What is the common approach to the leadership of the governing body?
The supervisory board shall elect a chairman and at least one vice chairman from among its members. The Stock Corporation Act confers various special tasks on the chairman, e.g. to prepare and chair supervisory board meetings, to represent the supervisory board vis-à-vis the management board and, in particular, to chair the annual general meeting. Notwithstanding this special role, the chairman has no right to issue instructions to the other members of the supervisory board nor has his vote a higher weight either. In practice, however, a large number of articles of association of private and public companies provide for the chairman's right to direct the vote, which gives preference to his vote in the event of a tie.
In Brazil, one of the members of the board of directors will also act as the chairperson of the board. Typically, this individual will have the power to call board meetings at any time, conduct and lead the discussions held at any meetings, and to exercise a casting vote (in case he or she is vested with such under the company’s by-laws). Please note that, in Brazil, the position of chairman of the board of directors of a company is typically occupied either by the founder of the company or a well-known executive.
As mentioned, about half of listed companies and most unlisted companies constituted as SAs are single-tier SAs in which the chair of the board of directors is also the DG, with about half of listed companies featuring either a supervisory board or a board of directors with a chair other than the DG.
Among listed companies (in the form of an SA) it has become increasingly common to name a lead independent director (administrateur référent) assigned to handle certain governance issues, including relations with shareholders, and/or a vice-president with similar functions
Other committees can be named by the board. The APEF-MEDEF Code recommends nominations and compensation committees, each composed principally of independent directors and no executive officer (with the compensation committee to include an employee director). Most publicly listed companies have at least compensation and nominations committees (sometimes one committee with both missions) and other committees (such as a strategy committee) are not uncommon.
The role of committees is to make recommendations to the board, which remains responsible for taking the relevant decisions.
The Management Board and Supervisory Board members are obliged to perform their service with the care and diligence of a prudent and conscientious manager. A business decision meets this standard if the relevant board member could reasonably assume to have gained sufficient information before making the decision, is not conflicted and considers that it is acting in the company’s best interests (under the business judgement rule).
The Board of Directors consists of at least a Chairman. A company may, at its discretion, also appoint one (or more) Managing Directors. The Managing Director is usually granted with all or most of the powers of the Board, together or separately from the Chairman. The Chairman is awarded by Law with some additional powers regarding the operation of the governing bodies, such as the convocation of a Board meeting and General Meeting.
The Corporate Governance Code provides that a board is usually led by a chairperson who is responsible for (1) managing the board by ensuring the board works effectively and performs its responsibilities, that all key and appropriate issues are discussed by it in a timely manner, that good corporate governance practice and procedures are established, and that the board acts in the best interests of the company; and (2) engaging the rest of the directors in the board by encouraging all directors to make a full and active contribution to the board’s affairs, ensuring that directors receive, in a timely manner, adequate information which must be accurate, clear, complete and reliable, and that all directors are properly briefed on issues arising at board meetings. However, the chairperson should not act as the chief executive of the listed company simultaneously unless a waiver has been sought from the Hong Kong Stock Exchange (paragraph A.2 of the Corporate Governance Code).
The Companies Ordinance does not require a board to appoint a chairperson, except in the case of a board meeting or a general meeting (section 586 of the Companies Ordinance).
The leadership of the governing body is generally exercised by the representative director (in the cases of a company with statutory auditors and a company with an audit and supervisory committee) or (representative) executive officers (in the case of a company with three committees). Representative directors must be appointed from among directors. The (representative) executive officers need not be appointed from among directors, but usually at least one executive officer concurrently serves as a director.
The general laws and the by-laws determine whether the chairman of the governing body is designated by shareholders or by such body. In public-interest entities, the chairman of the supervisory body shall be independent. Under IPCG Code, either the chairman of the board of directors of listed companies is independent, or the appointment of a lead independent director is recommended.
The KCC does not provide for specific regulations regarding the chairperson of the BOD. In general, the representative director is often elected as the chairperson of the BOD, but this is not a requirement under the KCC. The matters concerning the chairperson of the BOD including the method of election, powers and term of office are generally specified in the AOI or the BOD regulations.
Leadership of the board of directors is typically assumed by the chair of the board of directors who must assure that the board fulfills its duties according to the law and the internal regulations and that the relationship between the board and the executive management properly functions. The OaEC requires that the chair of Swiss companies listed on a Swiss or foreign exchange is elected by the shareholders’ meeting.
Leadership of the executive management is typically assumed by the CEO.
There is an increasing tendency towards the review of the board’s performance with external experts.
For corporations, there are two common approaches to board leadership. Some corporations have an independent or non-executive director serve as the chairman. Other corporations have the CEO serve as the chairman. Corporations that choose to combine the CEO and chairman roles typically appoint a lead independent director to serve as the representative of the independent directors with specific duties and responsibilities. Regardless of which approach a corporation adopts, the chairman of the board is elected by the directors to serve as the board’s leader, to run meetings and to serve as the liaison between the board and management.
LLCs may choose to structure the governing body’s leadership in any way. The leadership structure is determined by the LLC operating agreement and can vary widely for each LLC.
The Chairperson leads the board and is responsible for its overall effectiveness in directing the company. The Chairperson should facilitate constructive board relations and the effective contribution of non-executive directors, and should ensure that the directors receive timely, accurate and clear information. The UK Corporate Governance Code recommends that the Chairperson be independent on appointment and that the role of Chairperson and Chief Executive not be combined.
In addition to the Chairperson, the board should also appoint one of the independent non-executive directors to be the senior independent director to provide a sounding board for the Chairperson and serve as an intermediary for the other directors and shareholders.
In the event that a board is appointed (i.e. not in the case of a sole director), pursuant to Art. 2381, par. 2-3, ICC, all or part of its powers may be attributed to: (a) one or more individual members, acting as managing director(s), and/or (ii) an executive committee. In such case, the managing director(s) or the executive committee shall report to the board – at least on a semi-annual basis – on the general management of the company, the most significant transactions/events of the relevant period (with respect to the company and the subsidiaries) and the foreseeable evolution of the business.
It is worth noting that the board shall have the right to recall the attributed powers at its sole discretion, provided that in the event that there is no just cause for recalling said powers, the relevant managing director(s) or executive committee shall have the right to sue a claim for damages.
Typically, the leadership is entrusted with a sole managing director.
It should be stressed that the chairperson – even if non-executive – is granted with significant rights and powers under Art. 2381 ICC, such as calling board meetings, defining the items on the agenda, ensuring that the directors receive all necessary information for the purposes of resolving on the matters to be addressed by the board.
According to Turkish Law, it is possible for a manager to have the title of both a chairman and a CEO. It is a common approach that CEO of the company also has the BoD membership but in big companies it is separated from the BoD. However, pursuant to CGP, no one in the company must be authorized solely with unlimited powers that the authorities of chairman and CEO must be separated from each other clearly and this separation must be stated in the AoA. Furthermore, in case it is decided that a person will be appointed as both chairman and CEO, then this will be published at Public Disclosure Platform together with its justification (CGP, articles 4.2.5 and 4.2.6).
The board may choose from among its members a chairman who chairs the meetings of the board.
In a SA unless otherwise provided in the articles of association and insofar as a chairman has been elected, the chairman has a casting vote in case of a tie vote.
With respect to qualifying listed companies, the LSE Principles indicate that the board shall appoint a chairman, who shall prepare the agenda for board meetings, ensure that the procedures relating to board meetings, preparation of meetings, deliberations, and for taking and implementing decisions, are correctly applied and take the necessary steps to create a climate of trust within the board, contributing to open discussion, the constructive expression of the opinions of each of its members, and support for decisions taken by the board. In addition, the LSE Principles indicate that the decision-making process shall allow each director to express his point of view and that no single director or group of directors shall dominate the board’s decision-making process.