UK Companies Need More Effective Boards of Directors Reading Answers

Dec 23, 2022

UK Companies Need More Effective Boards of Directors Reading Answers is a particular topic which discusses about the importance of having more effective boards in the UK companies. The given IELTS topic has been taken from the book called “A Book for IELTS (Academic Module)”. There are 14 questions total in the the topic called UK Companies Need More Effective Boards of Directors Reading Answers, which should be answered within the alloted time of 20 minutes by the candidates. The topic basically comes with three different sorts of questions, that is, choose the correct heading,Yes/No/Not Given, and no more than a word. The candidates should read thoroughly the IELTS reading passage in order to recognize the synonyms and identify the keywords and for answering the questions below. Similar kinds of topics like UK Companies Need More Effective Boards of Directors Reading Answers are included in the IELTS reading practice papers, which the candidates can take into their consideration for performing a good score in this section.

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Section 1

Read the Passage to Answer the Following Questions

UK Companies Need More Effective Boards of Directors Reading Answers

After a number of serious failures of governance (that is, how they are managed at the highest level), companies in Britain, as well as elsewhere, should consider radical changes to their directors’ roles. It is clear that the role of a board director today is not an easy one. Following the 2008 financial meltdown, which resulted in a deeper and more prolonged period of economic downturn than anyone expected, the search for explanations in the many post-mortems of the crisis has meant blame has been spread far and wide. Governments, regulators, central banks and auditors have all been in the frame. The role of bank directors and management and their widely publicised failures have been extensively picked over and examined in reports, inquiries and commentaries.
The knock-on t of this scrutiny has been to make the governance of companies in general an issue of intense public debate and has significantly increased the pressures on, and the responsibilities of, directors. At the simplest and most practical level, the time involved in fulfilling the demands of a board directorship has increased significantly, calling into question the effectiveness of the classic model of corporate governance by part-time, independent non-executive directors. Where once a board schedule may have consisted of between eight and ten meetings a year, in many companies the number of events requiring board input and decisions has dramatically risen. Furthermore, the amount of reading and preparation required for each meeting is increasing. Agendas can become overloaded and this can mean the time for constructive debate must necessarily be restricted in favour of getting through the business.
Often, board business is devolved to committees in order to cope with the workload, which may be more efficient but can mean that the board as a whole is less involved in fully addressing some of the most important issues. It is not uncommon for the audit committee meeting to last longer than the main board meeting itself. Process may take the place of discussion and be at the expense of real collaboration, so that boxes are ticked rather than issues tackled. D A radical solution, which may work for some very large companies whose businesses are extensive and complex, is the professional board, whose members would work up to three or four days a week, supported by their own dedicated staff and advisers. There are obvious risks to this and it would be important to establish clear guidelines for such a board to ensure that it did not step on the toes of management by becoming too engaged in the day-to-day running of the company. Problems of recruitment, remuneration and independence could also arise and this structure would not be appropriate for all companies. However, more professional and better-informed boards would have been particularly appropriate for banks where the executives had access to information that part-time non-executive directors lacked, leaving the latter unable to comprehend or anticipate the 2008 crash.
One of the main criticisms of boards and their directors is that they do not focus sufficiently on longer-term matters of strategy, sustainability and governance, but instead concentrate too much on short-term financial metrics. Regulatory requirements and the structure of the market encourage this behaviour. The tyranny of quarterly reporting can distort board decision-making, as directors have to ‘make the numbers’ every four months to meet the insatiable appetite of the market for more data. This serves to encourage the trading methodology of a certain kind of investor who moves in and out of a stock without engaging in constructive dialogue with the company about strategy or performance, and is simply seeking a short¬ term financial gain. This effect has been made worse by the changing profile of investors due to the globalisation of capital and the increasing use of automated trading systems. Corporate culture adapts and management teams are largely incentivised to meet financial goals.
Compensation for chief executives has become a combat zone where pitched battles between investors, management and board members are fought, often behind closed doors but increasingly frequently in the full glare of press attention. Many would argue that this is in the interest of transparency and good governance as shareholders use their muscle in the area of pay to pressure boards to remove underperforming chief executives. Their powers to vote down executive remuneration policies increased when binding votes came into force. The chair of the remuneration committee can be an exposed and lonely role, as Alison Carnwath, chair of Barclays Bank’s remuneration committee, found when she had to resign, having been roundly criticised for trying to defend the enormous bonus to be paid to the chief executive; the irony being that she was widely understood to have spoken out against it in the privacy of the committee.
The financial crisis stimulated a debate about the role and purpose of the company and a heightened awareness of corporate ethics. Trust in the corporation has been eroded and academics such as Michael Sandel, in his thoughtful and bestselling book What Money Can’t Buy, are questioning the morality of capitalism and the market economy. Boards of companies in all sectors will need to widen their perspective to encompass these issues and this may involve a realignment of corporate goals. We live in challenging times.

Section 2

Solution with Explanation
Questions 1-7:
Reading Passage has seven paragraphs, A-G.
Choose the correct heading for each paragraph from the list of headings below.
Write the correct number, i-viii, in boxes 1-7 on your answer sheet.

Paragraph A

Answer: iv
Supporting Sentence: Governments, regulators, central banks and auditors have all been in the frame.
Keyword: Governments, regulators, banks, frame, management, failures, publicised
Keyword Location: Para A, last line
Explanation: The ending part of paragraph A implies that all the departments of Governments, regulators, central banks, auditors were remarked as the responsibe one for the problem of financial meltdown that was created.

Paragraph B

Answer: ii
Supporting Sentence: The knock-on t of this scrutiny has been to make the governance of companies in general an issue of intense public debate and has significantly increased the pressures on, and the responsibilities of, directors.
Keyword: scrutiny, knock-on, governance, issue, debate, responsibility
Keyword Location: Para B, line 1
Explanation: Line 1 of paragraph B states that the result of the publicised deterioration and comprehensive examination over reports, scrutinies, inquiries have impacted as the closure of examination, and this makes the path of creating pressure and responsibilities on the boards of directors.

Paragraph C

Answer: vi
Supporting Sentence: but can mean that the board as a whole is less involved in fully addressing some of the most important issues.
Keyword: board, whole, important, issues, less, involved
Keyword Location: Para C, line 1
Explanation: While the board of directors has devolved into committees to manage the workload properly, it has also become a risk that the board as a whole is not able to take part in some of the most important issues.

Paragraph D

Answer: viii
Supporting Sentence: A radical solution, which may work for some very large companies whose businesses are extensive and complex, is the professional board,
Keyword: solution, radical, professional, board, large, companies
Keyword Location: Para D, line 1
Explanation: The first line of paragraph D states that the profound wayout has been made in order to change the ways as professional board works with very complicated and large business in the companies which are very huge.

Paragraph E

Answer: vii
Supporting Sentence: One of the main criticisms of boards and their directors is that they do not focus sufficiently on longer-term matters of strategy, sustainability and governance
Keyword: boards, directors, criticisms, focus, sufficiently, long-term
Keyword Location: Para E, line 1
Explanation: The first line of paragraph E implies that as the boards of directors did not thought to expand their companies in case of long term purpose, they encountered one of the crucial criticisms.

Paragraph F

Answer: i
Supporting Sentence: Compensation for chief executives has become a combat zone where pitched battles
Keyword: battles, pitches, executives, compensation
Keyword Location: Para F, line 1

Explanation: There have been several disputes that have come up regarding the financial compensation between chief executives and senior managers, making the work field a combat zone

Paragraph G

Answer: iii
Supporting Sentence: Boards of companies in all sectors will need to widen their perspective to encompass these issues and this may involve a realignment of corporate goals.
Keyword: boards, companies, sectors, widen, perspective
Keyword Location: Para G, Line 3
Explanation: The third line of paragraph G explains that for the purpose of pointing their issue to others and for extending their perspective, some vital changes needed to be acquired by the board of companies. Their corporate goals also needed to be changed.

Question 8-11:
Do the following statements agree with the claims of the writer in Reading Passage?
In boxes 8-11 on your answer sheet, write

YES if the statement agrees with the claims of the writer
NO if the statement contradicts the claims of the writer
NOT GIVEN if it is impossible to say what the writer thinks about this

Close scrutiny of the behaviour of boards has increased since the economic downturn.

Answer: YES
Supporting Sentence: the search for explanations in the many post- of the crisis has meant blame has been spread far and wide.
Keyword: search, explanation, post, blame, spread, far
Keyword Location: Para A, line 2
Explanation: The second line of paragraph A implies that the close scrutiny for the purpose of searching for the explanations for the behavior of boards meant that the spreading of the blames happened awfully. This iniatiated the downfall of economic conditions. Hence, the statement is the correct one.

Banks have been mismanaged to a greater extent than other businesses.

Answer: NOT GIVEN

Explanation: No justified information is available in the above context in order to support this statement.

Board meetings normally continue for as long as necessary to debate matters in full.

Answer: NO
Supporting Sentence: board business is devolved to committees in order to cope with the workload,
Keyword: board, business, devolved, workload, cope
Keyword Location: Para C, line 1
Explanation: The first line of paragraph C explains that the board business are initiated in the committes so that they can confront and grapple with the pressure of works. Thus, it is an incorrect statement.

Using a committee structure would ensure that board members are fully informed about significant issues.

Answer: NO
Supporting Sentence: Problems of recruitment, remuneration, and independence could also arise and this structure would not be appropriate for all companies.
Keyword: structure, appropriate, companies, all, would not
Keyword Location: Para D, line 3
Explanation: Line 3 of paragraph D implies that for most of the companies, the recruitment, remuneration, and independence may appear as a hindrance. Thus, it is an incorrect sentence.

Questions 12-14:
Complete the sentences below.
Choose ONE WORD ONLY from the passage for each answer.
Write your answers in boxes 12-14 on your answer sheet.

Before 2008, non-executive directors were at a disadvantage because of their lack of _________

Answer: information
Supporting Sentence: However, more professional and better-informed boards would have been particularly appropriate for banks where the executives had access to information that part-time non-executive directors lacked, leaving the latter unable to comprehend or anticipate the 2008 crash.
Keyword: information, professional, well-informed, boards, appropriate, banks
Keyword Location: Para D, line 4
Explanation: Line 4 of paragraph D suggests that non-executive directors mostly were at a disadvantage for being less informative or having less information prior to the year of 2008.

Boards tend to place too much emphasis on __________ considerations that are only of short-term relevance.

Answer: financial
Supporting Sentence: One of the main criticisms of boards and their directors is that they do not focus sufficiently on longer-term matters of strategy, sustainability and governance, but instead concentrate too much on short-term financial metrics.
Keyword: financial, metrics, boards, directors, short, term
Keyword Location: Para E, line 1
Explanation: Line 1 of paragraph E suggests that there is a major criticism which the boards directors encountered was that they were not being able to think of their business as per long term policy and in a productive way. The boards directors showed their regards more on financial conditions which are basically short-term related.

On certain matters, such as pay, the board may have to accept the views of

Answer: shareholders / investors
Supporting Sentence: Compensation for chief executives has become a combat zone where pitched battles between investors, management, and board members are fought, often behind closed doors but increasingly frequently in the full glare of press attention. Many would argue that this is in the interest of transparency and good governance as shareholders use their muscle in the area of pay to pressure boards to remove underperforming chief executives
Keyword: board, investor, shareholders, area, pay
Keyword Location: Para F, line 1
Explanation: The first line of paragraph F suggests that the board directors in many cases are bound to accept the terms and conditions of shareholders or investors for eliminating chief executives those din’t performed well.

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