Which system is better?
It’s a matter of fact, that in stock company the management leads the business and not the shareholders itself. In Germany, we have a Management Board (MB) and a Supervisory Board (SB).
The SB should monitor the MB, to anticipate that the MB doesn’t act in the interest of the shareholders and creditors. For Example, in the form of inadequate salary payment, inadequate redundancy payments and nepotism.
In the unitary-board system of the UK aren’t exist a SB, but there are so- called Executive directors which operates beside the Non-executive directors. The Executive directors have the same function like the SB in the German stock company.
The dual board system is prescribed by law for German stock corporations.
The Management Board (MB) is appropriate for managing the enterprise. Its members are jointly accountable for the management of the concern. The Chairman of the MB coordinates the work of the MB.
The Supervisory Board (SB) appoints, supervises and advises the member of the MB and is directly involved in decisions of fundamental importance to the company.
The Members of the SB are chosen by the shareholders at the General Meeting. In enterprises having more than 500 or 2000 employees in Germany, employees are also represented in the SB. In practice, the dual-board system is also established in other continental European countries.
The unitary-board system, which exists in the UK, has only one organ, the board...
Where is the COMI?
One of the performances of cross-border insolvency is that debtors may seek to open proceedings in a state having insolvency legislation more favourable to their particular circumstances. This is labelled as “forum shopping”. The Regulation attempts to stop forum shopping by requiring that the main proceeding be opened in the member state where the debtor’s “centre of main interests” (COMI) is situated.
According to Art. 3 EU Insolvency Regulation, the international Courts of the particular Member state are responsible for the opening of an insolvency proceeding, where the debtor’s centre of main interest is. The European Court of Justice (ECJ) assumes that this is basically there, where „the debtor’s registered office “is. It’s where the administration of its interests "on a regular basis“is and it must be „therefore ascertainable by third parties."
Table of Contents
1. Advantages and disadvantages of the two-tier model:
1.2 Advantages
1.2 Disadvantages
2. Advantages and disadvantages of the one-tier model!
2.1 Advantages
2.2 Disadvantages
3. Summary
Objectives and Topics
The primary objective of this work is to evaluate the Centre of Main Interest (COMI) for an international company operating in Germany and the UK, while critically comparing the efficacy of the German two-tier board system against the UK's unitary board system regarding shareholder accountability.
- Determination of COMI for ThyssenKrupp AG under EU Insolvency Regulation.
- Analysis of Corporate Governance structures and shareholder interests.
- Comparative study of the two-tier vs. unitary board models.
- Identification of structural advantages and disadvantages in board governance.
- Evaluation of the impact of co-determination on corporate management.
Excerpt from the book
1.2 Advantages
The idea behind the two-tier board system is, to separate the controlling institution from the managing institution, to protect both, shareholders and the public interest, this is the major advantage. The Control is not only reverse-oriented but claims an open discussion between the SB and the MB. Anyhow, conflicts of interest between the members of the two boards should, theoretically not arise. Members of the SB are chosen by the shareholders in the general meeting. Accordingly SB members increase the like hood of getting re-elected by fulfilling their most important task, to mirror the MB adequately and thoroughly. At the same time, the members of the MB are opted by the SB and will stay in office if the company performs well.
In practice, the members of the SB are chosen by the MB and are only formally opted at the General Meeting. It is unusual for persons to become members of the SB who have not been pre-selected by the MB. This has two reasons: only “adequate” persons, in the opinion of the MB, become elected as members of the SB, and only those who „adequately“control, remain in office. In both cases, the MB`s definition of „adequacy“does not absolutely correspond with the shareholders definition. In practice, the members of the MB (usual the chairman) switch to the SB, and frequently become the chairman of this organ after retirement.
But the co-determining statute had even the advantage, to reduce the possibility of strikes and it is an early warning system for social conflicts. Furthermore, co-determination is capable of shielding companies from hostile takeovers.
Summary of Chapters
1. Advantages and disadvantages of the two-tier model: Examines the separation of management and control in the German system, highlighting the role of the Supervisory Board versus the Management Board and the influence of co-determination.
2. Advantages and disadvantages of the one-tier model!: Discusses the structure of the UK unitary board, focusing on the flow of information and the challenges of combining strategic and monitoring roles.
3. Summary: Concludes that both systems face significant challenges regarding shareholder influence and corporate governance effectiveness, noting that neither system is objectively superior.
Keywords
Corporate Governance, COMI, Two-tier board system, Unitary board system, Shareholder accountability, Insolvency Law, ThyssenKrupp AG, Management Board, Supervisory Board, Co-determination, Forum shopping, EU Insolvency Regulation, Executive directors, Non-executive directors.
Frequently Asked Questions
What is the primary focus of this paper?
The paper examines international insolvency law and corporate governance, specifically focusing on determining the Centre of Main Interest (COMI) and comparing the effectiveness of two-tier versus unitary board structures.
What are the central themes discussed?
The central themes include shareholder accountability, the separation of controlling and managing bodies, and the impact of national laws like German co-determination on corporate management.
What is the core research question?
The research explores two main questions: how to determine the COMI of an insolvent multinational company, and whether the German two-tier board system offers better shareholder accountability than the UK unitary system.
Which methodology is employed in this research?
The study utilizes a comparative legal analysis, applying theoretical concepts of corporate governance and insolvency regulations to the specific case of ThyssenKrupp AG.
What is addressed in the main body?
The main body details the definition of COMI under EU law, analyses the structural pros and cons of dual and unitary board models, and discusses the practical influence of the German Corporate Governance Code.
Which keywords characterize this work?
Key terms include Corporate Governance, COMI, Two-tier board, Unitary board, Shareholder accountability, and Insolvency Law.
How is the COMI of ThyssenKrupp AG determined in this study?
The author identifies Germany as the COMI for ThyssenKrupp AG, arguing that the central administration and the primary organization of business affairs are based there.
Why does the author consider both board systems "constant bad"?
The author suggests that in both systems, the actual influence shareholders have over management is limited, creating a gap between management actions and shareholder interests.
- Quote paper
- Susanne Eck (Author), 2009, Which system is better? One-tier or two-tier-board system? Where is the COMI of ThyssenKrupp AG, Munich, GRIN Verlag, https://www.grin.com/document/141906
