Board of Directors and its role

1. Board of Directors and its role

2. 2 different types of BoD Unitary board versus dual board .

3. Unitary: USA, UK and most of the EU states • Comprising both executive and non-executive directors • Responsible for all aspects of company’s activities • Shareholders elect the board at the company’s annual general meeting

4. Dual: Austria, Germany, the Netherlands, Denmark • Supervisory board and executive board of management • Clear separation between the functions of the boards

5. Supervisory Board • Overseeing the directions of the business • Appointed by the shareholders • Management • Appointed by supervisory board • Conducting day-to-day management

6. Significance of the Combined Code ‘Every company should be headed by an effective board, which is collectively responsible for the success of the company.’

7. ‘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.’

8. Role of the board: • Determining the company’s aims and the strategies, plans and policies to achieve those aims • Monitoring of the progress in the achievement of those aims • Appointing a chief executive officer with appropriate leadership qualities • Providing balance between a small group of managers and a vast group of shareholders

9. Epstein and Roy: • Providing superior strategic guidance to ensure company’s growth and prosperity • Ensuring accountability of the company to its stakeholders, including shareholders, employees, customers, suppliers, regulators and community • Ensuring that a highly qualified executive team is managing the company

10. Duties of the board of directors due to The Company Law Reform Bill (UK) • A duty to act within powers, that is, to act in accordance with the company’s constitution and only exercise powers for the purposes of which they are conferred • A duty to promote the success of the company (...) • A duty to exercise independent judgement • A duty to exercise reasonable care, skill and diligence • A duty to avoid conflicts of interest • A duty not to accept benefits from third parties • A duty to declare an interest on proposed transaction or arrangements

11. duties of the board of directors by The Business Roundtable (US): • Select, regularly, and, if necessary, replace the chief executive officer. Determine management compensation. Review succession planning. • Review and, where, appropriate, approve the financial objectives, major strategies, and plans of the corporation • Provide advice and counsel to top management • Select and recommend to shareholders for election an appropriate slate of candidates for the board of directors; evaluate board processes and performance • Review the adequacy of the systems to comply with all applicable laws/ regulations