Deciphering the Role of Directors in Corporate Governance
Chapter 1
The term “directors” holds paramount significance in the corporate management, serving as the cornerstone of organizational governance and decision-making processes. Within the intricate landscape of directorial structures and responsibilities, it is crucial to unravel the complexities and notice differences surrounding the “one-tier” and “two-tier” frameworks.
In both of them directors play crucial role in the management and oversight of business affairs, but the structure and responsibilities of directors can vary depending on the board model in place.
In the one-tier board model, prevalent in common law jurisdictions, executive directors, non-executive directors, and supervisors are amalgamated into a singular authoritative entity known as the Board of Directors. According to the Delaware General Corporation Law, which serves a classic expression of this monistic governance model, the Board of Directors is entrusted with managing the business and affairs of the corporation. While the US corporate landscape typically features a unified board, it’s customary to establish a myriad of additional board committees such as the audit committee, risk management committee, and others.
Conversely, the two-tier board model, more prevalent in civil law jurisdictions, entails distinct entities for executive and non-executive directors – the Management Board and the Supervisory Board. In continental systems, there’s no differentiation between inside and outside directors; all directors are executives formally designated to the corporate entity known as the Management Board. Non-executives serve on the Supervisory Board and don’t partake in managing the company’s affairs, what absolves them also of directors’ obligations.
In essence, an “executive director” in the one-tier system corresponds to a “member of the management board” in the two-tier system, while a “non-executive director” pertains to a member of the supervisory board.
All subsequent references to company executives, falling under the category of “executive director” in the US system or Management Board in continental Europe, employ the term “director.”
As we delve into the intricacies of Polish regulations in the following discussion, it is prudent to address one additional matter.
The Polish term “dyrektor” may sound like the English “director,” but it holds a distinct meaning. In Poland, a “dyrektor” is an internal function within an organization to handle affairs. This designation would be more accurately translated as “officer” in English terms. Examples of “dyrektor” in Polish context include the CEO, CFO, and CSO – individuals who hold internal managerial roles within a company. However, without specific powers granted by the board, they lack the authority to represent the company externally. Essentially, they do not bear overall responsibility for the company’s situation externally, except in cases of personal fault where they are accountable for their own actions and omissions.
Poland adopted a typical “two tiers” dualistic management system, so term “member of the board” can refer to different positions in Polish law, such as members of the management board, supervisory board, or audit committee. The term “board of directors” itself does not exist. There is also no collegial body composed of executive directors (management board), non-executive directors, and various officers of the company (meaning business directors in Polish terms, e.g., CEO, CFO).
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.