1.5 Composition of boards

Britain has boards consisting of three to five executive directors, a chairman and five or six outside directors. In other words, the boards are well-balanced between executives and non-executive directors and not too large.1

US boards very often have only one executive director, the CEO who is chairman at the same time (in the past often referred to as "the imperial CEO") and nine or ten independent directors, including a "lead" or "senior independent' director.2 The independent directors hold many executive sessions, which contrary to what the word indicates, are meetings without any executive directors present.3 Full board meetings are usually attended by the CEO and all independent directors, who together are the board, and by officers who are not on the board. Board committees consist of independent directors only. There is, of late, a strong movement to split the combined function of CEO/chairman into an independent chairman and a CEO. At present 30% of listed companies have an independent chairman. The arguments put forward for having a non-CEO as chairman give a good idea of what a CEO and a chairman should be doing to fulfil their role properly.

The question has even been asked whether the US is adopting elements of a two-tier board?4

Dutch management boards are not the same as UK and US boards of directors. Dutch management boards deal with all aspects of day-to-day management and with the broad strategy, while UK and US boards deal with broad strategy and high level management and leave day-to-day management and representation to executives in the UK and to officers in the US. Dutch companies will typically have about four to five managing directors and about five to six supervisory directors.5 Under the Dutch law in a two-tier board system the supervisory board only monitors and advises.

Main differences between the Dutch two-tier board and US and UK systems are that Dutch supervisory board members meet less often and receive less information and at a later stage, than US and UK outside directors. As they are not expected to go and see the workplace, they are generally less involved in the development of strategy. By law they are not supposed to participate in the process leading up to proposals, but as supervisors they have to wait for management to come with strategy or other essential plans and accept or reject what has been tabled. Therefore, in the majority of the companies, they do not receive more information than is necessary for the fulfilling of their monitoring duties and do not visit the workplace or talk with lower staff.

The new Dutch Act introducing one-tier boards as an alternative has opted for a mandatory non-CEO separate chairman and leaves a company free to decide on the number of executive directors and non-executive directors.

In the Netherlands the CEO has in many cases become more powerful over the last 10 years.

Apart from the introduction of a one-tier board, which has clearly been inspired by US and UK examples, the influence of these two countries has also been felt in the growing desire of many supervisory directors on two-tier boards in the Netherlands to be more involved in the development of certain fields, such as strategy, and get more and earlier information.