BOARDS deciphers the fundamental concepts: a closer look at monistic governance
Returning to the fundamentals—a clear definition, operational challenges, and critical analysis—helps guide the decisions of boards of directors and specialized committees. Today, we focus on the monistic model, a cornerstone for many family businesses and SMEs in Europe.
In contrast to dualistic organizations—which are widespread in Germany and the Netherlands and strictly separate management (Executive Board) from oversight (Supervisory Board)—this concentrated structure is especially suited to the needs of medium-sized entities, where swift decision-making and organizational simplicity are paramount. For example, in France, 95% of public limited companies have chosen the monistic model. This choice also appears to be favored in Luxembourg and Belgium, although no precise statistics confirm this.
Monistic governance: definition and key mechanisms
Monistic governance refers to an organizational model in which a single body—the Board of Directors—simultaneously assumes both operational management and strategic oversight functions. Comprised of directors appointed by the general meeting of shareholders, this board steers strategic direction while also supervising executive management.
Strategic issues of the monistic model: advantages and the need for vigilance
The choice of governance system commits the company for the long term, directly affecting its resilience and capacity for innovation. The monistic model offers several structural advantages:
- Increased responsiveness thanks to a shortened decision-making chain and smoother communication between directors and executives
- An integrated perspective on strategic issues, promoting coherence between direction and execution
- Adaptability to family or local contexts, where interpersonal trust plays a key role
However, this concentration of power requires robust safeguards. The merging of the roles of Chairman of the Board and Chief Executive Officer—a common practice in family groups—can lead to conflicts of interest or a lack of transparency in decision-making. Appointing a lead independent director and establishing specialized committees (audit, compensation, risk) are strongly recommended as best practices.e.
Critical analysis: strengths and weaknesses considering contemporary challenges
| Strengths | Challenges to Overcome |
| Structural simplicity | Risk of excessive concentration of power |
| Agility in decision-making processes | Limited internal checks and balances |
| Greater vulnerability during times of crisis | Strategic coherence |
| Better suited for family-owned businesses | Need for informed and diverse governance |
In response to the challenges faced by growing groups and in succession contexts, the current trend emphasizes the gradual separation of the roles of Chairman and CEO, as well as the diversification of board member profiles.
Companies adopting this model benefit from formalizing governance charters that include:
- Mechanisms for the annual evaluation of board members
- Clear thresholds for the declaration of interests
- Increased clarity and transparency regarding the distribution of responsibilities within the board and the company
Toward a modernized unitary governance
The unitary (monist) model remains highly relevant for companies seeking a balance between efficiency and control. However, its success depends on the rigorous application of principles such as transparency, diversification of skills, and the specialization of committees.
BOARDS supports boards of directors in optimizing their governance, whether through tailored audits, director training, or the implementation of strategic dashboards. Our next analysis will compare the unitary, dual, and hybrid systems—stay tuned!
