Understanding the Role of Independent Directors

Very Hard Corporate Governance Board Of Directors

In recent years, corporate governance has gained increased attention, particularly concerning the role of Boards of Directors in overseeing management and protecting shareholder interests. A newly appointed board member of a large publicly traded company is reviewing the company’s governance structure. The member is keen to understand the best practices that contribute to an effective board and mitigate conflicts of interest. One area of focus is the ratio of independent directors to management directors on the board.

Given that corporate governance codes often recommend specific ratios of independent to non-independent directors, which of the following statements best summarizes the rationale behind these recommendations?

A higher ratio of independent directors ensures greater oversight of management and minimizes the risk of conflicts of interest.

A higher ratio of independent directors is primarily meant to increase the board's size, which leads to more diverse perspectives.

A higher ratio of independent directors prepares the board for potential takeovers by ensuring management is kept in check at all times.

Hint

Submitted13.0K

Correct9.4K

% Correct72%