pakistan institute of corporate governance

8/2/2019 Pakistan Institute of Corporate Governance

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Pakistan Institute of Corporate Governance (PICG) with a view to achieving its broad-basedobjective of increasing awareness of good governance practices seeks to engage companies,corporations, institutions and individuals by inviting them to join its membership. It has accordinglyestablished a coherent membership regime and the Rules for Membership.

There are different categories of membership being offered to suit broad spectrum of companies and

individuals. The members can enjoy the benefits of access to best practices in good governance aswell as price privileges on all directors training and other events, roundtables, seminars andinternational conferences.

Additionally PICG offers networking opportunities at the highest corporate level and platform to helpinfluence and improve corporate governance standards in Pakistan.

The two broad categories include:Corporate membershipIndividual membership

te of Business Administration,

en/Kiyani Shaheed Road, KarachiFounder Member

Institute of Chartered Accountants of PakistanChartered Accountants Avenue, Clifton, Karachi

FounderMember

Institute of Cost and Management Accountants of PakistanST-18/C, Block-6, Gulshan-e-Iqbal, Karachi

FounderMember

Insurance Association of Pakistan1713 - 1715, 17th Floor Saima Trade Tower - A I.I.Chundrigar Road, Karachi

FounderMember

Investment Banks Association of Pakistan606, 6th Floor, Uni Towers, I.I. Chundrigar Road, Karachi-74000

FounderMember

Islamabad Stock Exchange (Guarantee ) Limited

Stock Exchange Building, 101-E, Fazal-ul-Haq Road,Islamabad

FounderMember

Karachi Stock Exchange (Guarantee) LimitedStock Exchange Building, Stock Exchange Road, Karachi

FounderMember

Lahore Stock Exchange (Guarantee) Limited19, Khayaban-e-Aiwan-e-Iqbal, Lahore.

FounderMember

Lahore University of Management SciencesOpposite Sector U, DHA, Lahore.

FounderMember

Leasing Association of Pakistan602, 6th Floor, Progressive Centre, 30-A, Block 6, PECHS,Shahrah-e-Faisal, Karachi-75400.

On Corporate Governance


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Mr. Hussain Dawood is Chairman of Dawood Hercules Chemicals Ltd., Engro Corporation Ltd,Karachi Education Initiative/Karachi School of Business and Leadership and the Pakistan PovertyAlleviation Fund, which is, globally, the largest World Bank financed social fund.

profile

Mr. Hussain Dawood spoke about Corporate Governance in Pakistan to the Knowledge Center staffin an exclusive interview.

The Pakistan Institute of Corporate Governance (PICG) is a not-for-profit company, limited byguarantee and without share capital, setup under section 42 of the Companies Ordinance, 1984.The Institute is charged with promoting good corporate governance practices in Pakistan.

Good corporate governance is an essential prerequisite for the integrity and credibility of financialinstitutions, stock exchanges, incorporated companies and the whole market economy. It buildsgreater confidence and trust by ensuring transparency, fairness and accountability with respect toshareholders and other stakeholders. PICG is involved in training and education, creatingawareness, undertaking research, publishing guidelines and other resource material. It provides aforum for discussion on corporate governance.

We are a public-private partnership. In addition to the Securities and Exchange Commission ofPakistan (SECP), our founding shareholders include the State Bank of Pakistan (SBP), the threestock exchanges in Pakistan, banking and insurance associations, apex bodies of the corporatebusinesses and Non-Bank Financial Institutions (NBFIs) as well as the leading business educationalinstitutions.

Founder Members of PICG:

01 Institute of Business Administration, Karachi

02 Institute of Chartered Accountants of Pakistan

03 Institute of Chartered Secretaries & Managers

04 Institute of Cost & Management Accountants of Pakistan 05 Insurance Association of Pakistan

06 Investment Banks Association of Pakistan

07 Islamabad Stock Exchange (Guarantee) Limited

08 Karachi Stock Exchange (Guarantee) Limited

09 Lahore Stock Exchange (Guarantee) Limited

10 Lahore University of Management Sciences


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11 Leasing Association of Pakistan

12 Modaraba Association of Pakistan

13 Mutual Funds Association of Pakistan

14 Overseas Investors Chamber of Commerce and Industry

15 Pakistan Banks Association 16 Securities & Exchange Commission of Pakistan

17 State Bank of Pakistan

18 The Federation of Pakistan Chambers of Commerce & Industry

19 The Institute of Corporate Secretaries of Pakistan

services

The PICG acts as a platform to provide its members as well as non-members, value-added servicesand regular activities that in addition to other benefits also offer networking opportunities.

Corporate Governance Leadership Skills

Board Development Series (BDS) - Director Education

Directors Orientation Workshop (DOW)

Corporate Governance Assessment & Advisory Services

Directors' Placement Service for Accredited Directors

Research Services

Vision mission and objective

The PICG envisions becoming the leading provider of knowledge about best practices in corporate

governance to all key stakeholders involved in or affected by corporate governance with the

objective of bringing about national economic and social transformations by improving the quality of

corporate governance in Pakistan. To achieve this, the objectives of the Institute are:

To represent, express and promote and give effect the findings and opinions of the members of the

Institute on events and issues relating to the proper management of business affairs of corporations

in Pakistan with the view to enhance long-term values of these incorporated bodies to shareholders

while considering the financial viability of business.

To promote awareness of corporate governance and encourage professional interaction

among members.

To encourage and provide a conducive environment for stakeholders to exchange opinions,

knowledge and information on corporate governance issues.
http://picg.org.pk/cglsp.phphttp://picg.org.pk/cglsp.phphttp://picg.org.pk/bds.phphttp://picg.org.pk/bds.phphttp://picg.org.pk/dow.phphttp://picg.org.pk/dow.phphttp://picg.org.pk/advisorys.phphttp://picg.org.pk/advisorys.phphttp://picg.org.pk/bss.phphttp://picg.org.pk/bss.phphttp://picg.org.pk/research.phphttp://picg.org.pk/research.phphttp://picg.org.pk/research.phphttp://picg.org.pk/bss.phphttp://picg.org.pk/advisorys.phphttp://picg.org.pk/dow.phphttp://picg.org.pk/bds.phphttp://picg.org.pk/cglsp.php


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To collect and circulate corporate information and data pertaining to corporate governance

and provide research materials to members.

To enhance accountability of management to stakeholders including employees, customers,

suppliers of the corporation and the environment in which the corporation does its business.

To strengthen compliance and conformance by corporations to laws and regulations and to

enhance self- regulating practices.

To print and publish newsletters, periodicals, books and leaflets and disseminate the

publications to the members.

To organise conferences, seminars, lectures and exhibitions either independently or

otherwise for the members or public at large and to establish and maintain a library, research

centre, reviews, periodicals, newspapers, investment updates, companies' statistics anddata.

To strengthen performances of the Institute and enhance the global competitiveness of

domestic corporations.

Corporate Governance Practices In Pakistan

Monday, 24 August 2009 09:16

Economic Updates -Exclusive Articles

Corporate Governance is commonly referred to as a system by which organizations are

directed and controlled. It is also a process through which company s objectives are

established, achieved, and monitored. It is concerned with the relationships and

responsibilities between the board, management, and other relevant stakeholders within a

legal and regulatory framework. The standard definition of corporate governance by

economists and legal scholars refers to the defense of shareholders interests (Jean Tirole,

2001). There is a growing interest in the concept of corporate governance in Pakistan mainly

because corporate governance is a key to develop market economy and civil society in

transitioning economics. Corporate governance is becoming increasingly important to

investors, because well-governed companies having lower risks and fewer unexpected eventscan protect shareholders rights and provide better assurance that management will act in the

best interest of the company and of all its shareholders. Since its inception in 1999, the SECP

has focused its regulatory measures on fostering investor s confidence to encourage good

corporate governance to ensure transparency and accountability in the corporate sector and

safeguard the interests of all stakeholders, especially those of minority shareholders. In March

2002, the first code of corporate governance for Pakistan was finalized and issued by Security
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and Exchange Commission of Pakistan (SECP). It was subsequently incorporated in the listing

regulations of the three stock exchanges and is now applicable to all public listed companies.

The main objectives of code of corporate governance are to:

(a) Stimulate the performance of companies;

(b) Limit insider s abuse of power;

(c) Monitor manager behavior to ensure corporate accountability and protection of interest of

investors and society;

(d) Propose restructuring of the board of directors to introduce board based representation by

minority shareholders and by executive and non-executive directors;

(e) emphasize openness and transparency in corporate affairs and the decision making

process;

(f) Require directors to discharge their fiduciary responsibilities in the larger interest of all

stakeholders in a transparent, informed, diligent, and timely manner.

To achieve the goal of effective institutional framework, that would help corporate

management, increase shareholder value while protecting the interests of other stakeholders,

SECP in partnership with the United Nations Development Program (UNDP), and economic

affairs division of the Government of Pakistan launched the SEC-UNDP project on corporate

governance in August, 2002. UNDP has provided technical and financial assistance to theSEC for developing and implementing good corporate governance practices and establishing a

sound regulatory framework for the corporate sector in the country. The work involves

implementation of the code of corporate governance issued by the SEC in March 2002,

creating stakeholder awareness, capacity building and networking with other emerging

markets and a corporate governance cell has also been established at the SEC which acts as

a resource centre and carries out research and awareness campaigns on various issues

related to corporate governance. In 2004, the SECP took the initiative to establish the Pakistan

Institute of Corporate Governance in Public Private Partnership. The establishment of the

institute fulfils the need for an institutional arrangement where all major stakeholders jointly

study governance practices in their respective roles, where necessary. Moreover, in 2006

International Finance Corporation (the private sector arm of the World Bank Group) launched

the Pakistan corporate governance project (PCGP) to improve corporate governance practices

in Pakistan and ACCA Pakistan (A part of Association of Chartered Certified Accountants)

strongly supported the adoption of code of corporate governance in Pakistan and has been

actively involved in arranging seminars and workshops to create awareness of best practices

of corporate governance in Pakistan.


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A survey of corporate governance practices in Pakistan 2007 was compiled and drafted by

ACCA Pakistan with the association of International Finance Corporation (IFC), SECP, and

PICG from listed and large (paid-up capital 500 million and above) listed companies and

financial sector institutions of Pakistan. The survey aimed at to make stakeholders understand

the extent to which financial institutions and companies in Pakistan follow good corporate

governance practices. Being a front line regulator, SECP initiated an action against

companies, which do not comply with the requirements of Listing Regulations, particularly

Regulation No. 32, which includes a) failure to declare dividend or bonus for the last five years;

b) failure to hold its annual general meeting for a continuous period of three years; c) has gone

into liquidation either voluntarily or under court order; d) failed to pay the annual listing fees for

2 years; and e) failed to join CDS after its securities have been declared eligible security by the

CDC. The Exchange after adopting the due process has placed a number of companies on

the Defaulters Counter , whose names are quoted separately through the Daily Quotation of

the Exchange along with nature of default(s) mentioned against each company. The purposeof placing the companies on separate counter Defaulters Counter is to create awareness

amongst the shareholders / investors that the company is in default(s) of the Listing

Regulations. In order to encourage good corporate governance and appreciate outstanding

performance of the companies, the Exchange has a practice to give away the awards to top

companies each year. The criteria for selection of top companies are regularly reviewed to

ensure that only such companies are rewarded that not only pay good returns to their

shareholders but also comply with the Listing Regulations, particularly the code of corporate

governance.

The Securities & Exchange Commission of Pakistan Act 1997 (SECP Act) established the

SECP as the regulator of the capital markets and the controller of corporate entities. The code

of corporate governance was issued in December 2002. The central bank of Pakistan is the

regulator and was formed by the State Bank of Pakistan Act 1956. Compliance of the code of

corporate governance has been made mandatory for Non-Banking Financial Institutions

(NBFI) and Development Financial Institutions (DFI s). PICG was formed by 19 stakeholders in

December 2004 as a Public Unlisted Company Limited by Guarantee to promote Corporate

Governance in Pakistan. Institute of Chartered Accountant of Pakistan (ICAP) was founded in

1961 under the Chartered Accountants Ordinance 1961 to regulate the Auditing Profession.

KSE has 75% of the trading volume of Pakistan. Stock exchanges are responsible to oversee

the listing requirements including the compliance of the code of corporate governance since

2003. IFC S CORPORATE GOVERNANCE PROJECT IN PAKISTAN (PCGP) IFC s Private

Enterprise Partnership for Middle East and North Africa (PEP-MENA) support the PCGP and

aim to promote and support the corporate governance reforms in Pakistan. The World Bank in

corporate governance assessment for Pakistan 2005 concluded that despite initial resistance

to the code from issuers and market participants, compliance was improving. Multinational


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companies, leading banks, and notable family controlled corporations were creating more

transparent and modern corporate governance structures. Companies are arranging

orientation seminars for their boards.There is also a need that regulatory bodies should keep

check on the companies. SECP should ensure effective implementation of corporate

governance practices and stock exchanges must implement listing rules relating to corporate

governance.

4 Chi. J. Int'l L. 141 (2003)

Cross-Listing and Corporate Governance: Bonding or Avoiding; Licht, Amir N.

article


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The Advantages of Corporate

Governance

1.

o Corporate governance improves access to capital.

Corporate governance refers to the ability of companies to manage

themselves effectively. Corporate governance is the collective system of

leadership used by executives and all major leaders in the company,

including important shareholders. It dictates how decisions are made and

who holds the power in the company. A strong corporate governance

system will be aware of the company's current progress and will have the

ability to make many changes in corporate structure as needed.

2. Enhanced Performance

o Corporate governance helps a company improve overall performance.Without corporate governance, a company tends to be weak and sluggish.Only a group of leaders working together can successfully foresee market

changes and prepare the company to meet them ahead of time, while alsomanaging the company in the here and now. It is too much work and toomuch responsibility for one person, or for only a loose body of leaders.

Access to Capital

o The better corporate governance a company has, the more easily it canaccess outside capital that the business can use to fund its projects. Sincecorporate governance includes major shareholders, it connects investorswith the business itself, and these investors use their resources and

contacts to support the company monetarily. Due to these closeconnections, capital also tends to be less expensive to finance with astrong corporate governance system.

Better Standards


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o Corporate governance makes many decisions about business operations,but one of the most important decisions involves corporate standards.Standards affect the quality of products and the goals that the businesshas in technology, customer service, and marketing. The combined effortsof the business leaders allows the company to accurately judge

competition and create standards that add value to the business's productsor services.

Better Talent Utilization

o Without a corporate governance, business leaders tend to flounder. Thelack of clear organizational structure at the top of the company makes itdifficult for people to move up the ladder or to aim for a particular position.With a strong corporate governance structure, however, people can findpositions that utilize their talents more effectively, and the board of

directors and top leaders of the business are always looking to add moretalented people to their numbers.

Corporate Governancewww.gcgf.org

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References

IFC: Corporate Governance FCGI: What is Corporate Governance

Photo Credit billion dollar corporation image by Augustus Saxton fromFotolia.com;
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Three Types of Corporate

Governance Mechanisms

Osmond Vitez started writing new media content in 2009. His articles have appeared on

websites such as Think+Up and Houston's Chron.com. He is an adjunct accounting instructor

and former corporate accountant, with experience ranging from small business to a Fortune 500

company. Vitez has two accounting degrees: a Bachelor of Science from Pensacola Christian

College and a Master of Science from Liberty University. By Osmond Vitez, eHow Contributor

updated September 16, 2010

Print this article

1.

o Corporate governance is the policies and procedures a companyimplements to control and protect the interests of internal and externalbusiness stakeholders. It often represents the framework of policies andguidelines for each individual in the business. Larger organizations oftenuse corporate governance mechanisms to manage their businessesbecause of their size and complexity. Publicly held corporations are alsoprimary users of corporate governance mechanisms.

Board of Directors

o A board of directors is a corporate governance mechanism that protectsthe interests of a company's shareholders. The shareholders use the boardto bridge the gap between them and company owners, directors andmanagers. The board is often responsible for reviewing companymanagement and removing individuals who don't improve the company'soverall financial performance. Shareholders often elect individual boardmembers at the corporation's annual shareholder meeting or conference.Large private organizations may use a board of directors, but theirinfluence in the absence of shareholders may diminish.
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Audits

o Audits are an independent review of a company's business and financialoperations. These corporate governance mechanisms ensure thatbusinesses or organizations follow national accounting standards,

regulations or other external guidelines. Shareholders, investors, banksand the general public rely on this information to provide an objectiveassessment of an organization. Audits can also improve an organization'sstanding in the business environment. Other companies may be morewilling to work with a company that has a strong track record of operations.

Balance of Power

o Balancing power in an organization ensures that no one individual has theability to overextend resources. Segregating duties between board

members, directors, managers and other individuals ensures that eachindividual's responsibility is well within reason for the organization.Corporate governance can also separate the number of functions that onedivision or department completes within an organization. Creating well-defined roles also keep the organization flexible, ensuring that operationalchanges or new hires can be made without interrupting current operations.

pakistan institute of corporate governance

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