One-tier boards

The one-tier (monistic) board is regulated by article 2:129a DCC for NVs and article 2:239a DCC for BVs. Executive and non-executive directors form a single management board, with the articles allocating duties between them. Non-executives typically oversee, advise and chair board committees. Because there is one board rather than two, every director is a member of the body that manages the company, and the distinction between executive and non-executive is a matter of allocated duties rather than of separate corporate bodies.

Three matters sit outside anything that can be allocated to an executive director. Articles 2:129a(1) and 2:239a(1) DCC provide that the chairmanship of the board, the making of nominations for the appointment of a director and the setting of the remuneration of executive directors cannot be allocated to a director who is an executive. Those restrictions apply in any NV or BV that has a one-tier board, and none of them is confined to listed companies, so the chair of a Dutch one-tier board is a non-executive director whether the company is admitted to trading or privately held.

The reasons for choosing the model are mostly practical. International groups adopt it because it is familiar to non-Dutch investors and matches the board structure used elsewhere in the group. Companies that prefer a single decision-making body choose it for speed, since strategy, execution and oversight are discussed at one table rather than passed between two. Listed companies sometimes adopt it because it allows a clearer separation of oversight inside a single board, with the non-executives holding the chairmanship, the nomination function and the remuneration function.

The considerations on the other side are equally practical. In a one-tier board the non-executives are members of the managing body, so they stand closer to the business, which helps the quality of the debate but makes independent oversight harder to sustain. Conflicts of interest arise more often because everyone sits on the same board, and the information reaching the non-executives is the information the executives present. Whether one-tier or two-tier is the better fit is therefore a question about how a particular company takes decisions rather than a question of preference.

The commercial reason to allocate duties in the articles is clarity, and the legal reason is liability. The articles may allocate duties between executive and non-executive directors, and that allocation is one of the circumstances a court considers when assessing whether a particular director performed properly under article 2:9 DCC. Where no allocation has been made, all board members are in principle exposed on the same footing for the whole of the board's conduct, which removes much of the benefit of separating executives from non-executives.

The allocation has limits. The statutory task of supervising the performance of duties by the directors cannot be taken away from the non-executive directors through an allocation of duties. Nor can a non-executive director rely on an allocation to excuse a failure to act on information before them. The chairmanship, the nomination of directors for appointment and the setting of executive remuneration cannot be allocated to an executive director at all. In practice the articles set the frame, the board rules do the detailed work, and committee charters cover audit, remuneration and selection.

Two matters recur. The first is information flow. In a two-tier structure the supervisory board's information rights are formalised because it sits outside the management board, whereas in a one-tier board all directors sit at the same table and the non-executives receive the information the executives present. This flow is best designed deliberately, through standing information requirements, direct access to internal audit and the external auditor, and time in every meeting without the executives present.

The second is conflicts of interest. Because executives and non-executives sit on a single board, the rule in articles 2:129(6) and 2:239(6) DCC, under which a director with a direct or indirect personal conflicting interest does not take part in deliberation and decision-making, applies more often and more visibly. Remuneration, related-party transactions and transactions with a controlling shareholder each call for a documented procedure agreed before the situation arises.