IPA IP 2024 Question 18

Increasing the number of highly independent outside directors — independent directors strengthen the board's supervision of management.

Corporate governance is the mechanism by which shareholders and other stakeholders make sure that management runs the company properly, and its core is a board of directors that monitors the executives. Inside directors owe their positions to the managers they are meant to supervise; independent outside directors have no such ties, so adding them makes the oversight of management's decisions more objective and transparent.

Answer (c)

Why not others:

• •(a) — improving the labor system to empower women is a human-resources and diversity measure; it does not add supervision of management
• •(b) — buying another company to deploy a business quickly is M&A, a business strategy decision
• •(d) — withdrawing from a business that is hard to make profitable is a choice of which businesses to keep (selection and concentration), also strategy

Key rule: Governance concerns who supervises management and how independently, not what management decides to do with the business.

Corporate Activities · AI-written, may contain errors