The Desirability of Introducing a Two-tier Board Structure in the Ethiopian Corporate Governance System
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Date
2020
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Publisher
A.A.U
Abstract
The board of directors could be an exceptionally complex organ considering its source and reasons
for presence, board members' connection to the corporations, shareholders and officers, and
board's function and models. In the corporate world, there are two predominant board of structures
namely a Two-tier board (dual-model) and the One –tier board (unitary model) structure which
Ethiopia follows currently. The two-tier board structure composed of the supervisory board and
managerial board whereas in the former one it unifies both i.e. the managerial and supervisory
board. A certain company has to be fulfilled with a well-governed and well-functioning effective
board of directors to become successful. Accordingly, In Ethiopia, these days, the general public,
as well as the business community, begins to come out from the cubicle approach and engages in
share companies that require collaboration and a large investment. The numbers of share
companies that are being formed are dramatically increasing. However, the current board of
directors’ governance laws are being detached with several gaps and the very updated principles
of corporate governance are not included in the code and other subsequent legislation.
Accordingly, this study is concerned to examine the shortcoming of the two systems in terms of
benefiting the viability of the company, shareholders, management’s, employees, and also society
in general. This study will also further analyze whether the Ethiopian corporate legal system should
introduce the two-tire board structure or not.