Board and Management Structures Flashcards
In which countries can a unitary board structure be found?
UK and US
In which type of countries can a dual board structure be found?
Germany
What is a unitary board?
A single board with executive and non-executive directors.
What is a dual board?
A supervisory board and an executive board with clear separation between the functions of supervision and management.
Who elects the boards in a two tier dual board?
The shareholders and in Germany the employees.
What are similarities of the unitary and dual boards?
- Responsible for appointing management
- Responsible for effectiveness of financial reporting, control systems and compliance.
What is the advantage of a single point hierarchy management model?
Clear accountability
What is the principle behind a matrix structure?
An individual may serve two or three managers rather than just one, having accountability to their functional manager for the delivery of services to a particular business unit, and having particular responsibility to e.g. the CEO of that business unit for their contribution.
In a compliance setting, how might a matrix structure work?
A team member may have responsibility to the compliance director in respect to their contribution to the compliance team’s objectives but also a reporting line to the CEO of a particular business unit where that person has applicable detailed compliance experience.
What are the advantages of a matrix reporting line?
Flexible servicing model - members of the team build and apply experience in multiple contexts to benefit the business overall.
What are the disadvantage of a matrix reporting line?
Susceptible to dilution of staff accountability and clarity in the roles that each person fulfils.
Tension between two managers who think they can determine 100% of a subordinates works.
What is a silo structure?
Isolated groups of workers report to a line or functional manager.
Which types of firms are likely to have silo structures?
Larger firms
What is the disadvantage of silo structures?
Groups operate independently with less cross functional collaboration and cohesion between silos - detrimental to group cohesion.
Duplication of functions - impact on group cost control.
From a compliance perspective, what is the disadvantage of a silo structure?
Replication of functions like monitoring, advisory and regulatory analysis in multiple locations can lead to inconsistency of the control infrastructure and ultimately undermine the clarity and consistency of liaison with regulators.
What are the 4 elements that allow the compliance function to maintain independence?
- Formal status within the firm.
- Head of Compliance with overall responsibility for coordinating the management of the firm’s compliance risk.
- Compliance function staff should not be placed in a position where there could be a conflict or interest in their duties.
- Compliance function staff are to have access to the information and personnel necessary to carry out their responsibilities.
