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A supervisory board or supervisory committee is a nominating committee chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and supervise the board of directors and CEO.

Corporate governance varies between countries, especially regarding the board system. There are countries that have a one-tier board system (like the U.S.) and there are others that have a two-tier board system like Germany.

In a one-tier board, all the directors (both executive directors as well as non-executive directors) form one board, called the board of directors.

In a two-tier board there is an executive board (all executive directors) and a separate supervisory board (all non-executive directors). The chairman of the supervisory board is the equivalent of the chairman of a single-tier board, while the chairman of the management board is reckoned as the company's CEO or managing director. These positions are almost always held by separate people.

Germany

German corporation law, the Aktiengesetz, requires all public companies (Aktiengesellschaften) to have two boards: a management board called a Vorstand and a supervisory board called an Aufsichtsrat.[2] The supervisory board oversees and appoints the members of the management board and must approve major business decisions.[3]

For German companies with more than 2,000 employees, half of the members of the supervisory board are elected by the employees. [4] When a German company has between 500-2,000 employees, the workers select one-third of the supervisory board.[5]

When it comes to internal elections the chairman of supervisory board, the Aufsichtsratsvorsitzender, has two votes in case of a draw.[6]

The supervisory board, in theory, is intended to provide a monitoring role. However, the appointment of supervisory board members has not been a transparent process and has therefore led to inefficient monitoring and poor corporate governance in some cases (Monks and Minow, 2001). The discussion about whether a one-tier or a two-tier board system leads to better corporate governance is ongoing in Germany and many other countries.

China

Another example of a two-tier board system: Mainland China

In China's corporation law, the so-called (中华人民共和国公司法), it stipulates a limited liability company (有限责任公司) to have: a board of directors (董事会) and a board of supervisors (监事会). Regarding the Chinese requirements of a board of supervisors, under Articles 52 to 57 of the Company Law of the People's Republic of China:

References

  1. ^ date
  2. ^ "Company Management in Germany". LawyersGermany.com. September 14, 2015. Retrieved March 14, 2020.
  3. ^ Gilbert Kreijger (February 28, 2018). "Why German corporate governance is so different". Handelsblatt. Retrieved March 14, 2020.
  4. ^ "The role and effectiveness of the Aufsichtsrat (Supervisory Board) and stakeholder inclusiveness". International Corporate Governance Network. Retrieved March 14, 2020.
  5. ^ Seibt, Christoph H.; Kulenkamp, Sabrina. "Corporate governance and directors' duties in Germany: overview". Thomson Reuters Practical Law. Retrieved March 14, 2020.
  6. ^ Gilbert Kreijger (February 28, 2018). "Why German corporate governance is so different". Handelsblatt. Retrieved March 14, 2020.