The Board of directors refers to a group of professional and top-ranked officials, executives, and managers who are responsible for overseeing the wellbeing of an organization or company. They are assigned with the duties of providing legalized execution of ideas smooth running of the company, thus ensuring there is profit-making and guarantees the best recruitment of a company among other tasks.
The Board of directors exists in two different types, which are the One-Tier Board of Directors and the Two-Tier Board of Directors. The One-Tier Board of Directors usually acts as a single governing board for an organization. They are responsible for making unified and strategic settlements for a company. The Two-Tier Board of Directors, as suggested by the name, features two different boards accountable for deciding on an organization and also executing the decisions.
While getting a clear picture of these two boards is important, there is always a confusing element. This is the reason why this piece covers the vital difference that exists between a One-Tier Board of Directors and a Two-Tier Board of Directors in detail.
One-Tier Vs. Two-Tier Board of Directors
These two types of board have unique features that set them apart from each other. One of the main differences with the One-Tier Board of Directors structure is that it only features a single committee that is assigned the duties of making all the vital managerial decisions for an organization. In contrast, a Two-Tier Board of Directors structure features two separate committees assigned with the duty of making the company’s decision.
The One-Tier Board of Directors structure assigns the powers of decision making to a single committee. It is made up of the executive and also the non-executive directors from an organization. One-Tier Board of Directors is commonly referred to as the Unitary Board of Directors.
The Two-Tier System on the same is mandated with the task of supervising policy executions. The two different boards, Supervisory and Management Boards, come from different departments and are overseen by two different individuals. The Management Board is overseen by the Chief Executive Officer of the firm, while the Chairman of the Organization oversees the Supervisory Board.
What is a One-Tier Board of Directors?
Any organization, regardless of whether it’s a profit-making organization or non-profit organization, there has to be a committee that is responsible for making vital administrative, operational, managerial, and financial decisions. Apart from the head governing each department, there has to be a Board of Directors that governs the entire institution by providing mutual discussion and decisions pertaining to the benefit of the organization in general. The execution of the policies is closely monitored by the committee.
One-Tier Board of Directors consists of a single committee residing at the highest level of the company’s hierarchy. They are entitled to make prompt as well as unanimous policies and decisions that highly contribute to the positive evolvement of a company. This Board of Directors is supervised by the Chairman.
What is a Two-Tier Board of Directors?
A Two-Tier Board of Directors, as earlier stated, is the highest level in the hierarchy when it comes to any organization. The only difference here is that it features two boards or committees. Unlike the One-Tier Board of Directors, the Two-Tiers Board of Directors has two separate committees that include the management and supervisory. They have different tasks and contributions to a company.
Since the Two-Tier Board system features two separate boards, there are also two governing presiding leaders. These two boards have two different supervisions. The management Board is supervised by the Chief Executive Officer of a company. The Supervisory Board, on the other hand, is presided by the Chairman of the Organization.
The Managerial Board is responsible for making management decisions for a company. At the same time, the supervisory board is mandated with taking care of policy execution as well as hiring and also firing members of a managerial board. This means that the Supervisory Board features more authority than Managerial Board.
Difference between One-Tier and Two-Tier Board of Directors
- The outstanding difference existing between these two boards lies within the number of committees. One-Tier Board of Directors only features a single committee, which is the Board of Directors responsible for making all the decisions and also policies for a company. The Two-Tier Board of Directors, on the other hand, features two committees that are different and have separate authorities and roles for a company.
- One-Tier Board of Directors is only supervised by a Chairman of Board of Directors. In contrast, a Two-Tier Board of Directors’ managerial committee is supervised by the organization’s CEO, and the Supervisory Committee is supervised by a chairman of the committee.
- The decision made by the One-Tier Board of Directors are quick, while those of the Two-Tier Board of Directors are slower as there are more people involved and the two committees have to give assent for the decision, which takes time.
- Shareholders do not have a huge or significant role when it comes to the One-Tier Board of Directors, while the Two-Tier Board of Directors features a provision for shareholders’ inclusion and involvement.
- In a One-Tier Board of Directors, every member is equal, and there is no division or segregation of authority. However, the Two-Tier Board of Directors has a supervisory committee which means there is a higher authority in charge of the managerial committee.
The difference between a One-Tier and a Two-Tier Board of Directors lies with the difference in numbers that each committee has. One-Tier only has a single committee, while the Two-Tier features two separate committees. Every committee has a different task and role to play within the organization.
These boards also have separate authorities from each other. The policy-making of a One-Tier Board of Directors is very different from that of a Two-Tier Board of Directors system as it involves two committees.
Generally, both of these two boards have a unique feature in an organizational setting. This means that they are responsible for the overall performance and decision-making of a company. Regardless of the difference, they still have the objective of making sure a company makes better and more informed policies.