Professional Documents
Culture Documents
Shareholders 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
Scope of Code of Corporate Governance, 2002 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.
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. (Voluntary provision) The directors to give consent that they are aware of their duties and powers
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) TENURE OF OFFICE OF DIRECTOR iv. Three years, vacancy to be filled in 30 days
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.
FINANCIAL REPORTING
CORPORATE AND FINANCIAL REPORTING FRAMEWORK Directors report to shareholders. Give complete and candid position of the company.
i. ii.
RESPONSIBILITY FOR FINANCIAL REPORTING Financial statements to be duly endorsed by CEO and CFO Secretarial compliance certificate required with annual returns
AUDITORS
AUDITORS NOT TO HOLD SHARES External Auditors and their spouse restricted to purchase shares in the company they are auditing.
AUDIT COMMITTEE i. not less than three member committee preferably from nonexecutive directors.
ii. Committee to meet at least once every quarter. iii. CFO to attend meetings of Audit committee.
Based on self regulation Drivers: 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. Mutual funds, financial institutions, insurance companies (Calpers, etc)
EXTERNAL DISCIPLINE
Drivers 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
Areas to consider:
Shareholders rights Stakeholders rights (financial institutions, employees, Community)