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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Concept of Governance in Professional Managed Company and Promoters Driven Company

Ananta Tech Ltd has no identifiable promoter, and its board is dominated by executives who also chair the nomination and remuneration discussions informally. A shareholder activist wants to strengthen board oversight of management. Which step best addresses the weakness in this professionally managed company?

The best step is to have a properly constituted nomination and remuneration committee led by independent directors. In a professionally managed company no promoter checks management, so independent directors must oversee appointments and pay, rather than executives deciding for themselves.

  1. AEnsure an independent-director-led nomination and remuneration committee with proper compositionCorrect
  2. BAppoint the CEO's relatives as additional directors
  3. CReduce the number of board meetings to cut cost
  4. DLet executives decide their own remuneration for speed

Explanation

Where management is not checked by a controlling owner, independent directors on key committees provide the main oversight over appointments and pay. The other choices weaken independence or oversight.

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