- Supervisory board
A supervisory board is a group of individuals chosen by the
stockholdersof a company to promote their interests through the governance of the company and to hire and supervise the executive directors and CEO. Corporate Governancedoes vary between countries, especially regarding the board system. There are countries that have a one-tierboard system (like the U.S.) and there are others that have a two-tierboard system (like Germany).
In a one-tier board all directors (both
executive directorsas well as non-executive directors) form one board.
In a two-tier board there is the
management board(all executive directors) and there is a separate supervisory board (all non-executive directors).
German corporation law
Aktiengesetzrequires all Aktiengesellschaften to have two boards:a management board called Vorstandand a supervisory board called Aufsichtsrat.
In Germany the supervisory board of large corporations is composed of 20 members, 10 of which are elected by the shareholders, the other 10 being employee representatives. The supervisory board oversees and appoints the members of the management board and must approve major business decisions.
The supervisory board, in theory, is intended to provide a monitoring role. However, 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 whether a one-tier or a two-tier board system leads to better corporate governance is ongoing in Germany and many other countries. Big improvements in corporate governance are an outflow of shareholders actively fulfilling their duties as owners of corporations - active private German investors and activist funds build this improvement.
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