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

Vexor plc complies fully with every rule in its country's governance code, but the board has no process to identify emerging strategic risks and the CEO also chairs the board. Shareholders say the board is complying yet governance is poor. Which conclusion best fits the scope of governance and the approach implied?

Compliance alone does not prove effective governance. Governance covers substance, including board-level risk oversight and balanced power. A company ticking code boxes while lacking risk processes and combining CEO and chair roles may still be poorly governed.

  1. ABox-ticking compliance with a rules-based code does not guarantee effective governance, as substance such as risk oversight and board balance mattersCorrect
  2. BFull compliance with a code proves governance is effective
  3. CRisk oversight is outside the scope of governance and belongs to operations
  4. DHaving a combined CEO and chair is required for effective governance

Explanation

Governance covers substance as well as form. A company may satisfy rules yet lack real risk oversight and independent challenge, and a combined CEO and chair concentrates power. Codes expect board-level risk responsibility, so the compliance-proves-effectiveness view is wrong.

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