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A governance board also known as council of delegates are chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and fire the board of directors.

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 a separate management board i.e., board of directors (all executive directors and all non-executive directors) and a separate governance board i.e. council of delegates (all executive delegates and all non executive delegates). The council of delegates representing the governance board is the equivalent of the management board i.e. board of directors of a single-tier board, while the chairman of the management board is reckoned as the company's chief executive officer and managing director. These 03 positions are held by the same individual.

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, 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.