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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

Iyer Industries Ltd is promoter-driven, and the promoter's son is appointed as a whole-time director while the founder continues as Chairman. To strengthen governance against concentrated control, which step best addresses the concern about succession and board independence?

The best step is a transparent nomination and remuneration process in which independent directors evaluate the appointment, supported by a documented succession plan. This tempers family influence, ensures merit-based selection and keeps the board objective, whereas removing independents or delaying disclosure worsens governance.

  1. ARemove all independent directors to speed decisions
  2. BEstablish a transparent nomination and remuneration process with independent directors evaluating the appointment and a documented succession planCorrect
  3. CLet the promoter family alone decide the appointment without committee review
  4. DDelay disclosure of the appointment until the next annual report

Explanation

A nomination and remuneration committee with independent directors assessing suitability, along with a formal succession plan, reduces the risk of nepotism and keeps the board objective. Removing independents or bypassing the committee increases the risk. Delayed disclosure breaches transparency norms.

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