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‡ ³Corporate Governance is concerned with holding the
balance between economic and social goals and
between individual and communal goals. The
governance framework is there to encourage the efficient
use of resources and equally to require accountability for
the stewardship of those resources. The aim is to align
as nearly as possible the interest of individuals,
corporations and society.

‡ The foundation of any structure of corporate governance


is disclosure. Openness is the basis of public confidence
in the corporate system and funds will flow to centers of
economic activity that inspire trust.´
-Sir Adrian Cadbury.
‡ ³Shareholders role in governance is to appoint
the directors and the auditors. Poor corporate
governance has ruined companies, sent
directors to jail, and destroyed a global
accounting firm and threatened economies and
governments.´
‡ e.g., Taj Company
‡ Cooperatives scandal
‡ Mohib Textile Mills Ltd
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‡ Wider use of INDEPENDENT DIRECTOR

‡ Introduction of AUDIT COMMITTEE

‡ Separation between CHAIRMAN and CEO

‡ Adherence to detailed code of BEST


PRACTICES.
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‡ Protect rights of SHAREHOLDERS

‡ Recognize the rights of STAKEHOLDERS

‡ Timely and accurate DISCLOSURE

‡ Responsibility of the BOARD


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The code provides a framework for efficient


and transparent running of listed
companies to enhance shareholder value.
The regulators need to be vigilant to
enforce the code in its true spirit.
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‡ Non Executive Director


‡ Qualification of a Director
‡ Tenure of Director
‡ Governance Policies of the Directors
‡ Information to Directors
‡ Orientation Courses
‡ CFO/ Co. Sec
‡ Corporate and Financial Reporting
‡ Audit Committees
BOARD OF DIRECTORS

‡ Encourage effective representation of independent non-executive


directors, including those representing minority interests.

‡ a. minority shareholders as a class are facilitated to contest.


(through the use of proxy)

‡ b. At least one independent director representing institutional


equity interest of financial institution. (a director nominated as a
director under section 182 and 183 not be taken as independent
directors)

‡ c. Executive directors not more than75% of the elected directors.


 
    

‡ The directors to give consent that they are aware of their duties
and powers
QUALIFICATION AND ELIGIBILITY TO
ACT AS A DIRECTOR
‡ Director, not to be a director in more than ten other listed
companies.

‡ ii. Director needs:


a. to be registered as a National Tax Payer ; and

b. Not to a defaulter as convicted by court of a banking


company, development financial institution, or a non-banking
financial institution or as a member by the Stock Exchange.

‡ iii Not to be director if spouse is engaged in the business of


Stock Brokerage (voluntary)

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‡ iv. Three years, vacancy to be filled in 30 days
RESPONSIBILITIES, POWERS AND
FUNCTIONS OF BOARD OF DIRECTORS

Every listed company shall ensure

a. Statement of Ethics and Business practices is prepared

b. Board of directors to adopt vision statement, and overall


corporate strategy; formulate significant policies (for the
purpose of risk management, marketing, etc.)

c. Establish internal control

d. Documentation by resolutions passed in meetings on all


serious issues. i.e. investment and dis-investment of funds,
loans, write-off of bad debts etc.
RESPONSIBILITIES, POWERS AND
FUNCTIONS OF BOARD OF DIRECTORS
e. Appointment etc. of Chief Executive to be determined by the
board.

f. Investment policy of modaraba institution to be approved and


reported in annual report.

‡ Significant issues to be placed for decision by the board of


directors (i.e. annual business plan, budgets, joint ventures
etc.)

‡ Orientation courses for directors.


QUALIFICATION OF CFO AND CS

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a. professional accountant ; or
b. graduate with 5 yrs experience in handling financial
affairs in a listed company or a bank.

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a. professional accountant ; or
b. member of a recognized body of corporate/chartered
secretaries or
c. lawyer ;
d. a graduate with 5 yrs experience of handling corporate
affairs.
FINANCIAL REPORTING

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Directors report to shareholders. Give complete and candid
position of the company.

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i. Financial statements to be duly endorsed by CEO and CFO
ii. Secretarial compliance certificate required with annual
returns

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AUDITORS

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‡ External Auditors and their spouse restricted to purchase shares


in the company they are auditing.

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i. not less than three member committee preferably from non-


executive directors.

ii. Committee to meet at least once every quarter.

iii. CFO to attend meetings of Audit committee.


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‡ INTERNAL DISCIPLINE
‡ Restricted to listed companies
‡ Regulation under section 34(4) of the
Securities Exchange Ordinance, 1969 -
structurally flawed
‡ Penalty- section 9(4) of the S.E. Ord, 1969
‡ Soft law
‡ Voluntary in nature
‡ Based on self regulation
‡ È  
‡ Incentive for better performance
‡ higher profits for the shareholders
‡ attracts more investment
‡ Shareholders (minority rights under the
Companies Ordinance, 1984 - sections
263, 265, 290, 305)
‡ Institutional investors- eg.  
  


      



  
EXTERNAL DISCIPLINE

‡ È  
‡ Stakeholders (financial and community)
‡ Regulators (SECP Act, 1997/ CO Ord, 1984)
‡ Institutional shareholders
‡ environmental law
‡ labour and taxation laws.
‡ Stock exchanges
‡ International credit rating firms
‡ Media
‡ NGOs
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‡ Shareholders rights

‡ Stakeholders rights (financial institutions, employees,


Community)

‡ Corporate Social Responsibility (CSR)

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‡ Public sector corporations ± new
legislations provide better governance
structure.
‡ Other corporate vehicles: cooperative
societies ?
‡ Other vehicles of business: Partnerships ±
no mention ± doing big business
‡