The Blog post contains the following IELTS Reading Questions:
- IELTS Reading Sentence completion
- IELTS Reading Matching headings
- IELTS Reading Yes/No/Not given
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IELTS Reading Passage: UK companies need more effective boards of directors
UK companies need more effective boards of directors
A. Companies in Britain and elsewhere should think about making significant changes to the director roles they currently have in place after a number of serious governance failures (that is, how they are managed at the highest level). It is evident that being a board director today is a difficult job. In the wake of the 2008 financial crisis, which caused a more severe and prolonged economic downturn than anyone had anticipated, blame has been placed everywhere due to the widespread search for explanations. All of the following have been implicated: governments, regulators, central banks, and auditors. Reports, inquiries, and commentaries have extensively picked over and examined the role of bank directors and management as well as their widely reported failures.
B. As a result of this scrutiny, pressures on and responsibilities placed on directors have significantly increased, making corporate governance in general a topic of intense public debate. The time needed to fulfil the requirements of a board directorship has significantly increased, which calls into question the viability of the traditional model of corporate governance by independent, non-executive directors who serve part-time. The number of events requiring board input and decisions has significantly increased in many companies, whereas previously a board’s schedule might have included eight to ten meetings annually. Additionally, the amount of reading and planning necessary for each meeting is growing. When agendas are overloaded, it may be necessary to limit the time for productive discussion in order to move the business along.
C. In order to manage the workload, committees are frequently formed to handle board business. While this may be more effective, it can also mean that the board as a whole is less involved in fully addressing some of the most crucial issues. The audit committee meeting frequently lasts longer than the actual main board meeting. Process may replace conversation and compromise genuine teamwork, resulting in the checking of boxes rather than the resolution of problems.
D. The professional board, whose members would work up to three or four days a week with the support of their own dedicated staff and advisers, is an unconventional solution that might work for some very large companies whose businesses are extensive and complex. There are obvious dangers in doing this, so it would be crucial to establish clear guidelines for such a board to prevent it from upsetting management by becoming overly involved in day-to-day operations. This structure wouldn’t work for all businesses due to potential issues with hiring, compensation, and independence. In contrast, more competent and knowledgeable boards would have been especially appropriate for banks where executives had access to information that part-time non-executive directors lacked, preventing the latter from understanding or foreseeing the 2008 crash.
E. One of the main criticisms of boards and their directors is that they place an excessive amount of emphasis on short-term financial metrics rather than longer-term issues of strategy, sustainability, and governance. The market’s structure and regulatory requirements support this behaviour. Directors must “make the numbers” every four months to satisfy the market’s insatiable appetite for more data, which can distort board decision-making. This encourages the trading style of a specific type of investor who trades stocks in and out without having a productive conversation with the company about strategy or performance and is only interested in making a quick buck. The fact that investors’ profiles are changing as a result of capital market globalization and rising use of automated trading systems has worsened this effect. Management teams are largely motivated to achieve financial goals and corporate cultures adapt.
F. Chief executive compensation has developed into a battleground where investors, management, and board members engage in heated arguments, frequently behind closed doors but more frequently in the spotlight of the media. As shareholders exert pressure on boards to fire underperforming CEOs in the pay area, many would argue that this is in the interest of transparency and good governance. When binding votes were implemented, their ability to reject executive compensation policies grew. As Alison Carnwath, chair of Barclays Bank’s remuneration committee, discovered when she was forced to step down after receiving harsh criticism for trying to defend the enormous bonus to be paid to the chief executive, the irony being that she was widely believed to have spoken out against it in the privacy of the committee, the chair of the remuneration committee can be an exposed and lonely role.
G. A discussion about the function and goals of the company as well as a heightened awareness of corporate ethics were sparked by the financial crisis. Academics like Michael Sandel, whose thoughtful and best-selling book What Money Can’t Buy questions the morality of capitalism and the market economy, say that trust in corporations has declined. Corporate goals may need to be realigned as a result of the need for boards of companies in all sectors to broaden their perspectives to take these issues into account. We are in difficult times.
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UK companies need more effective boards of directors Reading Questions
Complete the sentences below.
Choose ONE WORD ONLY from the passage for each answer.
Write your answers in boxes 1-2 on your answer sheet.
1. Non-executive directors had a disadvantage prior to 2008 due to their lack of________.
2. Boards frequently place an excessive amount of weight on_________factors that are only relevant in the short term.
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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.
3 Paragraph A
4 Paragraph B
5 Paragraph C
6 Paragraph D
7 Paragraph E
8 Paragraph F
9 Paragraph G
List of Headings:
i. Disagreements regarding senior managers’ financial arrangements.
ii. The effects of being closely scrutinised on businesses.
iii. Potential need for fundamental transformation in every aspect of business.
iv. For the occurred problems various external bodies are being held responsible.
v. The decreasing number of board members with sufficient experience.
vi. There is a risk that not all directors will participate in resolving major issues.
vii. Boards are not planning far enough ahead.
viii. A proposal to alter the board’s operations.
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Do the following statements agree with the claims of the writer in Reading Passage?
In boxes 10-13 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
10. Since the economic downturn, boards’ actions are being closely scrutinised.
11. Banks have been mismanaged to a greater extent than other businesses.
12. Board meetings typically last as long as is required to fully discuss all issues.
13. It would be guaranteed that board members are fully informed about important issues by using a committee structure.
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Answers for UK companies need more effective boards of directors
1. Answer: Information
2. Answer: Financial
3. Answer: iv
4. Answer: ii
5. Answer: vi
6. Answer: viii
7. Answer: vii
8. Answer: i
9. Answer: iii
10. Answer: Yes
11. Answer: Not given
12. Answer: No
13. Answer: No
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