ACCA Strategic Professional · Strategic Business Leader · The board of directors
Zentara plc, a listed manufacturer, has a board of eight: the chief executive, the finance director, the operations director and five other directors who work part-time, hold no shares and have no other ties to the company. A shareholder asks what the main purpose of the five part-time directors is. Which role best describes their primary contribution?
Independent non-executive directors mainly contribute objective judgement, challenging strategy and scrutinising executive performance. They do not run daily operations, prepare the accounts or sign the audit report, which are executive or auditor duties. Their independence from management is what makes their challenge valuable to shareholders.
- ABringing independent judgement and challenge to strategy and to executive performanceCorrect
- BManaging the daily operations of the manufacturing divisions
- CPreparing the annual financial statements and signing the audit report
- DRepresenting the interests of employees in management decisions
Explanation
Non-executive directors are part-time and, when independent, provide objective challenge to strategy and scrutinise executives. Day-to-day management and preparing accounts are executive and management responsibilities. Signing the audit report is an auditor's duty, not a director's.
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