"Corporate Finance":Corporate Governance and ESG

B is correct. Stakeholder theory broadens a company’s focus beyond the interests of only its shareholders to those of its customers, suppliers, employees, and others who have an interest in the company. The local community is likely a stakeholder in the company’s development plans. By identifying the community and understanding its interests, the company is engaging in stakeholder management.

A is incorrect. The company has not hired the local community as an agent, and the local community has not hired the company as an agent, so any conflict that arises would not be considered principal–agent conflict.

C is incorrect. Regulations do not necessarily require companies to consult with local communities. In this case, the consultations were taken in addition to meeting all the government/regulatory requirements

C is correct. In good corporate governance practices the audit and remuneration/compensation committees should be composed entirely of independent board members. Other committees such as environmental health and safety may have members from executive management.

A is incorrect. The remuneration/compensation committee should be composed entirely of independent board members.

B is incorrect. The audit committee should be composed entirely of independent board members.