ACCA Advanced Audit and Assurance (AAA) Practice Exam

What is the maximum time limit for a chair's position according to governance standards?

1. Five years

2. Seven years

3. Nine years

4. Limitless

The correct answer is: Nine years

The maximum time limit for a chair's position, according to governance standards, is typically set at nine years. This guideline is informed by best practices in corporate governance, which emphasize the importance of refreshing leadership to ensure that boards remain effective and can bring in new perspectives. A term limit serves to avoid entrenchment and promotes diversification of thought and leadership styles over time. With a defined tenure of nine years, governance standards aim to achieve a balance between the experience that a long-standing chair brings to the position and the potential drawbacks of a prolonged tenure, such as reduced independence or the risk of complacency. By adhering to this timeframe, organizations can encourage regular assessment of board performance and allow for new members to take on leadership roles, fostering an environment that supports continual improvement and innovation.