Unitary Boards

ACCA P1 考試：Unitary Boards

This is the most common board structure in the Anglo-Saxon world and in a number of EU countries.

A unitary board includes both executive directors and NEDs who take decisions as a unified group and are held legally and executively responsible (as a group and as individuals) for

their individual actions and the success of the company.

All members are not equal in terms of the organizational hierarchy, but they all are legally responsible and equally accountable for board decisions.

1 Advantages

Broadly, that the board acts as one with equal status, responsibilities and decision-making.

All members of the board have the same legal responsibility for the performance of a company. Therefore, NEDs are empowered within the board, being accorded equal status to executive directors rather than just acting in a supervisory capacity.

The presence of NEDS on the board might provide executive directors with different expertise, experience and perspectives that may be of invaluable help in devising strategy and the assessment of risk.

NEDs bring independent scrutiny to the board, challenging the CEO and executive directors before strategies are devised and implemented.

Board accountability is enhanced by providing a greater protection against fraud and malpractice and by holding all directors equally accountable under a "cabinet government" arrangement.

Unitary board arrangements reduce the likelihood of abuse of (self-serving) power by a small number of senior directors.

Closer relationships and better information flow as all directors are on the same single board. Promotes easier co-operation between the board members.

2 Disadvantages

The success of the NED role depends on the robustness, tenacity and expertise of the NED.

No specific provision is made for employees, external shareholders or union representatives to be on the board.

Such stakeholders depend on the role of the NEDs to be able to put forward their point of view.

The role of NEDs may be strenuous in terms of time and expertise. Not only do they perform a director's role, they also are expected to monitor executive directors as a whole.

NEDs are dependent on the information provided to them by the CEO. The higher the quality, the better they will be able to perform their role. This may, however, lead to "reluctance" on the part of the CEO to provide information that will then be used to challenge the CEO's decisions.

Managers may be less inclined to share information with a board as its monitoring intensity increases. With less information, even an independent board cannot monitor effectively. This implies that recent regulation aimed at increasing board independence may decrease shareholder value if there is a unitary board, even though shareholders may benefit if increases in independence improve disclosure practices.