Corporate Board Structures Vary by Geography
Sources: Investopedia, Process PA, BakerAvenue
Corporate governance models have become increasingly examined and evaluated as globalization impacts world markets. Corporate environments and structures can vary in significant ways, with different types of Board of Directors and geographical influence. Here’s an overview of the different corporate governance models by type and geography.
The owner of the organization does not sit as a member. Instead, the board is staffed by people who provide direction towards the organization’s best interests and future goals.
The board will simultaneously work as the board of directors and the staff of the organization. This typically only suits small or new organizations where the owners can’t afford employees.
The board sits in a purely advisory role. Similar to Governance boards, they provide advice and direction to someone who is running the organization. They work with another board in handling complex situations or areas of the organization.
The board makes decisions on the organization’s day-to-day operations. Board members will typically function as a group of subcommittees where each committee heads a different area of the organization.
As a CEO-less board, all members work and vote equally on all points of business. This type is most often suited for small-to-medium sized organizations where all board members are working towards a singular goal.
Similar to the Advisory board, the Policy board will work more in the background, while a CEO, owner, or other high-level staff member puts the board’s work into practice. This board works on forming policies, practices, and directions to guide the organization.
The board will put particular emphasis on the value of the organization to the community. In most of their decision making, they will include ways to give back to the community, which is used as a metric for evaluating organizational impact.
The Anglo-US model, also known as the Anglo-Saxon model, was constructed by individualistic business societies in Great Britain and the United States. The board of directors and shareholders represent the controlling parties, while the managers and chief officers have secondary authority; however, most companies have legislative controls over shareholders' ability to assert practical, day-to-day control over the company.
The German model, also known as the continental model or European model, is carried out by the supervisory council and the executive board. The executive board is in charge of corporate management, while the supervisory council, chosen by employees and shareholders, controls the executive board. With government and national interest as strong influences, the corporation holds responsibility to submit to government objectives and the betterment of society. Banks also often have heavy influence in the finances and decision making for firms.
In the Japanese model, governance patterns take shape in light of two dominant legal relationships: one between shareholders, customers, suppliers, creditors, and employee unions; the other between administrators, managers, and shareholders. There is a sense of joint responsibility and balance in the Japanese model, which translates to loyalty between suppliers and customers. Japanese regulators play a large role in corporate policies, with Japanese officials representing corporations' major stakeholders. Corporate transparency is lacking in the Japanese model, given the interrelationship and concentration of power among the many Japanese corporations and banks. Individual investors are seen as less important than business entities, the government, and union groups.
Three dominant models exist in modern corporations: the Anglo-US model, the German model, and the Japanese model. The differences between these systems can be seen in their focuses and flexibility.