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IAI Actuarial Core Principles · Business Finance · Corporate governance and the regulation of companies

Which feature of a board is most directly intended to reduce the risk that a single individual holds unchecked power over a company's decisions?

Separating the roles of chairman and chief executive best limits concentrated power. The chairman leads the board and oversees its effectiveness, while the chief executive runs the business. This division of responsibility provides a check that a combined role or an all-executive board would lack.

  1. AHaving the same person act as both chairman and chief executive
  2. BSeparating the roles of chairman and chief executiveCorrect
  3. CAppointing only executive directors to the board
  4. DGiving the chief executive sole authority to appoint auditors
  5. Removing the audit committee to speed up decisions

Explanation

Splitting the chairman and chief executive roles divides responsibility for running the board from running the business, so one person cannot dominate. Combining the roles or using only executives concentrates power and weakens independent challenge.

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