Business Inside Out by Martin Towers: Why single board structure can help firms avoid scandal

Elsewhere a supervisory board is supplemented by a management board; different people with different functions.

After corporate scandals going right back to Robert Maxwell plundering the company pension fund, a series of governance initiatives in the UK has lead to the unitary board wherein sit both executive and non-executive directors.

The executive work full time in the business, the non-executives don’t being independent of management and there to represent shareholders’ interests by providing constructive challenge, wise counsel and often specialist advice without being responsible for running anything day-to-day. It means there is far less danger now of the adverse consequences arising from a dominant CEO.

Contrast this situation with the two boards. The supervisory board comprises solely non-executives and the management board the executive. Often large in number the supervisory board include bankers, unions or works council, politicians, academics and other worthies, and who may only meet quarterly.

All very well as an idea but too often the supervisory board has little or no idea what is really going on inside the business while being a recipe for fudge and compromise. I do wonder whether Dieselgate at VW or the Boeing Max crises would have happened under the unitary board structure where the non- executive directors hear first hand and know what is going on. If Boris as CEO had a chair to report to, would those parties have happened?

Every board needs a chair. The Chair runs the board and the CEO runs the company in the unitary structure. UK corporate governance in the public markets is very strong on these two as quite separate roles. Any deviation calls for a lot of explaining and it better be convincing.

The role of Chair is pivotal in making the unitary board structure work effectively.

In the UK the Chair has usually never worked for the company in an executive capacity but likely has relevant sector experience having been chosen through a rigorous external headhunting process and emerged top of the pile.

The days of old school ties are long gone, it’s a meritocracy with greater emphasis upon diversity.

The board Chair is thus ringmaster, confidant, wise counsel, decision-maker, time-keeper, ambassador, God, all rolled into one, so certainly needs not just experience but a sense of humour and comes preferably with humility and a low ego. This is not always the case.

The relationship between the Chair and the CEO is essential to the success of the business.

The relationship has to be built on mutual respect and trust, for these two have to get on otherwise it won’t work.

Martin Towers is the former finance director of Kelda Group, which was the parent company of Yorkshire Water, and former CEO of Spice PLC. He is now an early-stage business investor.