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Board of Directors

Every company should be headed by an effective board, which is collectively responsible for the success of the company. The board’s role is to provide entrepreneurial leadership of the company within a framework of prudent and effective controls which enables risk to be assessed and managed. All directors must take decisions objectively in the interests of the company. As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy. Non-executive directors should scrutinize the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.
Board balance and independence - The board should include a balance of executive and non-executive directors (and in particular independent non-executive directors) such that no individual or small group of individuals can dominate the board’s decision taking. The board should not be so large as to be unwieldy. To ensure that power and information are not concentrated in one or two individuals, there should be a strong presence on the board of both executive and non-executive directors.
Appointments to the Board - There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board.
Chairman and chief executive - There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the company’s business. No one individual should have unfettered powers of decision. The chairman is responsible for leadership of the board, ensuring its effectiveness on all aspects of its role and setting its agenda. The chairman is also responsible for ensuring that the directors receive accurate, timely and clear information.
Information and professional development - The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. All directors should receive induction on joining the board and should regularly update and refresh their skills and knowledge. The chairman is responsible for ensuring that the directors receive accurate, timely and clear information.
Performance evaluation - The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. Individual evaluation should aim to show whether each director continues to contribute effectively and to demonstrate commitment to the role (including commitment of time for board and committee meetings and any other duties).
Re-election - All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. The board should ensure planned and progressive refreshing of the board.
Unitary-Dual - Currently there are two main systems of corporate governance in the world. The first one is the one-tier board, also called a unitary board system. The second possibility is the two-tier board structure, mainly known under the name of a dual board management system. Due to historical and other reasons, each country has adopted different systems of corporate governance. In some states, i.e. Germany, Austria or Netherlands there is a clear distinction between a management board with the function of dealing with the everyday business of the company, and a supervisory board, which is responsible for monitoring the work of the management board. In others, i.e. the USA, the UK, France there is a one-tier structure with both management and control in the same board (the Board of Directors). Nevertheless, each country has its specific rules, regulations and laws, as well as corporate governance codices. There have been numerous discussions about the efficiency and effectiveness of both systems. The existence of two different systems has particularly political reasons. Different policies consider the influence of the labour important and give them thus power in the decision process. In the efforts to approximate the regulations of the member states, the European Union created a European legal entity – the European Company – with its own corporate governance rules.