Today the shareholders of J.P. Morgan Chase & Co. prepare for one of the most contentious stockholders votes of recent memory. One of the main issues centers on Jamie Dimon, who is the CEO of the company as well as the Chairman of the board of directors. Many of those who hold stock believe that these roles should be separated; in the vote last year the proposal was rejected but still received the backing of 40% of stockholders, which is nothing to take lightly. The arguments in favor of this separation range from too much power being concentrated in a single person to a person can only focus on so many things and being CEO of company as large as J.P. Morgan Chase is enough of a task in itself. Regardless of the facts of this specific case, it brings into the question the larger issue of corporate governance. It would be beneficial to see how different countries operate – both in theory and practice – and see how those companies perform under different structures.

On a broad scale the intent behind the board of directors differs among culture. The United States as well as the United Kingdom is somewhat unique in the way that it strictly emphasizes shareholder value. While this is one of the main goals of any board regardless of the region, the countries in continental Europe tend to put some emphasis on employees of the company in addition to shareholder value. Where the United States and United Kingdom differ is that commonly the CEO is also the Chairman of the board in the US. This is the issue that is at the heart of the J.P. Morgan Chase vote this week and has received a good share of scrutiny following the perceived lack of oversight of the past half-decade.

Almost everyone regardless of country or culture agrees that company oversight can be improved. The issue that academics run into when researching this subject is the fact that it is difficult to isolate the true effect a board’s structure will have on organizational performance. Beyond that board structures are largely dictated by the law of the land. You see this in Germany where two-tiered boards exist. On top of this, half of the supervisory board (the independent oversight board) consists of labor representatives, showing a different philosophy from the US or UK, as mentioned above. The unitary system that is operational in the US has a much closer relationship with management and as a result has been a point of criticism.

Which approach is the best? As always this issue is far from black and white, with each structure providing certain benefits the others do not. If we look at the two dominant structures that have been discussed many in the US are arguing for a system that more closely mimics that of Germany. German companies have done a relatively good job at keeping executive compensations from ballooning and also have been adept at managing relations with labor and other societal factors that American companies can only dream of. How much of this can actually be contributed to the board room structure is tough to say but having a completely independent board would appear to make executives more responsive – at least in theory. With that being said the unitary system of the US has been correlated with the high profits that shareholders are always after. Again, how much of this is causation is hard to say but one of the many reasons this type of board structure (that allows for high compensation of executives) can be sustained is the performance they provide. The battle over which system is supreme will continue on until everyone interests converge and that does not seem to be happening anytime soon.

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