- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 3. Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits
- Subject 2. Corporate Governance Mechanisms
CFA Practice Question
The drawbacks of a large board include ______
II. lack of depth of experience and counsel.
III. a potential lack of ability to adequately spread the workload among members to operate effectively.
IV. being slower to act.
V. deferring more frequently to management.
I. difficulty in coordinating members' views.
II. lack of depth of experience and counsel.
III. a potential lack of ability to adequately spread the workload among members to operate effectively.
IV. being slower to act.
V. deferring more frequently to management.
Correct Answer: I, IV and V
II and III are possible drawbacks of a small board.
User Contributed Comments 8
| User | Comment |
|---|---|
| Rotigga | Why would a large board defer more frequently to management (V)? The more voices in a board room, the more potential for someone to raise an objection to an executive proposal. I would think a smaller, more tightly-nit board would have less chance of dissenting than a larger one. |
| cp24 | I agree, Rotigga. A larger board has more resources and presummably more expertise to address issues... so why defer to mgt? |
| nike | the conclusion is directly from the textbook (page 169): a large Board ... and defer more frequently to the chief executive. |
| todolist | I guess the larger the board, with more voices and various opinions given, the harder to reach an agreement therefore defer the decision back to management |
| Allen88 | good pt todolist |
| gill15 | This stuff just know the answers.....you can have opposing views and ideas for so much of it. Just answer what CFA wants.... CFA Puppet. |
| schweitzdm | I too didn't include V in my answer, but it makes sense given todolist's explanation. |
| jzty | 1. Harder to reach an agreement. 2. It takes longer time to convey the decision to all the employees. |