Which of the following is true? In terms of King IV the CEO …a.should be a member of the audit committee.b.is not prohibited from being a non-executive director of another company.c.should be the chairperson of the remuneration committee.d.should be accountable, and report to the chairperson of the board.Clear my choice
Question
Which of the following is true? In terms of King IV the CEO …a.should be a member of the audit committee.b.is not prohibited from being a non-executive director of another company.c.should be the chairperson of the remuneration committee.d.should be accountable, and report to the chairperson of the board.Clear my choice
Solution
The correct answer is:
d. The CEO should be accountable, and report to the chairperson of the board.
Here's why:
a. The CEO should not be a member of the audit committee. This is because the audit committee is responsible for overseeing the company's financial reporting, internal controls, risk management and the internal and external audit functions. It would be a conflict of interest for the CEO to be a part of this committee.
b. While King IV does not explicitly prohibit a CEO from being a non-executive director of another company, it does emphasize that a CEO should have sufficient time to fulfill their responsibilities. Being a non-executive director of another company could potentially conflict with this.
c. The CEO should not be the chairperson of the remuneration committee. This is because the remuneration committee is responsible for setting the remuneration of the CEO and other senior executives. It would be a conflict of interest for the CEO to chair this committee.
d. The CEO should be accountable and report to the chairperson of the board. This is in line with the principles of good corporate governance, which emphasize accountability, transparency and fairness. The CEO, as the highest-ranking executive in the company, should be accountable to the board of directors, which is headed by the chairperson.
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