The One-Tier Board (IVOR nr. 85) 2012/2.5.1:2.5.1 Introduction on role of board members

The One-Tier Board (IVOR nr. 85) 2012/2.5.1

2.5.1 Introduction on role of board members

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

As mentioned above in 2.4.1, boards of companies in each country must develop, implement and monitor all the elements: purpose, strategy, policies, risk management, orderly succession, evaluation and communication. The question for each country is how these tasks should be divided. Which board member should have which role? And how can these roles be optimally fulfilled?

The main differences between a one-tier board in the UK and the average two-tier board in the Netherlands concerning the division of responsibilities are that in the UK the non-executive directors (NEDs) have on-site and operational information, receive more and earlier information, are involved in board resolutions and are actively involved in developing strategy. In addition, the UK chairman has a more intensive role and is paid more than the average Dutch chairman of a supervisory board.

These three elements — early, more on-site information, involvement in decision making, involvement in developing strategy — are all worth considering to include in the practice of boards in the Netherlands, whether in a one-tier or a two-tier board system. I will make a proposal for Dutch boards to once a year discuss these aspects and how to deal with them.

In this section (2.5) the role of board members of a UK company will be discussed conceming the following items: first, the legai context of the division of powers between shareholders and board members (2.5.2); the definition of the roles of the unitary board and its members (2.5.3); the dual role of NEDs: monitoring and strategy (2.5.4); followed by the important aspects of the active role of UK NEDs in developing strategy, i.e. what is strategy?; how is strategy discussed?, at what stage and how does the debate take place?, is there debate and is it creative?, what influence on strategy can NEDs have if (a) he/she knows the business or (b) is an outsider (2.5.5)?; and subsequently some specific aspects for banks and the financial industry and what additional input is provided by the Walker Review for the roles of NEDs (2.5.6); which is followed by the important sub-section on the roles of the UK chairman (2.5.7); and finally a discussion about what can be done to enable NEDs to perform their dual roles — strategy and monitoring — optimally: aspects such as involvement, interpersonal behaviour, independence, time commitment, remuneration, early and operational on-site information, committees, the senior independent director (SID), evaluation, induction, training, qualities, diversity, regular selection, documentation on division of roles and NED appointment letters (2.5.8); as well as a description of the best practice for rigorous succession procedures (2.5.9); and the role of shareholders and ways in which boards can single out special shareholders who take a long-term view and are prepared for "stewardship" (2.5.10). This is all closed by a summary of the UK roles of NEDs (2.5.11).

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