Question

Which one of the following statements is TRUE?

a. Frequently, large boards of directors are less effective than small boards of directors.

b. Since outside directors have no other connection with the firm, they are indebted to the CEO for putting them on the board.

c. The more members of a board of directors, the better its function.

d. A company whose board members are elected in staggered terms is said to be an interlocking board of directors.

e. A company has an interlocking board of directors if the CEO also serves as the chairman of the board of directors.

Answer 1

(a) is true. Studies by experts have shown that smaller boards tend to be more effective than large boards.

(b) is not true. Independent directors have no such indebtedness or obligation because the CEO does not appoint directors, the shareholders do.

(c) is not true. Studies by experts have shown that smaller boards tend to be more effective than large boards.

(d) is not true. It is called a staggered board of directors. Interlocking board is where a director in one company also serves on the board of another company.

(e) is not true. Interlocking board is where a director in one company also serves on the board of another company.