijl die van de one-tier board geregeld aanwezig is, toch zo’n twee a drie dagen in de
week. Dat zorgt ervoor dat hij veel actiever en meer betrokken is. Hij is veel meer bezig met
de shareholders en de investors, en is actiever betrokken in het reilen en zeilen van de
organisatie. Dat was voor mij toch even wennen. Ik ben het gewoon van de two-tier structuur
dat hij wat afstandelijker is. Maar eigenlijk is de one-tier chairman, en dat geldt eigenlijk voor
alle outside directors van de one-tier board, veel meer betrokken, zeker wat betreft de
strategische zaken. Ze zitten dichter op de business, krijgen meer info en er is meer interactie.
Gezien de rol van de chairman in de one-tier board zou ik deze structuur boven de two-tier
structuur verkiezen.
In de one-tier board is er geen formele splitsing tussen inside en outside directors, beide
types zitten samen in één groep en delen de verantwoordelijkheid voor de strategy,
control en service rol. Vermindert dit in uw ogen de afstand tussen de inside en outside
directors? Vormt dit een bedreiging voor onafhankelijk toezicht of leidt dit eerder tot
een betere informatiedeling?
Dat toezicht blijft onafhankelijk, en dat is ook duidelijk in de meetings, maar er is wel veel
meer contact met de internals. Zo kan er meer en beter toezicht worden uitgevoerd. Er worden
visies gedeeld -en heel belangrijk- de informatie die gegeven wordt kan gevalideerd worden.
Men kan dus nagaan of de informatie en het beeld dat men heeft wel correct is.
Hoeveel leden omvat de board? Is er een minimum of maximum aantal vooropgesteld?
Hoe relateert dit aan de effectiviteit van de board?
We zijn met tien leden, waarvan acht externen en twee internen. Er is geen maximum, maar
het aantal externen moet wel steeds groter zijn dan het aantal internen. Misschien relevant om
hier te vermelden is dat ik een duidelijke trend naar een steeds kleiner aantal internen of
uitvoerende zie. In de two-tier boards worden de management boards echt heel klein, vaak
met enkel de CEO en CFO, en dan soms nog eens een COO of CHR erbij.
Wat betreft de effectiviteit, denk ik dat je voldoende leden moet hebben voor de verschillende
expertisedomeinen, maar tegelijkertijd moet je het ook zo klein mogelijk houden om de
interactie te verzekeren. Ergens tussenin lijkt mij ideaal, zo krijg je voldoende flexibiliteit.
VIII!!
Hoe is het leiderschap van de board georganiseerd? Hoe draagt dit mogelijks bij tot de
effectiviteit van de board?
De rol van de chairman staat voor mij centraal, bij ons is dat trouwens een externe chairman.
De one-tier chairman heeft echt een betere feeling, ook omdat hij gewoon veel meer tijd
besteed aan zijn rol. Maar de CEO die blijft wel heel duidelijk de leider van het uitvoerende;
de chairman blijft daarbuiten.
Wordt er aandacht besteed aan de diversiteit van de board? Hoe relateert dit aan de
effectiviteit van de one-tier structuur?
We werken met heel specifieke profielen, dus we zoeken diversiteit in termen van gender,
leeftijd, regio, expertise, technologische kennis enz. Die diversiteit bepaalt ook het aantal
leden van de board op deze manier. Maar die diversiteit staat wel eerder los van de structuur
denk ik. Alhoewel dat het juridisch gezien misschien makkelijker is in de one-tier. Want de
management board in de two-tier wordt zo klein dat je daar bijna geen diversiteit meer kan
inbouwen.
Zijn er verder nog andere elementen die naar uw mening kunnen bijdragen tot de
effectiviteit van de board?
Ik vind dat wij op dit moment eigenlijk bijzonder effectief zijn, en dat komt vooral door het
informele gebeuren rond de board denk ik want dat schept een basis van vertrouwen. Dat gaat
over etentjes, recepties, informele omgang tussen board members enz. Ook de rapportering
door de comités is van belang, dat bespaart de board heel wat tijd. Maar het is vooral de
chairman die centraal is voor die effectiviteit; hij gaat leden persoonlijk aanspreken, verwacht
een persoonlijke verontschuldiging bij afwezigheid, hij stelt gewoon hogere eisen en dat
loont.
Company D
Waarom hanteert het bedrijf een two-tier structuur? Was dit een bewuste keuze?
Wel, voorheen hadden we een three-tier structuur, maar die hebben we omgezet naar een twotier structuur. We hadden een bestuur, een directie en een raad van commissarissen toen. We
zijn heel sterk gegroeid de voorbije jaren en door een groot aantal fusies gegaan, vandaar dat
we steeds meer nood hadden aan een professionelere aanpak, en zo bleef de directie maar
groeien. Het probleem van die three-tier structuur was dat niemand eigenlijk nog duidelijk
zijn rollen en taken wist. En dat maakte de two-tier structuur dan wel weer heel duidelijk. Dat
is voor ons toch wel een hele verbetering.
Hoe hebben jullie die keuze voor de two-tier board gemaakt? Wat waren belangrijke
aspecten in die keuze? Wat zijn de voordelen van deze structuur?
Wij hebben daarvoor Jaap Winter onder de arm genomen als consultant, en gezien het feit dat
voor ons stakeholdervertegenwoordiging en de onafhankelijkheid van de raad van
commissarissen heel belangrijk was, kozen we dus voor de two-tier structuur. Nu ligt ook heel
duidelijk vast wat de rollen van de raad van bestuur en raad van commissarissen zijn, en
welke daarvan mogen gedelegeerd worden. De raad van commissarissen heeft een
ondersteunende rol voor het management, en dus niet de rol van besturen. Ze houden een
oogje op de raad van bestuur, en het is daarbij cruciaal om op de hoogte te blijven en bij te
sturen, alsook serieus en onderbouwd een mening te kunnen geven. Dus dat zijn toch
belangrijke voordelen voor ons. Echter is het wel zo dat we niet echt georganiseerd zijn als
een pure two-tier board. De vergaderingen van de raad van commissarissen zijn altijd
bijgezeten door het management. Deze vergaderingen beginnen en eindigen wel zonder hen,
!
IX!
dus sommige discussies en alle beslissingen van de commissarissen worden afzonderlijk
gemaakt. We houden onze vergaderingen eigenlijk dus als een one-tier, maar we handelen als
een two-tier.
In het huidig two-tier model zijn uitvoerende en niet-uitvoerende bestuurders formeel
van elkaar gesplitst. Zulk model definieert ook duidelijk de rollen voor de raad van
bestuur en de raad van commissarissen (respectievelijk strategie/service en controle). Is
deze splitsing volgens u een noodzaak, voor bijvoorbeeld de onafhankelijkheid of
onpartijdigheid van de commissarissen? Op welke manier zou deze splitsing een invloed
kunnen uitoefenen op de effectiviteit van de board?
Zoals eerder gezegd, werken we met een heel strikte rolverdeling. Er ligt heel duidelijk vast
welke rollen toebehoren aan de raad van bestuur en raad van commissarissen, en welke
mogen worden gedelegeerd. Dat brengt heel wat meer duidelijkheid dan voordien. Dus voor
ons is dat iets positief, die rolverdeling. Ik vermelde ook dat we eigenlijk wat een one-tier
board zijn. Onze raad van commissarissen heeft dus een hoge betrokkenheid. De raad van
commissarissen heeft wel het laatste woord, maar krijgt ook veel kansen om met het
management te overleggen. Wat de effectiviteit betreft vind ik dat ook positief. Dus alhoewel
met zo’n strikte rolverdeling werken is het niet zo dat er geen contact tussen de raad van
bestuur en de raad van commissarissen mag zijn, eerder het tegenovergestelde is waar.
Hoeveel leden omvatten de raad van bestuur en raad van commissarissen? Hoe
beïnvloed de grootte de effectiviteit van de board? Is er een bepaald minimum of
maximum aantal vooropgesteld? Hoe is het aantal bepaald?
Onze raad van bestuur is heel klein, die bestaat maar uit twee leden: de CEO en de CFO. De
raad van commissarissen omvat negen leden. We hebben geen minima of maxima, echter is
dat aantal eerder het resultaat van voldoende representatief te willen zijn voor de stakeholders
alsook om voldoende draagkracht te hebben. En hoe groter je wordt, hoe moeilijker de
interactie en communicatie verloopt vermoed ik. U haalde ook de service rol van de board aan
in uw brief, wel dan denk ik hier dat een kleinere board daar minder goed in slaagt. Ik vind
negen dus een goed aantal, je wilt het niet te klein want dan wordt het wat eng.
Hoe is het leiderschap georganiseerd? Hoe beïnvloed deze structuur mogelijks de
effectiviteit van de board? Is dit element ook in overweging genomen bij de overgang
naar een nieuwe board structuur?
De raad van bestuur en de raad van commissarissen hebben elk hun eigen voorzitter. Dat zijn
de CEO en een onafhankelijke commissaris. Die leiderschap structuur was niet
doorslaggevend voor ons. Zo belangrijk is dat denk ik niet, of toch nog wanneer de personen
die deze autoriteit krijgen competente personen zijn.
Is er diversiteit ingebouwd in de board? Hoe kan diversiteit in de two-tier structuur
mogelijks bijdragen tot een effectievere board?
We letten op diversiteit in termen van regio en business. Dus daarmee bedoel ik de product
categorieën. In de management board is men maar met twee, dus daar is diversiteit niet echt
aan de orde. En ja, diversiteit speelt toch wel een rol in de effectiviteit van de board, maar hoe
dat specifiek relateert aan de two-tier board dat zie ik niet. Ik denk niet dat two-tier boards het
makkelijker of moeilijker hebben op dat vlak.
In de two-tier structuur is er een formele splitsing van controle en strategie, die de
onafhankelijkheid en onpartijdigheid van de monitoring in de hand zou kunnen werken.
Ondervindt u ook dat deze structuur onafhankelijkheid stimuleert? Of is betrokkenheid
net noodzakelijk voor het correct uitvoeren van de rollen?
X! !
De two-tier structuur is de beste oplossing om de shareholders en stakeholders adequaat te
vertegenwoordigen, net door de onafhankelijke formele positie van de non-executive
directors. Langs de andere kant zijn deze personen wel heel betrokken. Onze raad van
commissarissen heeft een hoge betrokkenheid, maar dat is niet echt een bedreiging denk ik, de
raad van commissarissen blijft een aparte entitieit. De performantie van de raad van
commissarissen wordt door externen geëvalueerd en de houden ook jaarlijkse conferenties
waarbij de commissarissen zelf een evaluatie uitvoeren. We houden vast aan het principe dat
de raad van commissarissen zichzelf zal vormen. De commissarissen hebben een heel groot
takenpakket, ze kunnen daar ook wel een aantal rollen delegeren, maar die inclusie helpt hen
wel denk ik. Zo kunnen ze ook middenin projecten updates van het management vragen, en
niet enkel wanneer het project al voltooid is. Dat creëert een sterke raad van commissarissen
vind ik.
In welke mate maken jullie gebruik van comités? Voor welke doeleinden? Welke
waarde heeft dit voor de board?
We maken gebruiken van adviesraden, die zo’n 25 a 30 personen omvatten. Hun rol is vooral
om de raad van commissarissen informatie te verschaffen en meer gedetailleerd inzicht te
bieden in bepaalde zaken.
Company E
Waarom hanteert het bedrijf een two-tier structuur? Was dit een zeer bewuste keuze?
Wij hebben een two-tier structuur, maar eigenlijk hanteren we een gemende structuur. De
bank is recentelijk opgesplitst in 3 onderdelen; de bank, de groep en de verzekeringen. Elk
van hen heeft hun eigen management board, maar de supervisory board blijft gelijk. Op een
voormiddag hebben we dus drie delen in de vergadering en zullen er ook telkens drie
verslagen opgemaakt worden.
Wat was de reden voor deze opsplitsing?
Binnen Europa is er een nieuwe wetgeving die oplegt dat de verzekeringen moeten worden
afgesplitst van de gewone bankactiviteiten.
Als achtergrond informatie, heeft u ook ervaring als bestuurder in een one-tier board?
Ja, ik zetel ook nog in een groot aantal boards, waarvan de meerderheid one-tier structuren
zijn (plus vermelding namen bedrijven). Maar die verschillen tussen beide structuren die zijn
in de praktijk niet zo groot als in theorie ervaar ik. En uiteindelijk is het allerbelangrijkste om
personen aan te duiden die niet bang zijn om hun mening te geven, personen die kritisch
denken en kennis hebben van de business. Wanneer je zulke directors hebt maakt het eigenlijk
niet uit in welke structuur ze moeten functioneren, denk ik.
Gezien uw ervaring in beide structuren, wat zijn de voordelen van een two-tier
structuur t.o.v. de one-tier structuur?
Mijn aanbeveling is om het simpel te houden. En dat is nu wel een voordeel van de one-tier
structuur. Nu echter zijn we van mening binnen de onderneming dat de two-tier structuur de
beste manier is om de juiste “checks and balances” aan te brengen. De two-tier structuur
schept duidelijkheid. Onze management board neemt het dagelijks bestuur en de lange termijn
strategie op zich, terwijl onze supervisory board zich bezig houdt met supervisie en advies, en
hier zetelen enkel externe bestuurders in.
Hoe zou u een effectieve raad van bestuur/raad van commissarissen omschrijven? Wat
zijn kenmerken van een goede raad, gebaseerd op uw eigen ervaringen?
!
XI!
Ja, effectiviteit is echt belangrijk. Wij vergaderen drie uur lang, en dat is normaal want we
zijn een grote internationale groep, en dat is echt wel nodig. Dit geeft ons de kans om de
nodige vragen te stellen aan management, en hen te challengen.
We hebben ook vier verschillende comités, die afzonderlijk vergaderen, en deze geven advies
aan de raad van commissarissen. Dit moet dan bekrachtigd worden door de raad van
commissarissen. En dit functioneert echt goed; het geeft de kans om dieper in te gaan op
zaken die niet volledig aan bod moeten komen in de vergaderingen van de raad van
commissarissen, maar alle bestuurders moeten wel de volledige informatie hebben om een
goede en correcte beslissing te nemen.
Een van de kritische noden die ik heb als bestuurder, is goede informatieverschaffing. Op
vrijdagavond brengen ze mij thuis een pak documenten, ongeveer toch duizend pagina’s. En
ik moet dat gelezen hebben tegen maandag of dinsdag, en men verwacht ook echt dat je deze
gelezen hebt. Maar waarom zijn die documenten zo uitvoerig? Dit is een beetje een parapluhouding. Management wil voorkomen dat er gezegd wordt “het staat er niet in”. Het zou toch
beter zijn mocht management ofwel die documenten gewoon vroeger geven -ervaring heeft
ons echter geleerd dat deze documenten altijd maar op het laatste moment af zijn- ofwel wat
korter door de bocht zou gaan. Ik ben zeker niet de enige die dat zegt.
In de two-tier structuur is er een formele splitsing van controle en strategie, die de
onafhankelijkheid en onpartijdigheid van de monitoring in de hand zou moeten werken.
Ondervindt u ook dat deze structuur onafhankelijkheid stimuleert? Of is betrokkenheid
net noodzakelijk voor het correct uitvoeren van de rollen?
In het huidige systeem is dat geen nadeel. We staan wel dicht bij het management, maar we
spreken ook afzonderlijk. Ten tweede, zijn de mensen die aan de tafel zitten ‘echte
persoonlijkheden’; mensen die echt hun mening durven uiten.
Trouwens, in Nederland is er sinds twee jaar een examen voor commissarissen. Je moet
goedgekeurd worden door de DNB(Dutch National Bank) en de AFM (Authority Financial
Markets), deze geven een beeld over de kwaliteit van de commissarissen. Dat examen is een
interview van drie uur, zeer algemene vragen over de algemene werking van de raad van
commissarissen. Dat waren helemaal geen technische vragen, maar bijvoorbeeld: hoe kritisch
bent u, spreekt u soms een voorstel tegen? Op dat vlak is Nederland misschien wel voor op
België.
Nu, om nog eens terug te komen op die onafhankelijk. Je bent onafhankelijk of niet, en het
aantal onafhankelijke bestuurders staat vast voor ons. Maar die onafhankelijkheid kent wel
slijtage, na verloop van tijd heb je vernieuwing en verjonging nodig.
Naar mijn mening moet elke bestuurder -onafhankelijk of afhankelijk op papieronafhankelijk zijn. Iedereen moet met zijn mening naar voor komen, durven tegenspreken
enz. Ik denk ook dat onafhankelijkheid veel minder met structuur heeft te maken dan met de
persoonlijkheid van de board members.
Hoeveel leden bevat de raad van bestuur/ raad van commissarissen? Ondervindt u
moeilijkheden wat betreft het aantal deelnemers? Invloed op communicatie of werking?
Bepaald max aantal, waarom?
We hebben tien commissarissen, maar in totaal kunnen we soms met zeventien aan tafel zitten
(met secretaressen erbij). Actieve deelname is met vijftien. De management board bevat
trouwens enkel de CEO, CFO en CRO (Chief Risk Officer)
XII! !
Vroeger waren we met acht commissarissen, maar door die afsplitsing van de verzekeringen
zijn we nu met tien. Heel vroeger waren we met twintig ongeveer, maar dat is echt te veel.
Acht a tien is echt veel effectiever, maar dat hangt natuurlijk af van hoe groot het bedrijf is.
Small is beautiful, en hoe kleiner hoe makkelijker de interactie. Hoe groter, hoe meer
specialiteiten je krijgt. Maar je wil dan wel verschillende specialiteiten die niet overlappen.
Hoe is het leiderschap georganiseerd? Hoe kan dit deze leiderschap structuur een rol
spelen in de effectiviteit van het bestuursmodel?
We hebben dus twee voorzitters: de CEO en een externe voorzitter voor de raad van
commissarissen. Deze dubbele structuur is wel nodig. Er moet iemand staan naast de CEO. Je
moet toch afstand kunnen nemen, er moet iemand de CEO kunnen tegenspreken. Als de CEO
beide rollen krijgt, dat systeem werkt misschien wel, maar ik vind dit echt gevaarlijk. De
controle staat veiliger als de machten gescheiden zijn. CEO-dualiteit werkt daarentegen
absoluut destructief, en dan vooral wat betreft de controle op de CEO en het management.
Is diversiteit volgens u ook belangrijk voor de effectiviteit? Wordt er expliciet gelet op
diversiteit?
Binnen het bedrijf hebben we hiervoor grote inspanningen gedaan. We hebben nu vier
vrouwen in de board, drie Nederlandse en een Spaanse, en die staan echt wel hun mannetje.
Wordt er ook gelet op diversiteit in termen van professionele achtergrond, ervaring
enz.?
Toen ik erbij kwam op de board, waren er veel mensen uit de industrie en eigenlijk zeer
weinig met een financiële achtergrond. Dat hebben we nu wel wat aangepast. De banksector
evolueert heel snel, en als je er niet in zit dan zit je snel achter. Dus die kennis hebben we echt
wel nodig.
U haalde daarnet ook complementariteit aan, waarom is dit belangrijk voor de
effectiviteit?
Je moet elkaar versterken met complementariteit, vandaar dat die mensen uit de industrie ook
zeer nuttig zijn. Zij hebben een andere kijk en een frisse invalshoek. Maar de grootste
toegevoegde waarde hier zit in complementariteit. De board wordt zoveel krachtiger en
vaardiger wanneer de expertisedomeinen en persoonlijkheden verschillend zijn én elkaar
aanvullen.
Wat ik wel nog wil toevoegen, is dat de raad van bestuur en commissarissen enkel goed kan
werken is als iedereen voldoende kritisch is en dat de mensen die deel uitmaken van de board
competent zijn. Je moet het beslissingsproces kritisch in de juiste richting kunnen sturen.
Company F
Waarom hanteert het bedrijf een two-tier structuur? Was dit een bewuste keuze?
Het feit dat we een two-tier structuur hebben komt doordat het gewoon altijd zo geweest is.
Tot vorig jaar hadden we de keuze nog niet, dus het is eerder historisch zo ingegroeid. Echter
staat het wel op onze agenda voor de toekomst om de afweging t.o.v. de one-tier structuur te
maken, maar dat is momenteel nog niet aan bod gekomen.
Het two-tier model schrijft een formele splitsing van inside en outside directors, en hun
respectievelijke rollen, voor. Ervaren jullie dit als positief voor de effectiviteit van de
board? Hoe verloopt de informatie verschaffing tussen beide groepen?
!
XIII!
Die rolverdeling schaft een zekere duidelijkheid en versterkt de onafhankelijke attitude van de
non-executive directors. De rolverdeling heeft ook een juridisch aspect en een praktisch
aspect. Dat praktische houdt in dat de commissarissen bijvoorbeeld minder vaak vergaderen.
En dat heeft dan als gevolg dat zij substantieel minder informatie ontvangen. Die informatie
asymmetrie is echter slechts deels het gevolg van de structuur, want non-executives zijn
gewoon altijd minder betrokken en geïnformeerd.
Op die manier creëer je een andere modus operandi dan de one-tier board. Op die manier kan
het ook zo zijn dat een two-tier board eerder lijkt op een one-tier board met een lage
vergaderfrequentie dan op een andere two-tier board die wel veel vergadert.
U stelt dus dat het verschil eerder praktisch of operationeel is?
Klopt. Commissarissen zijn niet per se meer betrokken in de one-tier structuur, maar er is wel
een andere manier van opereren of omgaan. Ik geloof ook niet dat de governance een gevolg
is van de structuur, maar dat de governance eerder afhangt van de strategie en de omvang van
het bedrijf. Zo zie je bijvoorbeeld dat hele grote beursgenoteerde bedrijven soms een threetier structuur maken: een heel klein management board (met de CEO en CFO), een executive
committee (met de andere leden van de C-suite) en de raad van commissarissen.
En CEO-centeredness dat is een andere trend die ook steeds duidelijker wordt, dat is wat een
veramerikanisering eigenlijk. De nadruk op de CEO vergroot steeds, hij wordt steeds
belangrijker. En dat vergt betere controle, alsook meer afstelling door de raad van
commissarissen. Zo evolueren we waarschijnlijk allemaal naar een one-tier board of een twotier board, maar dan met een klein aantal supervisors.
Hoeveel leden omvatten de raad van bestuur en raad van commissarissen? Hoe
beïnvloed de grootte de effectiviteit van de board? Is er een bepaald minimum of
maximum aantal vooropgesteld? Hoe is het aantal bepaald?
We hebben geen maximum, maar ik vind zes a negen ideaal. Niet te klein en niet te groot, zo
krijg je voldoende flexibiliteit. Maar de grootte is eigenlijk vooral het gevolg van toeval en
wie beschikbaar is op het juiste moment.
Hoe is het leiderschap georganiseerd? Hoe beïnvloedt deze structuur mogelijks de
effectiviteit van de board?
Ik denk dat de leiderschap structuur op zich niet zoveel uitmaakt, zolang er een leider is die
op dezelfde hoogte staat als de CEO. Hier komt dus opnieuw die CEO-centeredness naar
boven, je wil zeker een chairman aanduiden die niet de CEO is. Die rol van chairman van de
raad van commissarissen zal hoogstwaarschijnlijk steeds belangrijker worden. Bij ons zit de
CEO de management board voor, maar de supervisory board wordt voorgezeten door een
externe chairman.
Is er diversiteit ingebouwd in de board? Hoe kan diversiteit in de two-tier structuur
mogelijks bijdragen tot een effectievere board?
Diversiteit krijgt steeds meer aandacht, in alle soorten bedrijven. We interpreteren dat op vlak
van gender, professionaliteit en achtergrond. Je wil een gezonde mix krijgen, dat geeft
dynamiek in de boardroom. De structuur beïnvloedt de diversiteit niet denk ik, dat ligt meer
bij andere factoren. De two-tier structuur is niet meer of minder divers, ik denk dat structuur
en diversiteit los staan van elkaar, alhoewel ik vermoed dat in de two-tier structuur, die
traditioneler is hier in Nederland, dat je daar minder diversiteit zal aantreffen.
XIV!!
In de two-tier structuur is er een formele splitsing van controle en strategie, die de
onafhankelijkheid en onpartijdigheid van de monitoring in de hand zou kunnen werken.
Ondervindt u ook dat deze structuur onafhankelijkheid stimuleert? Of is betrokkenheid
net noodzakelijk voor het correct uitvoeren van de rollen?
De leden van de raad van commissarissen nemen absoluut een onafhankelijke houding aan,
dat moet. Maar ze hebben wel een marginale toets; ze gaan dus niet alles second-guessen,
maar ze zijn wel kritisch. Ze zijn zich ook bewust van hun positie in de two-tier structuur, dus
die marginale houding is het gevolg van het model denk ik. Maar daarom zijn de
commissarissen niet meer of minder onafhankelijk dan in het one-tier model. Ik denk dat er in
het one-tier model meer formele regels zullen zijn om die onafhankelijkheid vorm te geven.
En natuurlijk hangt dit ook allemaal samen met de persoonlijke kwaliteiten en integriteit van
de commissarissen.
Zijn er verder nog andere elementen die naar uw mening kunnen bijdragen tot de
effectiviteit van de board?
Het zijn vooral de individuele kwaliteiten en de mix ervan die belangrijk zijn. Als er geen
competente directors zijn, dan blijven de board structuren papieren tijgers. Verder denk ik ook
dat structuren een reflectie zijn van andere zaken: de cultuur, de stijl en personaliteiten. En die
is ook niet statisch, maar eerder dynamisch met wisselwerkingen.
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XV!
Appendix 3 – Conceptually clustered matrix
Topics
Integration versus separation of
control and strategy
Board size
Company A
*Hospitality business
*Outside director
-Integration brings closeness
and awareness, avoids having
supervisory board that is
‘high in the sky’
-Share responsibilities:
provides information
incentive
-Exploit knowledge and
expertise of all members
-7 members
-Always #outside directors >
#inside directors
-Determined by workload
-A small board allows for
sufficient interaction
One-tier board systems
Company B
*Education
*Chairman
-Leverage knowledge of all
members, especially of
outside directors
-Stay on top of things; allows
for full control
Company C
*Publisher
*Inside director
-Integration provides
opportunities to gather more
information and validate
whether that information is
correct: considered to increase
quality of monitoring
Company D
*Horticultural business
*Inside director
-Delineation of roles provides
clarity
-Separation safeguards and
voices stakeholder concerns
-Separation requires joint
meetings, with the purpose of
information exchange
-5 members
-Stay small: group feeling,
social cohesion and full
information
-Yet, sometimes too small to
effectively pursue service
role: need larger set of skills
and expertise
-10 members
-Always #outside directors >
#inside directors
-Trend towards reduced board
size
-Preference for smaller board:
interaction and flexibility
-Crucial for effectiveness:
one-tier chairman more
involved with company,
shareholders and investors
-More active role, devotes
more time to role
-Adds to effectiveness of
board
-Diversity is considered
unrelated to structure, but due
to small size of management
board in two-tier structure
harder to establish diversity in
two-tier model
-Management board: 2
-Supervisory board: 9
-Joint meetings: 11
-Size must be small enough to
allow for interaction
-Size must be large enough to be
effective in service role
-Determinants of size: expertise
and stakeholders
-Competence of leader is more
important than leadership
structure
Leadership structure
-Chairman: outside director
-Not crucial for board
effectiveness
-Clear message about
leadership to external world
-Chairman: outside director
-Unity of command
-Public relations function of
chairman
Diversity
-Communality required
-Mix outside and inside
directors in one group
-Strength of one-tier: high
level of diversity possible
Independence
-Big challenge for one-tier
boards
-Never 100% independent,
because of shared
responsibility
-Benefits of involvement >
costs of loss of independence
-Diversity provides
perspective
-Set of basic, foundational
principles shared by all
members needed, otherwise
diversity may limit
effectiveness
-Involvement and proximity is
required to monitor
management; not considered a
threat to independence
-Independence monitored
through check-list evaluation
Other
/
XVI!!
-Importance of boardroom
culture: open discussion, trust,
transparency, critical thinking
-Advice from external
consultants and ex-chairman
-While separation of roles in
two-tier board can facilitate
independence, other elements
are also important: open
boardroom culture (freedom
to express any point of view
and question management)
-Importance of informal
happenings (establish
personal relationships and
trust
-Use of committees: to
provide expert knowledge,
time efficiency
-Reflection of company
operations and stakeholder
interests
-Creating a diverse two-tier
board is not more or less difficult
than creating a diverse one-tier
board
-High involvement of
supervisory board, not regarded
as threat to independence
-Evaluate independence on
conferences (self-evaluation)
-Independent position of outside
directors (supervisory board acts
as separate entity)
/
Two tier board systems
Company E
*Financial group
*Outside director
-Separation provides right
‘checks and balances’
-Need for joint meetings:
opportunity to question and
challenge management
-Information flow from
management board to
supervisory board must be
properly managed
-Management board: 3
-Supervisory board: 10
-Joint meetings: 13
-“Small is beautiful”: required to
interact
-Big enough to cover different
fields of expertise
-Outside director in leadership
position required, not necessarily
a dual leadership structure
-Chairman of supervisory board
to critically question
management and CEO
-High level of attention to
diversity; high added value for
the board
-Complementarity required
-Independence needed for
constructive discussions
-Outside directors not more or
less independent in two-tier
structure than in one-tier
structure
-Use of committees: information
supply, time efficiency
-Human capital is considered
more important than the board’s
structure
Company F
*Retailing industry
*Inside director
-Separation provides clarity and
enforces independence of outside
directors
-Creates information gap, but is
inherent to nature of outside
directors’ role, but information
gap less in one-tier
-Lower meeting frequency for
supervisory board
-Management board: 7
-Supervisory board: 7
-Trend: management board
becomes smaller, instalment of
executive committee (three-tier)
-Not too big, nor too small:
ensure flexibility
-Skills of chairman: crucial role
in ensuring effectiveness of the
board
-Evolution towards CEOcenteredness: CEO-duality
strongly discouraged
-Unitary or dual leadership not
critical
-Diversity is unrelated to
structure
-Attention to diversity in terms
of professional background and
gender
-Goal: establish healthy mix of
profiles
-Separation of roles outlines
distant and independent position
of outside directors; acts as
enforcement, not as guarantee
-Independence is more a matter
of personal integrity and
personal qualities
-Boards remain paper tigers if
directors are not competent
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