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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

Kalyani Auto Ltd, a promoter-driven listed company, has the promoter's son as Managing Director. The board wants to strengthen governance without removing promoter control. Which step best addresses the key weakness of promoter-driven governance?

Having a meaningful number of genuinely independent directors along with a robust nomination and succession process best addresses the weakness. It introduces objective oversight and merit-based leadership continuity without removing promoter control, countering concentration of power and family-based appointments.

  1. AMerging the roles of Chairman and MD in the same person
  2. BEnsuring a meaningful number of genuinely independent directors and a robust nomination and succession processCorrect
  3. CReducing disclosures about related-party transactions
  4. DAppointing only relatives of promoters as committee members

Explanation

The main weakness is concentrated control and weak independent oversight; genuinely independent directors and structured succession introduce checks and merit-based continuity. Combining Chairman and MD roles concentrates power, and reducing disclosure or using relatives as committee members weakens accountability.

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