Skip to content

CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Concept of Governance in Professional Managed Company and Promoters Driven Company

Sagar Pharma Ltd's board approves a related party transaction in which the promoter's family firm supplies raw material at a price above market. The audit committee had not reviewed it. Which core principle of corporate governance is most directly compromised?

Fair treatment of all shareholders, with transparency and accountability, is compromised. An above-market related party deal favouring the promoter's family firm and skipping audit committee review shifts value away from minority shareholders and weakens oversight. Profit, diversification and audit fees are not governance principles.

  1. AFair treatment of all shareholders, along with transparency and accountabilityCorrect
  2. BMaximisation of short-term profit
  3. CDiversification of the product range
  4. DReduction of the statutory audit fee

Explanation

An above-market related party deal benefiting the promoter at the company's expense, bypassing the audit committee review, undermines fairness to all shareholders, transparency and board accountability. The other options are business matters, not governance principles.

Did you get it right without looking?

One question tells you little. A timed set on Concept of Governance in Professional Managed Company and Promoters Driven Company shows your real accuracy, how long you take and where you lose marks.

Practise Concept of Governance in Professional Managed Company and Promoters Driven CompanyFree diagnostic mock

More Concept of Governance in Professional Managed Company and Promoters Driven Company questions