CIMAPRA19-P03-1 Exam - Topic 4 Question 13 Discussion

Question

The Board of Directors of VCX, a state-owned electricity company, includes four executive directors the Chief Executive Officer, the Finance Director the Operation Director and the Technical Director

All of the shares in the company vest in the Office of the Minister for Energy, who is entitled to appoint two non-executive directors to the Board It has been alleged that the Minister appoints political "insiders" who have no particular knowledge of. or interest in. the electricity industry

There are three further non-executive directors

* L, who spent seven years as Chief Executive of VCX, but retired from that role two years ago,

* M, who spent several years on the Board of a state electricity company in a different country to VCX but who resigned from it before accepting the position with VCX: and

* N, who is a qualified and experienced professional accountant

In relation to best practice in respect of Corporate Governance, which of the following statements are valid? Select ALL that apply

Blair · Accepted Answer

A) None of the executive directors should be allowed to sit on the Remuneration Committee and D) M and N are both suitable appointees to the Audit Committee and F) Non-executive directors should be responsible for monitoring the performance of executive management especially with regard to company strategy and objectives

Blair · Answer

B) M is unsuitable to be part of the Board because his previous involvement with a similar company in another country is a conflict of interest.

Blair · Answer

C) L can now be considered to be an independent non-executive director

Blair · Answer

E) The Finance Director should be part of the Audit Committee because of her expertise