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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

Bharat Components Ltd is a listed company with widely dispersed shareholding. No single shareholder holds more than 3%, and the board is led by a CEO hired from the market who holds negligible shares. Which description best fits this company?

It is a professionally managed company. Shareholding is widely dispersed and the CEO is a hired professional with negligible shares, so ownership is separated from control and managers run the business without a controlling promoter block.

  1. AA professionally managed company where ownership is separated from controlCorrect
  2. BA promoter-driven company where promoters exercise control through shareholding
  3. CA closely held family company with no separation of ownership and management
  4. DA government company controlled by the Central Government

Explanation

Dispersed shareholding and a hired CEO with negligible holding indicate that owners (shareholders) and managers are different groups. This separation of ownership from control is the defining feature of a professionally managed company. The promoter-driven option is wrong because no shareholder holds a controlling stake.

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