CORPORATE GOVERNANCE

This study Material is Prepared by

Dr. Pradip Kumar Das, Associate Professor,
Department of Law and Governance,
CUSB,
for the students of LL.M.
 MODULE-II:
THE BOARD OF DIRECTORS AND BOARD
COMMITTEES-II
Types of Board Structures:
1. Unitary Board or Board of Directors,
2. Two-tire board[dual]
1. Unitary Board or Board of Directors:
qUnitary board can be found in Anglo-Saxon countries e.g. USA, UK, Ireland,
Australia, Canada & Russia etc
qThis board is consisted of both executive and non-executive directors;
qMajor advantages:
-Possibility of dialogue and better communication between executives and non-
executives;
 MODULE-II:
THE BOARD OF DIRECTORS AND BOARD
COMMITTEES-II
-Comparatively flexible and inexpensive;
-It helps in taking quick decision;
-It maintains efficient information flow;
-It helps non-executive directors in accessing corporate data.
qDisadvantages:
-Danger of concentration of power in one hand;
- It enhances dependency upon CEO cum Chairman;
- There is risk of building a coalition between CEO & Outside Directors;
- Concentration of power affects the transparency.
 MODULE-II:
THE BOARD OF DIRECTORS AND BOARD
COMMITTEES-II
Two-tire board[dual] OR Supervisory Board:
qThis kind of board system is seen in Germany, Austria and Polland;
qThis board not only manages the company’s business operation, but is
accountable to and supervised by a supervisory board elected by shareholders.
qIt plays monitoring functions- appoints the CEO and it structures executive
compensation, selects the auditors and follows corporate strategy,
qThis board provides a wider platform for balancing interests of different
stakeholders;
qWeaknesses:
-This system has limited access to corporate data and information which has to be
delivered by the management board.
 MODULE-II:
THE BOARD OF DIRECTORS AND BOARD
COMMITTEES-II
-There is a risk of dominating the board by majority shareholders.
Size of the Board and number of directorship:
Size:
Section 149(1) of the Companies Act, 2013 says that the minimum number of
directors is 3 in case of public company, 2 in case of private company and 1 in case
of One Person Company. The maximum number of directors stipulated is 15.
However, a company may appoint more than 15 directors after passing a special
resolution in AGM.
Number of Directorship:
Section 165 stipulates that a person cannot hold office at the same time as director
in more than 20 companies. Provided that the maximum number of public
companies in which a person can be appointed as a director shall not exceed 10.
 MODULE-II:
THE BOARD OF DIRECTORS AND BOARD
COMMITTEES-II

THANK YOU