The One-Tier Board
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The One-Tier Board (IVOR nr. 85) 2012/3.4.12:3.4.12 Summary of the composition of US boards
The One-Tier Board (IVOR nr. 85) 2012/3.4.12
3.4.12 Summary of the composition of US boards
Documentgegevens:
Mr. W.J.L. Calkoen, datum 16-02-2012
- Datum
16-02-2012
- Auteur
Mr. W.J.L. Calkoen
- JCDI
JCDI:ADS593742:1
- Vakgebied(en)
Ondernemingsrecht (V)
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The US has a one-tier board system to which it is traditionally accustomed. Over the last 50 years there has been a fight to introduce independent directors to boards and have committees consisting solely of independents. 30% of listed companies now have separated the function of CEO from that of chairman. In the past 15 years there has been a trend towards holding more distinct meetings in committees and towards independent directors meeting separately in "executive sessions".
US boards are composed in such a way as to create a counterbalance to the formerly all-powerful CEO (this has been due to the efforts of shareholder activists and rule makers such as the SEC and stock exchanges).
Counterbalance is provided in the following way:
the board is composed of a large majority of independent directors (about 8 to 12), there is only one executive: the CEO. However, the other officers (CFO, COO, HRO and CRO) are always invited to attend the board meetings. The aim of board meetings is to create the best long-term strategy for the corporation. The independent directors challenge the offlcer 's proposals and ensure that all alternatives are discussed;
independent directors meet in executive sessions, without the officers, before and/or after each board meeting;
30% of US listed companies have a non-CEO chairman. The other 70% have a lead director, who leads the executive sessions.
The composition of boards in the US differs from that of the UK. In the UK all executives are members of the board together with NEDs who have a small majority. The aim in the UK is to achieve balance, rather than counterbalance as in the US. Whereas the non-CEO chairman has only recently gained ground in the US (still only 30% of all the listed corporations), 99% of UK listed companies have separate chairmen. Executive sessions are a special feature of the US system.