2.5.1 Composition/structure building block

The composition/structure building block of independence creates an environment or system in which the independent supervisor can work in such a way that he is able to make optimal use of his independence. In general, two different board structures are distinguished: unitary and dual board structures. In a unitary board structure a distribution of tasks exists between executive directors and NEDs. Basically, executive directors are involved in daily business and NEDs in supervision, advice and the development of the company’s strategy. A dual board structure is characterised by two separate corporate organs: a management board and a supervisory board. The management board is involved in daily business and the supervisory board in supervision and advice. NEDs in a unitary board and the members of the supervisory board in a dual board structure can be qualified as independent or nonindependent. Both structures may have board committees, which are functionally tasked in areas where conflicts of interest may appear. An audit committee, remuneration committee and nominations committee are required in the three countries of this study.

Due to the separation of execution of tasks and management on the one hand and supervision on the other hand, a dual board structure is considered to be more independent in nature. However, the fact that the supervisory board is at a larger distance from the management board than NEDs from executive directors in a unitary structure means that NEDs have more and better information at their disposal. (Consideration 2.2) The use of board committees in both structures, the combined meetings between management board and supervisory board in dual board structures, and the separate meetings of (independent) NEDs in unitary board structures means that differences are less pronounced in practice. This convergence means that the advantage and disadvantages – more distance in a dual board structure, better cooperation and information flows in unitary board structures – are mitigated by the fact that both board structures move towards a one-and-a-half-tier board.