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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards

Sagar Textiles Ltd, a listed public company, has a board that meets regularly, but directors rarely challenge management and the audit committee's recommendations are seldom discussed. The Chairperson says the board is effective because the meeting attendance is 100%. Which view best reflects the concept of board effectiveness?

Board effectiveness is about the quality of oversight, challenge and decision-making by directors. Full attendance alone does not show that directors question management or add value, so the Chairperson's claim is incomplete. Real effectiveness appears in how the board debates, monitors and guides the company.

  1. AEffectiveness is shown by attendance alone, so the Chairperson is right
  2. BEffectiveness depends on the quality of challenge, oversight and decision-making, not mere attendanceCorrect
  3. CEffectiveness is measured only by the company's share price in the quarter
  4. DEffectiveness is achieved once the board has more executive directors than non-executive directors

Explanation

A board is effective when it provides independent oversight, constructive challenge and sound strategic decisions. Attendance is only an input and does not show that directors are contributing. Share price in one quarter is influenced by many external factors and is not a measure of board effectiveness.

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