All of the following indicate Zero’s board’s lack of independence except:

A. personal relationships.

B. service of the outside counsel as a board member.

C. lack of interlocking directorships.

Jane Smith, CFA, has recently joined Zero Asset Management, Inc. (Zero) as a board member. Since Smith is also outside council for Zero, she is already very familiar with Zero’s operations and expects to begin contributing good ideas right away. Zero is a publicly traded investment management firm that historically focused on mutual fund management.
Although there is current market opportunity to add a new type of mutual fund, the board recently decided against adding the fund. Instead, the board decided to expand its business to include a hedge fund operation within the existing corporation.
Bill Week, CEO of Zero, has publicly stated that he is willing to bet the company’s future on hedge fund management. Week is the founder of Zero, as well as chairman of the board, and maintains a controlling interest in the company.
Like the rest of Zero, the firm’s new hedge fund is quantitatively driven and index based.
The fund has been set up in a separate office with new systems so that the analysts and managers can create a unique hedge fund culture. Trading and execution are the only operations that remain with Zero. The fund is run by one of Zero’s most successful portfolio managers.
Smith learns that although none of the board members sit on other companies’ boards, most have at one point or another worked at Zero and so they are very familiar with Zero’s operations. A board member has attempted to make the health insurance and retirement concerns of the board members an agenda item, without success to date. Smith eagerly anticipates the next board meeting as they are always in a luxurious setting.
At the board meeting, Smith asks a number of questions about Zero’s corporate governance system. The board becomes concerned by Smith’s questions and decides to hire an independent consultant to review their corporate governance responsibilities. The consultant starts his analysis by stating that a corporate governance system relies upon checks and balances among managers, directors, and investors. Smith asks if Zero has the proper systems in place. The consultant says that he has looked at conflicts of interest and has one more area to review in order to verify that the board is meeting its major objectives. Concerned about the company’s stock price, Smith asks the consultant what work he has done concerning Zero’s corporate disclosures for investment professionals. The consultant indicates that he has reviewed Zero’s regulatory filings for clear and complete information, as well as the company’s policies regarding related party transactions.