Certified Environmental Social and Governance Analyst (CESGA) EFFAS Practice Test

Regarding composition and nomination, what is expected from an effective board?

1. Majority of independent directors in the nomination committee

2. Board evaluation every two years

3. Bi-annual re-election

4. Public policy on diversity

The correct answer is: Majority of independent directors in the nomination committee

An effective board is expected to have a majority of independent directors in the nomination committee. This composition is crucial because independent directors are less likely to have conflicts of interest and can provide unbiased oversight and judgment. Their independence enhances the integrity of the nomination process, ensuring that directors are selected based on merit and in the best interest of the organization and its shareholders. A nomination committee with a majority of independent directors actively helps maintain accountability and adherence to good governance practices. While board evaluations every two years, bi-annual re-elections, and a public policy on diversity might also contribute positively to board effectiveness, they do not specifically indicate the composition and structure necessary for an effective nomination process as directly as having a majority of independent directors.