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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

Vitara Foods Ltd is listed, has widely dispersed shareholding, and no single shareholder holds more than 3%. Day-to-day control rests with a CEO and senior managers who were hired from the market and hold negligible shares. Which description best fits this company?

The company is professionally managed because shareholding is widely dispersed and hired managers with negligible shareholding run it. Ownership is separated from control, unlike promoter-driven or family-held companies where a concentrated shareholder group controls the board and management.

  1. AA professionally managed company where ownership and control are largely separatedCorrect
  2. BA promoter-driven company where promoters control the board
  3. CA closely held family company with ownership and control combined
  4. DA government company controlled by the State

Explanation

Dispersed holdings and hired managers with little equity indicate separation of ownership from control, the hallmark of a professionally managed company. Promoter-driven or family-run models would show concentrated holdings and promoter control of management.

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