What is Two-Tier Model of Corporate Governance

A two-tier model of corporate governance is perceived to be suitable for the corporate governance of liability partnerships (LLP) in Malaysia because the ownership and management of LLPs are both asserted on the partners, and there is the absence of a board of directors (unlike a company). As such, there is a need for a body to supervise the members/partners to ensure good governance for an LLP. All the corporate governance theories – namely agency theory, ethical theory, stakeholder theory, and corporate social responsibility (CSR) – are also relevant to LLPs in ensuring a good corporate governance framework. As such, the legal justifications and theories to support a corporate governance framework for LLPs should be similar to a company. However, due to the internal regulations of LLPs (which have overlaps between ownership, management, and decision-making structures), this chapter would propose a two-tier model of corporate governance with perceptive view on sustainability's development goals to be adopted for LLPs.