Question

explain why a well-managed business should have an independent
board of directors in order to provide a strategic direction to business activities and to
assist top management in meeting the objectives of the business. (30marks)

Answer 1

A well managed business should have an independent board of directors in order to provide a strategic direction to business activities and to assist top management in meeting the objectives of the business.

This is because independent directors act as a guide to the company. It is under the watch of an independent board of directors that an organization is able to focus on and improve its governance standards as well as corporate credibility. The independent directors enable an organization to achieve its strategic objectives by serving as watchdogs ensuring that risk management is proper and aligned with the goals and objectives of the organization.

Further independent directors are not totally dependent on the organization’s President and CEO for seeking information with regards to the organization. The independent directors are able to get outside information and hence apply a fresh perspective to the management of the organization.

Thus an independent board of directors enables an organization to get a strategic direction to its business activities and meet its objective in an optimal manner by having a commitment to serve the shareholders with integrity. This is possible due to absence of any form of conflict of interest with regards to independent directors. Secondly organizations benefit from the good judgment and common sense of the independent directors. Lastly independence in board brings in diversity of perspective and this provides a whole new dimension to the strategic objective of an organization.