Dr. Jeroen Veldman

Beyond the Two-Tier Board

The board plays a central role in the modern corporation. Its role as a steering organ for the direction of public companies is embedded in a series of trade-offs in regards to corporate architecture and, relatedly, the position of stakeholding groups. For this reason, the use of two-tier boards has become a staple of theorizing about public corporations and their relation to broader interests.

I will look at VW as a paradigmatic case of a company with a two-tier board operating in a conducive environment, which yet ostensibly failed to take proper account of broader interests and failed to protect the long-term reputation and viability of the going concern.

Using this case I will argue that although the role and constitution of the board remains a powerful instrument to understand the direction of public corporations, changing theoretical conceptions of the role of shareholders along with practical shifts toward more concentrated shareholdings have provided a different institutional landscape, that have allowed parties outside the board gaining increasing normative as well as practical influence over corporate governance decisions.

In the light of shifting structural conditions under which corporate strategy can be determined I will argue that two-tier boards are an interesting means in the corporate governance debate, but that it can only function if it is embedded in broader institutional conditions that to warrant the inclusion of broad and long-term interests in the decision-making structure of the public corporation.