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

Marlow Group's board is debating whether governance should be judged only by regulatory compliance. The chair proposes that the board should also be responsible for strategic direction and value creation. Which view of governance does the chair's proposal reflect?

The chair's proposal reflects the view that governance has two dimensions: conformance, meaning accountability, control and compliance, and performance, meaning strategic direction and value creation. A board is responsible for both, not for compliance alone.

  1. AGovernance has both a conformance (compliance and accountability) dimension and a performance (strategy and value creation) dimensionCorrect
  2. BGovernance is purely about conformance with rules
  3. CGovernance is only about maximising short-term share price
  4. DGovernance is the responsibility of external auditors alone

Explanation

Governance is commonly seen as balancing conformance, covering accountability, control and compliance, with performance, covering strategy and value creation. Treating it as compliance only ignores the chair's point. Auditors review but do not own governance, which is a board responsibility.

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