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NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

In corporate governance analysis, which board feature most directly strengthens oversight of management on behalf of minority shareholders?

Independent directors, particularly on the audit committee, most directly strengthen oversight because they are free of material ties to promoters or management and can objectively challenge decisions on behalf of minority shareholders. Boards dominated by relatives or a CEO leading the audit committee reduce independence.

  1. AHaving the promoter's relatives as most of the board members
  2. BPresence of independent directors, including on the audit committeeCorrect
  3. CHaving the CEO also serve as chairperson of the audit committee
  4. DRotating the statutory auditor every month

Explanation

Independent directors have no material relationship with the company or promoters, so they can objectively challenge management and protect minority interests. Related-party dominated boards and a CEO chairing the audit committee weaken independence. Monthly auditor rotation is not a governance practice.

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