ACCA Strategic Professional · Strategic Business Leader · Governance scope and approaches

A state-owned railway company has the government as sole shareholder. The minister regularly instructs the board to keep loss-making rural routes open and to freeze fares before elections, while also demanding that the company be financially self-sufficient. Which governance problem does this best illustrate?

The case illustrates conflicting objectives and political interference. The government demands social outcomes such as rural routes and frozen fares while also requiring financial self-sufficiency, so the board cannot be clearly accountable. This is a typical public sector governance difficulty.

AExcessive executive remuneration
BConflicting objectives and political interference in a public sector bodyCorrect
CFailure to apply the comply or explain approach
DInsider trading by directors

Explanation

Public bodies often have multiple, conflicting objectives (social service versus financial self-sufficiency) and political principals who can override the board. The minister's instructions create unclear accountability for performance. Nothing in the case concerns pay, listing rules or insider dealing.

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