2.2.1.2 Dual board structure

Companies with a dual board structure have two different entities that govern the company: the management board and the supervisory board (Mallin 2007: 122). The structure of a dual board is shown graphically in the right hand panel of Figure 2-1. The management board is responsible for daily business, development of the strategy, internal control and compliance with legislation and its members are employed by the company (Hopt and Leyens 2004: 141; Corporate Governance Code Monitoring Committee 2008: 11-12). The role of the management board can partly be compared with the role of executive directors in a unitary board structure (Maassen and Van den Bosch 1999: 33). Like executive directors in unitary board structures, members of the management board are often members of senior management of the company. The chairman of the management board is referred to as CEO as well, although this is an Anglo-Saxon term applicable to a unitary board (Maassen and Van den Bosch 1999: 31). Supervision of the management board and advice are the responsibility of the supervisory board (Hopt and Leyens 2004: 141), whose members have a comparable function to NEDs in a unitary board structure (Maassen and Van den Bosch 1999: 33). Members of the supervisory board are grouped into independent and non-independent, like the NEDs in a unitary board structure. The chairman of the supervisory board must ensure that the supervisory board will function properly. Due to the separation of management board and supervisory board the chairman of the supervisory board cannot chair the management board simultaneously, unlike the chairman of a unitary board (Hopt 2006a: 459). Accordingly, CEO duality is not possible in a dual board structure.

Independence in a dual board structure only applies to the supervisory board. Independence is the ratio of the number of independent SDs (independent member of the supervisory board) and the total number of members of the supervisory board.1

Dual boards are the predominant board structure in Germany, the Netherlands, Austria and Denmark (Mallin 2007: 161). Table 2-1 gives the general characteristics of a dual board structure and compares them with a unitary board structure.