The Unitary and Dualistic Structure of the Board in the Us and Germany

Nowadays, healthcare institutions cannot handle their performance without the help of management and governance. High-quality technologies are highly expensive and should be looked after by specialists; a single person cannot manage the budget for buying them. In turn, various services that modern hospitals and other healthcare organizations provide require numerous specialists. Organizing a chain of supplies, services, payments, and cooperation is a complicated task, even for a company’s top management. As a result, boards exist to transfer the responsibility of taking the most crucial decision to a circle of people instead of each company’s worker. The functions, structures, and powers of boards are varied among companies in different countries. As such, the German dualistic board structure has certain benefits over the US unitary system because of greater employees’ involvement in the decision-making process.

Throughout its history, Germany has developed a specific model of governance in enterprises and organizations under law. The predominant variety of a board structure in the country is dualistic one (or two-tier), which implies specific characteristics. The basic principle of such a model constitutes the presence of two governance sections of a company: the Supervisory Board and Management Board. According to Deloitte (2021, p. 6), the latter one is “responsible for the day-to-day business of the company,” while the primary coordinates the managers. Additionally, Supervisory Board members can choose employees for the Management Board, as well as regulate its size and obligations. Such a structure serves for the “representation of the various stakeholders in the company (other than its shareholders) into the company’s corporate governance” (Deloitte, 2021, p. 4). In turn, both managers and supervisors’ staff can comprise the workers of a company, as well as external shareholders; however, the preference usually is for internal intercompany personnel (Hopt & Leyens, 2021). Thus, the main peculiarity of the German dualistic board structure is that it contains two parties responsible for the management and oversight of a company’s performance.

The German two-tier system obtains components that are similar to those of the US unitary board of directors, as well as highly distinctive traits. First of all, both board structures involve shareholders in their primary committees (Hopt & Leyens, 2021). The reason for this may lie in the importance of shareholders. Since they invest their resources in the company, they want to know and influence the distribution and use of their financial aid. Second, in contrast to German boards, the US ones lack managerial sections, consisting of “employees, labor unions, business partners, creditors and the public at large” (Deloitte, 2021, p. 4). It could be stated that “US corporate law traditionally builds on the shareholder value approach,” while Germans rely on the labor force (Hopt & Leyens, 2021, p. 31). Finally, top management is present in the structure of the US enterprises, yet it obtains only executing powers. In comparison, the German system provides an ability of direct influence on a company’s policy and practice for the Management Board. Therefore, both structures share the same core but differ in the matter of who gains the power in an organization.

The US healthcare organizations’ governance is structured in the same way as any company. Namely, they include a unitary board of directors, unlike in German enterprises. However, these institutions could adopt an option to include a company’s employees and labor representatives on the board. For example, currently, physicians do not have access to power over stakeholders even though they could be helpful in the decision-making process. They are professionals in the field of healthcare, and their insights would serve an excellent purpose in the quality of the management of companies. Moreover, governance of medical institutions includes the “assessment of clinical effectiveness,” which could be done and evaluated with the help of experienced workers (Downtown Consulting International, n.d., para. 11). Since the immediate actors of the treatment services, clinicians would know more about the effectiveness of their services than shareholders or propose decisions relatable to the company’s practice. In brief, US healthcare organizations can implement labor forces on their board of directors for their benefit.

Finally, the implementation of dualistic governance has different consequences for non-profit and for-profit organizations. For the former, the structure may become expensive and not appropriate. Since such an organization aims at providing services rather than receiving income, it depends on shareholders to a lesser extent than for-profit institutions. As a result, the problem of the excessive influence of investors is non-existent for these companies. Then, the use of an additional section of governance would lead to more significant expenditure. In contrast, organizations that value income in their work would benefit from the two-tier board structure since it limits the power of shareholders. Hence, different factors are involved in the work of the dualistic system, which is represented in its use by the two types of organizations.

To conclude, the dualistic structure of the directory board of Germany differs from the US system by the element of giving power to people that are not shareholders of a company. In healthcare, such an option may help provide better assessment and decision-making on matters of clinical performance. However, the use of the two-tier system is not useful for non-profit organizations in the same way as for income-oriented ones.

References

Deloitte. (2021). The German supervisory board. Web.

Downtown Consulting International. (n.d.). Governance in healthcare. Web.

Hopt, K. J., & Leyens, P. C. (2021). The structure of the board of directors: Boards and governance strategies in the US, the UK and Germany. SSRN Electronic Journal, 1–46. Web.