Certified Financial Management Specialist Practice Exam

Which model is characterized by a two-tiered system consisting of a management board and supervisory board?

1. Japanese Model

2. Continental Model

3. Anglo-American Model

4. Transitional Model

The correct answer is: Continental Model

The model characterized by a two-tiered system, consisting of a management board and a supervisory board, is known as the Continental Model. In this model, the management board is responsible for the day-to-day operations of the company, while the supervisory board oversees and monitors the management board's activities. This structure allows for a clear separation of responsibilities, enhancing corporate governance by providing checks and balances between management and oversight functions. The two-tier system is particularly common in several European countries, where corporate governance practices emphasize the distinct roles of management and supervisory entities to prevent potential conflicts of interest and ensure accountability. The supervisory board typically consists of non-executive members, which can include representatives from shareholders, employees, and other stakeholders, thus enabling a broader perspective in decision-making processes. Other models, such as the Anglo-American model, tend to have a single-tier board structure where both management and oversight responsibilities are combined in one board. The Japanese model features some hybrid aspects, but it does not strictly adhere to the two-tier structure prevalent in the Continental system. The transitional model refers to a corporate governance style in nations adapting from one system to another, which does not consistently utilize the two-tier approach.