Final answer:
The relationship between management and the board of directors is that the board supervises management's decisions and strategies, while management handles the day-to-day operations. The board is meant to act in the shareholders' interests, providing oversight to top executives.
Step-by-step explanation:
The correct answer that best describes the relationship between management and the board of directors is option b) The board of directors supervises management's decisions and strategies. Management is responsible for the day-to-day operations of a company, and the board of directors provides oversight and direction to ensure that the company is run in the interests of the shareholders. The board is elected by the shareholders and acts as the first line of corporate governance, holding top executives accountable for their actions and decisions. It is not the role of the board to provide financial advice nor to execute operational tasks, and corporate governance requires both management and board involvement.
The theory behind the role of the board of directors is that they help ensure that the firm is run in the interests of the true owners-the shareholders. In practice, however, top executives often have significant influence in selecting board candidates, which may affect the board's objectivity and effectiveness. Additionally, the company's financial records are typically reviewed by an auditing firm, which also plays a role in corporate governance, alongside outside investors such as mutual funds or pension funds with substantial stakes in the company.