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

Orrin Logistics plc is replacing its retiring chair. The existing chief executive, Dalia Munro, proposes that she alone select the successor from her personal contacts and that the board approve the choice without discussion. Which committee should instead lead the process, and which governance principle does Dalia's proposal breach?

The nominations committee should lead the process. Board appointments should follow a formal, rigorous and transparent procedure led by independent directors, with attention to the balance of skills and diversity. A chief executive choosing the successor alone from personal contacts concentrates power and bypasses proper scrutiny.

  1. AThe audit committee, because the principle of accountability to shareholders requires financial expertise
  2. BThe nominations committee, because board appointments should follow a formal, rigorous and transparent process led by independent directorsCorrect
  3. CThe remuneration committee, because the principle of fair pay applies to all new board appointments
  4. DThe risk committee, because the principle of prudent risk management applies to all appointments

Explanation

Appointments to the board are the responsibility of the nominations committee, which should run a formal, rigorous and transparent process, normally led by independent non-executive directors and considering the balance of skills and diversity. Dalia's proposal concentrates power in one executive and avoids scrutiny. The other committees have different remits.

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