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 has an interlocking board of directors if the CEO also serves as the chairman of the board of directors.
E) A company whose board members are elected in staggered terms is said to be an interlocking board of directors.

Question

Quizplus · Accepted Answer

Research has shown that large boards of directors can be less effective than smaller ones because larger boards can have difficulty making decisions quickly and cohesively. Smaller boards generally have better communication and greater efficiency. Option B is incorrect because outside directors are not necessarily indebted to the CEO. They are chosen for their expertise and independence, and their role is to represent the interests of shareholders, not the CEO. Option C is incorrect because there is no clear evidence that more members increase board performance. Option D is incorrect because an interlocking board exists when two or more companies have directors who serve on each other's boards, creating a web of connections. Option E is also incorrect because staggered terms refer to when board members hold overlapping terms, so not all board member seats are up for election at the same time.

Which One of the Following Statements Is TRUE