Many entrepreneurs try to control the composition of their boards of directors, but more experienced entrepreneurs tend to share control, inviting participation from institutional investors and outside directors.
Which option best summarizes the idea that might be guiding experienced entrepreneurs' behaviour?

Question

Read the following statements and answer the question that follows.
A. Back then, they were owned by companies and installed on their premises.
B. Rooms and servers began to replace computer mainframes in the 1990’s.
C. These were supplemented by processors from Intel, which by the mid-2000s translated its dominance of PC semiconductors into a near monopoly of the server market.
D. They mostly ran on chips made by IBM and HP, the big tech of the day.
E. Things started to change once again around a decade ago, when Amazon began selling some of its spare server capacity.
Which of the following combinations is the MOST logically ordered?

Answer 1

Look at this from the entrepreneur's side: why would someone who has already built a company willingly hand over some control? The passage tells us they do, by bringing in institutional investors and outside directors, so the right answer must explain a real benefit of doing that.

Option A: Fits well. Bringing in experienced people to check on the business (monitoring) and to talk through decisions with (a sounding board) is a genuine reason to want outside directors on the board.
Option B: If investors are only there to agree with the entrepreneur, there is no real sharing of control, just a rubber stamp. This does not match the idea of inviting outside participation.
Option C: Asking board members to approve higher pay for themselves is a conflict of interest and unrelated to why boards are diversified.
Option D: Running daily operations is the job of company management, not the board; outside directors are not normally expected to do this.

The only option that gives a credible, board-appropriate reason for sharing control is option A: gaining performance monitoring and a sounding board for decisions.

Let's summarize:

Experienced entrepreneurs add outside directors mainly for oversight and advice.
Option A is the one option that describes this correctly.
Options B, C, and D either contradict independent oversight or bring in unrelated motives.

The answer is option A.

Answer 2

Look at this from the entrepreneur's side: why would someone who has already built a company willingly hand over some control? The passage tells us they do, by bringing in institutional investors and outside directors, so the right answer must explain a real benefit of doing that.

Option A: Fits well. Bringing in experienced people to check on the business (monitoring) and to talk through decisions with (a sounding board) is a genuine reason to want outside directors on the board.
Option B: If investors are only there to agree with the entrepreneur, there is no real sharing of control, just a rubber stamp. This does not match the idea of inviting outside participation.
Option C: Asking board members to approve higher pay for themselves is a conflict of interest and unrelated to why boards are diversified.
Option D: Running daily operations is the job of company management, not the board; outside directors are not normally expected to do this.

The only option that gives a credible, board-appropriate reason for sharing control is option A: gaining performance monitoring and a sounding board for decisions.

Let's summarize:

Experienced entrepreneurs add outside directors mainly for oversight and advice.
Option A is the one option that describes this correctly.
Options B, C, and D either contradict independent oversight or bring in unrelated motives.

The answer is option A.

Over Number	Run Rate
N-2	8.00
N	7.43
N+2	8.11
N+4	8.45
N+6	8.08

Show Hint

The Correct Option is A

Solution and Explanation

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