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ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance

A listed company's board is dominated by its chief executive, who also chairs the board and personally selects all other directors. Which corporate governance weakness is MOST directly shown?

The key weakness is that power is concentrated in one person who is both chair and chief executive and who picks the other directors. This undermines independent oversight and accountability to shareholders. The other options describe issues that the scenario does not mention.

  1. AExcessive concentration of power in one individual, weakening accountability and independent oversightCorrect
  2. BOver-reliance on non-executive directors for day-to-day management
  3. CLack of a separate internal audit function by law
  4. DExcessive disclosure of remuneration to shareholders

Explanation

Combining the roles of chair and chief executive and controlling board appointments concentrates power in one person. This weakens independent challenge and accountability to shareholders. Nothing in the scenario concerns non-executives managing the business, internal audit legality or remuneration disclosure.

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