Question

Equifax, a credit-reporting agency, disclosed that it had suffered a massive data breach affecting as many as 143 million people. Hackers had gained unauthorized access to sensitive personal data—Social Security numbers, birth dates, and home addresses—for nearly half of the United States. The company also faced multiple federal investigations, including hearings at the U.S. Congress over its handling of the hack and reports that its executives had sold an unusual amount of stock before the breach was publicly disclosed. Effective corporate governance requires Equifax's board of directors to

a) play the lead role in forming the company's strategy and then directly supervise the efforts and actions of senior executives in implementing and executing the strategy.
b) provide guidance and counsel to the CEO in carrying out his/her duties as chief strategist and chief strategy implementer.
c) strengthen its oversight of the company's strategic direction, evaluate the caliber of senior executives' skills, handle executive compensation, and oversee financial reporting practices.
d) work closely with the CEO, senior executives, and the strategic planning staff to develop a strategic plan for the company and then oversee how well the CEO and senior executives carry out the board's directives in implementing and executing the strategic plan.
e) review and approve the company's business model and also review and approve the proposals and recommendations of the CEO as to how to execute the business model.

Answer 1

The board of directors' role in effective corporate governance at Equifax involves oversight of strategic direction and management accountability. The board is tasked with evaluating executive performance, compensation, and ensuring reliable financial reporting. However, the influence of top executives over board selection can compromise governance as seen in historical corporate failures.

Step-by-step explanation:

Effective corporate governance requires Equifax's board of directors to strengthen its oversight of the company's strategic direction, evaluate the caliber of senior executives' skills, handle executive compensation, and oversee financial reporting practices. The board of directors, as the primary governance body, elected by shareholders, has the responsibility to provide proper oversight for top executives. Auditing firms and large outside investors, such as those who invest in mutual or pension funds, also play a critical role in corporate governance. However, in practice, top executives often hold substantial sway in the selection of board candidates, which may affect the board's effectiveness in ensuring that the firm operates in the interests of its true owners—the shareholders. This was evident in the case of Equifax and previously with Lehman Brothers, where corporate governance failed to provide accurate financial information.