Antecedents and consequences of the two-tier board structure, SMS 2010

The two-tier board structure departs from the traditional unitary board by instituting two distinct structures clearly separating the management function from the control function. Indeed, the two-tier board structure introduces on the one hand, a directorate, which consists primarily of a number of executives whose main responsibility is to assure the strategic management of the firm. On the other hand, the two-tier structure introduces also a supervisory board, which includes a number of non-executive directors who have three main tasks. First, they appoint, monitor and dismiss members of the directorate. Second, they are in charge of preparing the annual financial statement, which should be approved at the annual shareholders meeting. Finally, they have to control and approve all major strategic decisions, related for example to diversification, mergers, acquisitions, restructuring, or financing proposed by the directorate.