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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Conceptual Framework of Corporate Governance

Veda Textiles Ltd's promoter-chairman approved large related-party loans to his family firm without informing the board or minority shareholders, and the annual report did not mention them. Which corporate governance principle is most directly breached?

The breach is of transparency and disclosure together with fair treatment of minority shareholders. Hiding related-party loans from the board and the annual report denies stakeholders material information and lets the promoter benefit at the minority's expense, which is a classic governance failure.

  1. ATransparency and disclosure, along with fair treatment of minority shareholdersCorrect
  2. BSeparation of the roles of Chairman and Managing Director
  3. CRotation of statutory auditors
  4. DPayment of dividend out of profits only

Explanation

Concealing related-party dealings from the board and shareholders defeats disclosure and equitable treatment of minority holders. The other options concern different matters: role separation, auditor tenure and dividend source are not the core failure on these facts.

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