code of corporate governance. (1)

8/8/2019 Code of Corporate Governance. (1)

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ByAsim Gul

Danya Riaz Qureshi

Hafsa SattarKinza Mughal

CODE OF CORPORATEGOVERNANCE


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What is corporate governance?

y Corporate governance is the set of processes,customs, policies, laws, and institutions affectingthe way a corporation is directed, administered or

controlled.y Corporate governance also includes the

relationships among the many stakeholdersinvolved and the goals for which the corporation isgoverned.

y The principal stakeholders are the shareholders,the board of directors, employees, customers,creditors, suppliers, and the community at large.


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Fundamental Objective of CorporateGovernance

y Enhancement of Shareholder Value, keeping inview the Interests of other Stakeholders.

y Provides a framework for efficient and transparentrunning of listed companies to enhanceshareholder value.

y The regulators need to be vigilant to enforce thecode in its true spirit


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Constituents of Corporate Governancey The Board of Directors

Pivotal role

Accountable to stakeholders

Directs management

y The Shareholders & Stakeholders To participate in appointment of directors

To hold the BoD accountable for governance through properdisclosures

y The Management To act on the direction of the BoD

To provide requisite information to the BoD for decisionmaking

To implement and monitor control systems


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Main Provisions

Board Matters

Remuneration Matters

Accountability And Audit

Communication With Shareholders


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Corporate Governance

R = Responsibility

A = Accountability

F = Fairness

T = Transparency

RAFT contributes to

effectiveness!


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y Mapping Responsibility: Responsibility is taken bythose who make decisions.

yAccountability: All who have enjoyed power

through a strong set of rules are answerable tosponsors as well as society.

y Transparency: Through checks and balances like;Auditing Committee, External and Internal auditsystems, which are free of interference by decisionmakers.


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Awareness of Corporate Governance

y Code of Governance issued in 2002. Mandatory forall listed companies

y SBP requires all non-listed commercial banks anddevelopment financial institutions to comply with

the code


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OECD Principles of CorporateGovernance, (1999)

y Protect rights of SHAREHOLDERS

y Recognize the rights of STAKEHOLDERS

y Timely and accurate DISCLOSURE

y Responsibility of the BOARD


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Best Practices

y In multinationals corporate governancebenchmark, internal reporting and disclosurerequirements are set out by the parent company

y This translates to practices that go beyond theregulatory requirement

y Such companies though few are becoming theeffective drivers for corporate governance


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BOARD OF DIRECTORS

y Encourage effective representation of independentnon-executive directors, including thoserepresenting minority interests.

y a. minority shareholders as a class are facilitated tocontest. (through the use of proxy)


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BOARD OF DIRECTORS

y At least one independent director representinginstitutional equity interest of financial institution. (adirector nominated as a director under section 182 and

183 not be taken as independent directors)

y c. Executive directors not more than75% of theelected directors. (Voluntary provision)

y The directors to give consent that they are aware oftheir duties and powers


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BOARD OF DIRECTORS

y Encourage effective representation of independent non-executivedirectors, including those representing minority interests.

y a. minority shareholders as a class are facilitated to contest.(through the use of proxy)

y b. At least one independent director representing institutionalequity interest of financial institution. (a director nominated as adirector under section 182 and 183 not be taken as independentdirectors)

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

(Voluntary provision)

y The directors to give consent that they are aware of their duties andpowers


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QUALIFICATION AND ELIGIBILITY TO ACTAS A DIRECTOR

y Director, not to be a director in more than ten other listed companies.

y 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.

y

iii Not to be director if spouse is engaged in the business of StockBrokerage (voluntary)

TENURE OF OFFICE OF DIRECTOR

y iv. Three years, vacancy to be filled in 30 days


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Pakistan Institute of Corporate Governance

PICG was set up as a non-for-profit company in

Dec 2004, limited byguarantee and withoutshare capital, forfurtherance of Corporate

Governance in Pakistan


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Pakistan Institute of Corporate Governance

y The institute has been setup in public-privatepartnership; shareholders include, in addition to theSecurities and Exchange Commission of Pakistan, theState Bank of Pakistan, the three Stock exchanges, the

Banking Insurance and NBFS Associations,professional bodies of accountants & companysecretaries, academia, and the Corporate Sector

y PICG is involved in training and education, creatingawareness, undertaking research, publishingguidelines and other resource material, and acts aforum for discussion on corporate governance


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QUALIFICATION OF CFO AND CS

CFO has to be:

a. professional accountant ; or

b. graduate with 5 yrs experience in handling financialaffairs in a listed company or a bank.

CS has to be:

a. professional accountant ; or

b. member of a recognized body of corporate/chartered

secretaries or

c. lawyer ; ord. a graduate with 5 yrs experience of handling corporate

affairs.


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FINANCIAL REPORTING

CORPORATE AND FINANCIAL REPORTING

FRAMEWORK

Directors report to shareholders. Give complete and candidposition of the company.

RESPONSIBILITY FOR FINANCIAL REPORTING

i. Financial statements to be duly endorsed by CEO and CFO

ii. Secretarial compliance certificate required with annual

returns

DISCLOSURE OF INTEREST BY A DIRECTOR.


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Major Initiatives

SECP issued the Code of Corporate Governance for listedSECP issued the Code of Corporate Governance for listedcompaniescompanies

Mar 2002

Seminar by SECP on Corporate Governance beyond ListedSeminar by SECP on Corporate Governance beyond ListedCompaniesCompanies-- IslamabadIslamabad May 2004

ACCA Pakistan held a centenary conference on GoodACCA Pakistan held a centenary conference on GoodCorporate Governance for investmentCorporate Governance for investment-- LahoreLahore May 2004

Annual Conference on Regulation, Supervision andAnnual Conference on Regulation, Supervision andPerformance of Corporate GovernancePerformance of Corporate Governance-- LahoreLahore May 2004

AA researchresearch andand educationaleducational initiativeinitiative inin collaborationcollaboration withwithCitigroupCitigroup foundation,foundation, NewNew YorkYork onon FoundationsFoundations ofofCorporateCorporate GovernanceGovernance inin PakistanPakistan byby LUMSLUMS

Jun 2004


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Major Initiatives (Contd.)

Pakistan Institute of Corporate Governance incorporated for thefurtherance of Corporate Governance in Pakistan

Dec 2004

Second Annual Conference sponsored by SECP & LUMS onCorporate Governance in Pakistan

Jun 2005

PICG formally launched in Islamabad Aug 2005

PICG in collaboration with SECP organised an interactive sessionwith the boards of three listed companies Building an effectiveBoard

Nov 2005

SECP and IFC organised a roundtable event to present theReport on Observances of Standards & Codes (ROSC) withrespect to Corporate Governance in Pakistan

Mar 2006

PICG and ACCA Pakistan arranged a two day CorporateGovernance orientation for company Directors- Karachi

Mar 2006


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Major Initiatives (Contd.)

A survey of 40 well known listed companies conducted byMr. Zafar Khan (Chairman, KSE & Director, PICG)

Apr 2006

PICG along with IFC partnered with the SBP conducted thefirst ever local conference on Corporate Governance inBanks- Karachi

May 2006

PICG along with IFC and the Investment Banks Associationof Pakistan (IBAP) partnered a half day conference- Lahore

May 2006

PICG along with IFC and the Leasing Association of Pakistan

(LAP) partnered a half day seminar on the Role of Board ofDirectors- Karachi

Jun 2006

PICG again along with IFC and the Modarba Association ofPakistan (MAP) partnered a half day seminar on the Role ofBoard of Directors- Karachi

Jun 2006

code of corporate governance. (1)

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