A properly qualified board member is of vital importance to proper corporate governance within a firm. Board members who lack the requisite skills, knowledge and expertise to conduct a thorough review of the firm’s activities are:
A) less likely to participate fully in decision-making matters during board meetings. B) more likely to defer to management when making decisions. C) more likely to consult with outside interests to assist in decision-making.
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B. Board members must be properly qualified, having the knowledge and experience which is required to advise management in light of the firm’s specific situations encountered. Both remaining answers are incorrect.
No, it’s good. In the corporate governance part of the corporate finance reading, it is clearly stated that a incompetent board might relinquish more power to the management due to their lack of knowledge of industry or company. This is the reason why board members must usually be experts in the field or have a thorough knowledge of the industry.
Yes, the CFAI materials really push the ‘less likely to challange management’ part. Stating that the other two answers are incorrect is a bit far fetched though, how do they know what fictional board members would do? In fact, I think A and C are both quite likely. Unfortunately this is just one of the questions where you have to have read a certain charpter in the book, rather than testing useful knowledge.