Guidelines for the Functioning of Boards of Directors

The one-tier governance system was formally introduced into the Slovenian legal system in 2006 with the act amending the Companies Act (hereinafter: ZGD-1) . It is a governance system of joint stock companies featuring a board of directors and executive directors, while a two-tier governance system comprises a supervisory board and a management board. As of 2006, shareholders have been able to choose between a one-tier and two-tier governance systems, which they define in the company's articles of association. In 2011, 44 companies employed a one-tier governance system in Slovenia according to the records of the Slovenian Directors' Association (SDA). With the seventh year of the introduction of a new governance system being underway, the SDA has decided to research the practice in this area at the abovementioned companies. The SDA survey  has shown that the one-tier governance system was chosen by the shareholders of joint stock companies that found themselves in difficulties as well as the shareholders of companies with consolidated ownership or of controlled companies that were wholly owned by the controlling company. According to the survey, the one-tier governance system is supposedly more effective in the abovementioned cases in particular because it allows greater adaptability of the system to the operations and particularities of the company as well as a stronger role of the shareholders who are able to exercise stronger control of the company's operations. The survey has also shown that the companies introducing the one-tier governance system most frequently encounter difficulties stemming from the lacking normative regulation of the one-tier system and the absence of a legal and business tradition. Despite this, however, they are finding in the majority of cases that the one-tier governance system is more effective for them in practice than the two-tier governance system.