Anglo-American Board Model (One-Tier) Versus European Model (Two-Tier)

One-tier and two-tier models are the typical expressions used to describe how corporate governance is structured in a company, in compliance with its country’s legislation. In a one-tier model, corporate governance prerogatives are assigned to a single board, named the board of directors. This board is usually appointed by the shareholders’ meeting and, according to the law, it exercises both direction and control. The one-tier model is typical of the Anglo-American countries, but it can be found in other world regions too. A two-tier model consists of two separate corporate governance boards, which are appointed in sequence. The process starts with the appointment of the supervisory board by the shareholders’ meeting; the employees can also take part in the nomination process, if it is laid down by law. Then, the supervisory board appoints the management board, which is composed of executives who are selected from outside the supervisory board. The two-tier model mainly characterizes Germany and the Rhine context. The legislation of some European countries, such as Italy, Portugal and the Netherlands, also envisages a third type of corporate governance model, in which two separate bodies appointed by the shareholders’ meeting perform different functions: a board of directors is responsible for defining strategies and managing activities, while a board of statutory auditors monitors the company’s administration and information system. The effective functioning of corporate governance boards is the key to ensuring decision-making and assessment processes based on social responsibility and sustainability principles, in the broad interest of all stakeholders.