Differences between unitary and two-tier board structures

Differences between unitary and two-tier board structures

Under a unitary board structure there is a single board of directors, comprising executive and non-executive directors (NEDs).

By comparison, there are two separate boards under the two-tier structure:

• the management (operating) board which is responsible for the day-today running of the business, consisting of executives only and led by the chief executive.
• the supervisory (corporate) board with a wider membership, responsible for the strategic oversight of the organisation and led by the chairman.

The NEDs on a unitary board will be, largely, classified as independent NEDs, stressing the fact that they will act in the best interests of the wider shareholder population.

The supervisory board under a two-tier structure will include representatives of major shareholders, environmental groups, employees (possibly from trade unions) and providers of finance. These individuals, although not holding executive positions within the business, are definitely not considered to be ‘independent’ and will be acting in the interest of their own group.

Under a two-tier board structure the two boards meet separately, so executive discussion around running the business will not be heard by the higher board members, and vice versa. This is unlike the single board meeting that will be held for a unitary board.