Which of the following is NOT an element of the corporate governance system?

• A. Board of directors
• B. Internal controls
• C. Executive compensation policies
• D. Monitoring by top management

Answer: (D)

Corporate governance relies on structures and processes that ensure accountability and direction, with the board of directors providing oversight and independence. Internal controls are the mechanisms that safeguard assets, ensure reliable financial reporting, and promote compliance. Executive compensation policies tie management incentives to performance and risk outcomes, reinforcing governance by aligning interests.

Monitoring by top management, on the other hand, is an activity conducted within the management team and lacks the independent, external check that governance requires. True governance depends on independent oversight—primarily by the board and independent auditors—to hold management accountable. Because top management monitoring is not an independent governance mechanism, it is not considered a formal element of the corporate governance system.