According to the passage, which of the following should be the practice/practices in good corporate governance? 1. Companies should always comply with labor and tax laws of the land. 2. Every company should have a government representative as one of the independent directors on the board to ensure transparency. 3. The manager of a company should never mix personal funds with company funds. Select the correct answer using the codes given below:

Passage

Corporate governance is based on principles such as conducting business with integrity and fairness, being transparent regarding all transactions, making necessary disclosures and decisions, complying with all laws of the land, and accountability and responsibility towards stakeholders. Another highlighted point is the need for those in control to distinguish between personal and corporate funds while managing a company. Fundamentally, a company with good corporate governance inspires confidence in the market. The presence of an active group of independent directors on the board contributes greatly to this confidence. Corporate governance influences share prices positively and attracts foreign institutional investors. Unfortunately, it often gains attention only after large scams are exposed.

QUESTION

CSAT

Easy

Comprehension

Prelims 2013

According to the passage, which of the following should be the practice/practices in good corporate governance?

Companies should always comply with labor and tax laws of the land.
Every company should have a government representative as one of the independent directors on the board to ensure transparency.
The manager of a company should never mix personal funds with company funds.

Select the correct answer using the codes given below:

Select an option to attempt

Explanation

Statement 1 is correct. The passage explicitly states that complying with all laws of the land is a key principle of good corporate governance. This includes labour and tax laws, as they fall under legal

Statement 2 is incorrect. The passage emphasizes the importance of independent directors in ensuring confidence and good governance. However, it does not suggest that a government representative must serve as an independent director. Independence implies being free from external influence, including government control.

Statement 3 is incorrect. The passage emphasizes that those in control must distinguish between personal and corporate funds. While the principle applies broadly to the management of the company, the passage does not specifically single out the manager as the sole party responsible for this practice. Instead, it refers to those in control, which includes directors, stakeholders, and executives collectively.