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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards

Tara Foods Ltd, a listed company, has a vigil mechanism but employees fear retaliation and cannot reach anyone senior if the matter involves management. The board wants the mechanism to support effective governance. Which feature does section 177 require?

The mechanism must have adequate safeguards against victimisation and provide direct access to the Audit Committee chairperson in appropriate or exceptional cases. Section 177 also covers both directors and employees and requires disclosure on the website and in the Board's report, which strengthens board oversight.

  1. ASafeguards against victimisation and direct access to the Audit Committee chairperson in appropriate or exceptional casesCorrect
  2. BReporting only to the managing director to preserve confidentiality
  3. CA prohibition on disclosing the mechanism on the company website
  4. DCoverage of employees only, excluding directors

Explanation

Section 177(9) and (10) require a vigil mechanism for directors and employees, with adequate safeguards against victimisation and direct access to the Audit Committee chairperson in appropriate or exceptional cases. Details must be disclosed on the website, if any, and in the Board's report. Reporting only to the managing director would defeat the purpose, and directors are covered.

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