Skip to content

CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Governance Influencers

Greenfield Pharma Ltd. plans to expand a plant near a river. A local NGO, Jal Raksha Samiti, gathers village signatures, files a representation with the pollution control authority and submits its views at the public hearing. The board treats the NGO only as a nuisance and ignores its concerns. Which governance view is most consistent with good practice?

Civil society groups such as the NGO are legitimate stakeholders, and the board should engage with them through a structured stakeholder engagement process. Stakeholder status depends on being affected by or affecting the company, not on holding shares, and engagement should be proactive rather than reactive.

  1. ACivil society groups are legitimate stakeholders whose concerns should be engaged through a structured stakeholder engagement processCorrect
  2. BOnly shareholders are stakeholders, so the NGO may be disregarded
  3. CNGOs matter only if they hold shares in the company
  4. DEngagement is needed only after the regulator imposes a penalty

Explanation

Stakeholder-inclusive governance treats communities and NGOs as affected parties whose concerns should be identified, heard and addressed, irrespective of shareholding. Limiting engagement to shareholders reflects the narrow shareholder-only view. Waiting for a penalty is reactive and poor practice.

Did you get it right without looking?

One question tells you little. A timed set on Governance Influencers shows your real accuracy, how long you take and where you lose marks.

Practise Governance InfluencersFree diagnostic mock

More Governance Influencers questions