The Structure of the Board of Directors: Boards and Governance Strategies in the US, the UK and Germany

Board models like the one-tier board, as used in the US and the UK, or the two-tier board, as used in Germany, provide a basic governance structure that enables the use of specific governance strategies. It is the use of specific governance strategies, not the choice of a board model, which determines the role of the board in alleviating agency problems between owners and managers, controlling and non-controlling shareholders, and shareholder and stakeholder constituencies. Based on this finding, the choice of the suitable board model should be left to private parties. The market for corporate control is known as a removal strategy that alleviates the agency problem between owners and managers of potential target companies. To achieve this effect, it must be ensured that takeover defenses are taken in the interest of shareholders rather than to shield the incumbent board from removal by the acquirer. The governance options include focusing board structure through the allocation of decision-making power to independent directors in the US or to the supervisory board in Germany, and, as an alternative, reinstalling shareholder decision-making, thus removing the board from its coordination task in the UK. Counter-intuitively, one might group US and German law together, despite differences in basic structure and the adoption of UK control shift regulation by the European Union.