ACCA Strategic Business Leader (SBL) Practice Exam

What is one advantage of a two-tier board structure?

1. Regularity in board meetings

2. Independence from direct operations

3. More directors involved in strategy

4. Quicker decision-making

The correct answer is: Independence from direct operations

A two-tier board structure, commonly seen in corporate governance, features a clear distinction between the supervisory board and the management board. The supervisory board is responsible for overseeing the management board’s activities but does not engage in day-to-day operations. This separation offers significant advantages, one of which is enhanced independence from direct operations. By having one tier focused solely on oversight and governance, the supervisory board can maintain an objective perspective and make decisions that are in the best interest of stakeholders without being influenced by the operational activities of the company. This independence is critical for ensuring that the board can hold management accountable, provide strategic direction, and safeguard the interests of shareholders without being swayed by the immediate pressures and challenges of ongoing business operations. In contrast, options like regularity in board meetings, more directors involved in strategy, and quicker decision-making may not inherently result from a two-tier structure. While these elements can be present, they are not exclusive advantages that define the nature of a two-tier board. The primary benefit lies in the clear focus on governance without operational interference, allowing for a well-rounded and judicious decision-making process at the board level.