ExpertEasy1 markMultiple Choice
Organisational structure, culture, governance and sustainabilitySection ASyllabus BCorporate Governance
ACCA · Question 35 · Organisational structure, culture, governance and sustainability
True or False: To maintain good corporate governance, Non-Executive Directors (NEDs) should ideally have previously worked as executives in the same company to ensure they understand the business deeply.
True or False: To maintain good corporate governance, Non-Executive Directors (NEDs) should ideally have previously worked as executives in the same company to ensure they understand the business deeply.
Answer options:
A.
True
B.
False
How to approach this question
Consider the primary role of an NED: independent oversight. Prior employment creates a conflict of interest.
Full Answer
B.False✓ Correct
Corporate governance codes stress the importance of independent Non-Executive Directors. A former executive of the company is generally not considered independent due to pre-existing relationships and potential bias towards their own past decisions.
Common mistakes
Assuming industry knowledge is more important than independence.
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