Governance risk

Governance is the system of checks that prevent a company's controlling shareholders (typically the promoter family in India) from taking value at the expense of minority shareholders.

When governance is strong, board independence is real, audit committees are active, related-party transactions are at market terms, and disclosures are honest. When governance is weak, none of those checks works - and minority shareholders silently bleed.

The five biggest governance risks

1. Compromised board. "Independent directors" who are friends, ex-employees, or relatives of the promoter. Quorum without real questions. Board meeting attendance below 75%.

2. Captive auditor. The auditor has been with the company for decades, audits multiple group entities, or has limited independence. Look at auditor change history and any qualifications.

3. Related-party transactions at non-market terms. Already covered in detail on the related-party page - usually the largest silent value transfer.