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

Which statement best distinguishes the role of non-executive independent directors from that of executive directors on a unitary board?

Independent non-executive directors provide objective oversight and challenge of management, scrutinising strategy, risk and pay, while not being involved in daily operations. They typically staff audit, nomination and remuneration committees, which supports accountability to shareholders.

  1. AIndependent directors bring objective oversight of management, including scrutiny of strategy, risk and remuneration, without being involved in day-to-day runningCorrect
  2. BIndependent directors manage daily operations while executive directors only chair committees
  3. CIndependent directors are appointed by the auditors to verify the accounts
  4. DIndependent directors hold a controlling shareholding to protect minority investors
  5. Independent directors are barred from serving on the audit committee

Explanation

Independent non-executives are not part of the management team and provide challenge and monitoring. They commonly sit on audit, nomination and remuneration committees. The other options misstate their role, appointment or shareholding.

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