Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Which of the following best describes a one-tier board?

1. A board comprising both executive and non-executive members

2. A board consisting solely of executive members

3. A board with separate oversight committees

4. A board that only includes non-executive members

The correct answer is: A board comprising both executive and non-executive members

A one-tier board is characterized by its composition, which includes both executive and non-executive members. This structure allows for a blended approach to governance where executive directors, who are involved in the day-to-day operations of the company, work alongside non-executive directors, who provide independent oversight and contribute to the strategic direction of the organization. This combination fosters better communication and understanding between management and the board, enabling comprehensive oversight while ensuring that the interests of shareholders and other stakeholders are represented. The presence of non-executive members in a one-tier system helps to mitigate conflicts of interest and enhances accountability. In contrast, a board made up solely of executive members lacks independent oversight, which can lead to governance issues. A board with only non-executive members may not possess the operational insight necessary to make informed decisions. Additionally, the presence of separate oversight committees is more characteristic of a two-tier board structure, which segregates management and supervisory functions, rather than a one-tier model. Thus, the correct choice encapsulates the essence of what defines a one-tier board.