ACCA Strategic Professional · Strategic Business Leader · The board of directors
Halvard Group has a combined chair and chief executive, Mr Dahl, who has led the company for 15 years. The five non-executives were all appointed by him, most are his former colleagues, and they rarely challenge proposals. Following a failed acquisition, investors call for reform. Which change would MOST directly address the weakness in the board's oversight of executive power?
Separating the chair and chief executive roles and using an independent nominations committee best addresses the problem. It breaks the concentration of power in Mr Dahl and removes his control over appointing directors who are meant to challenge him. Adding executives or extending his contract would strengthen his dominance.
- ASeparate the chair and CEO roles and appoint a nominations committee of independent non-executives to select new directorsCorrect
- BIncrease the number of executive directors so that more people share management tasks
- CGive Mr Dahl a longer contract to improve stability
- DReduce the frequency of board meetings so that decisions are made faster
Explanation
The problem is concentration of power and lack of independence in appointments. Splitting the chair and CEO roles and using an independent nominations committee separates running the board from running the business and removes CEO control over who joins the board. Adding executives or lengthening his contract would strengthen his position, not oversight.
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