Certified Financial Management Specialist Practice Exam

What is one of the key responsibilities of the board of directors?

1. Setting employee schedules

2. Determining corporate exploration strategies

3. Making decisions on executive compensation

4. Allocating marketing budgets

The correct answer is: Making decisions on executive compensation

One of the key responsibilities of the board of directors is making decisions on executive compensation. This task is crucial because the board is responsible for overseeing the management of the company and ensuring that executive pay aligns with the company's performance, strategic goals, and overall compensation philosophy. By determining compensation packages, including salaries, bonuses, and stock options, the board plays a critical role in attracting, retaining, and motivating top executives who are essential for driving the company's success. This process typically involves evaluating performance metrics, industry standards, and company financial health to create a compensation strategy that aligns the interests of executives with those of shareholders. In contrast, setting employee schedules is typically a responsibility handled by management rather than the board, which focuses more on governance and strategic oversight. Determining corporate exploration strategies falls under the purview of management teams and may involve input from the board during strategic planning sessions, but it is not a primary function of the board itself. Allocating marketing budgets is also a task for management, as it pertains to the implementation of business strategies on a day-to-day level, which does not directly fall within the governance responsibilities of the board.