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ACCA Strategic Professional · Strategic Business Leader · The board of directors

Orlin Holdings has a unitary board of nine directors. The chief executive is also chair, and six of the other directors are executives who report to him. Two non-executives were recommended for appointment by him. Which weakness of the unitary board model is most clearly illustrated?

The weakness illustrated is concentration of power and weak independent challenge. With the CEO also chairing, executives in the majority and non-executives nominated by the CEO, the unitary board lacks the independence needed to oversee management, which is a recognised risk of this model.

  1. AConcentration of power and weak independent challenge because executives can dominate the boardCorrect
  2. BExcessive formality caused by the legal separation of two boards
  3. CLack of employee representation required by law in unitary structures
  4. DInability to appoint non-executive directors

Explanation

A unitary board relies on non-executives to provide challenge. Combining the CEO and chair roles and having a majority of executives and CEO-nominated non-executives lets one individual dominate. The other options describe features of two-tier boards or are incorrect.

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