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Corporate Governance (CG) is the relationship between corporate managers,
directors and the providers of equity, people and institutions who save and invest
their capital to earn a return. It is the system by which companies are directed and
managed. It infuences how the objectives of the company are set and achieved, how
risk is monitored and assessed, and how performance is optimized. Without a doubt
good governance is an essential part in corporate success and sustainable economic
The regulation of corporate governance is not new. It has been an important part of
company law for many decades and we should not assume that corporate
governance did not exist before the various codes were drawn up. The importance of
shareholders being able to hold directors to account was a key part of the design of
the joint stock company, and company law has always provided for various aspects
of this accountability relationship. It has traditionally been a condition of the
granting of limited liability, for example, that companies should provide certain
minimum information to their shareholders on an annual or half-yearly basis, in
addition to general meetings and so on.
Furthermore, there have, unfortunately, always been corporate governance ‘scandals’
where company directors have acted illegally or in bad faith towards their
shareholders. Bad corporate governance didn’t start with Enron. It has always been
important for investors to have a high level of assurance that directors will act in the
shareholder’s best interests and this need continues to this day. Part of the debate,
however, is about the best mechanism to underpin the activities of directors in
helping to achieve this. While in most countries, fnancial accounting to shareholders
is underpinned by company law and International Financial Reporting Standards,
some of the other activities of directors are not, and it is in this respect that countries
difer in their approaches.
There are some certain objectives behind preparing this report. These acted as
incentive to make the report.
 Broad Objectives
The broad objective of the study is to understand the state, culture and practice of
corporate governance in diferent sectors in Bangladesh like Public limited
companies - Financial and Non-Financial institutions and State Owned
Enterprises (SOE) in Bangladesh.
 Specifc Objectives
In particular, the study is expected to know the followings:
1.The current practice of corporate governance in terms of liability to its
2.How far the current practice of corporate governance passes the test of
3.Whether corporate governance system in Bangladesh is clear for all
The methodology followed to prepare this report is as follows –
1.Review of the available literature/ secondary material. Various journals and
research papers, conference papers presented in the international conference on
CG in Bangladesh, seminar papers, World Bank reports, diagnostic study reports
and newspaper articles have been surveyed in making this study.
2.Survey of corporate entities.
3.Interviews with relevant stakeholders of respective organizations.
We faced several constraints while preparing this report. Such as:
1.The study was conducted under limited time. Only few weeks were not sufcient
time to visit all the related area of corporate governance.
2.In case of interviewing diferent stakeholders of diferent organizations like
public ltd companies, fnancial institutions and so on; we needed to conduct the
survey among a signifcant number of people for adequate information. Due to
the time constraint and information unavailability we could not proceed further.
3.There is a signifcant diference between theoretical concept and practical feld.
Insufciency of necessary information and data.
4.Information asymmetry, Inaccuracy of data, Misrepresentation of materials.
Corporate governance has been viewed from diferent perspectives using diferent
theoretical lens. For instance, Sir Adrian Cadbury viewed corporate governance from
a control perspective and defnes it “as a system by which companies are directed
and controlled” (Cadbury, 1992, p.15); whilst Shleifer and Vishny (1997, p.737)
emphasized more on the relationship perspectives and considered it as a means to
“deal with the ways in which suppliers of fnance to corporations assure themselves
of getting a return on their investment”. Some other scholars (e.g. Letza et al., 2004a;
Mallin, 2010; Morck et al., 2005; Solomon, 2007) rather preferred to view corporate
governance from a wider perspective to incorporate various stakeholder groups into
the company’s objectives. They argued that it is not only for shareholders, rather as a
social entity, a company should be accountable to its various stakeholder groups who
have a long term relationship with the company and who have the potential to
impact frm performance.
Although most of these defnitions emphasize on the structure of rights and
responsibilities of diferent stakeholders in a company (Aoki, 2000), they difer due to
the diversity of corporate practices around the world (Aguilera and Jackson, 2003;
Chizema and Kim, 2010). In addition, as Mallin (2010) suggested, many disciplines
(like law, economics, fnance etc.) have infuenced the development of corporate
governance and thus theories that have fed into it are quite varied. Thus being driven
from diferent theoretical perspectives, corporate governance has been defned in
diferent ways and stylized in diferent formats for identifying the purpose of the
corporation, deciding who should have the control, identifying the problems or
fnding an optimal solution (Letza et al., 2008; Letza et al., 2004a). However, literature
indicates that despite this wide diversity, most of the current perspectives on
corporate governance can be categorized into two contrasting paradigms:
shareholder and stakeholder (Friedman and Miles, 2002; Kakabadse and Kakabadse,
2001; Letza et al., 2004a).Whilst from the camp of shareholding, corporate
governance is seen as a mechanism to deal with these issues by narrowing its vision
to satisfy the needs of only shareholders, the opposite camp advocates having much
wider vision to satisfy the needs of stakeholders (Letza et al., 2008; Letza et al.,
The following sections briefy discuss these two theoretical perspectives of
governance with the aim to understand the way they have infuenced the present
study and other studies on code compliance. The arguments in the following sections
are greatly infuenced by some scholarly papers (especially the work of Letza et al.,
2004a) which have critically reviewed major theories on corporate governance.
1.5.1 Agency theory and Shareholder Perspective of Corporate Governance
Agency theory is the most dominant theory of corporate governance (Dalton et al.,
1998; Ermongkonchai, 2010; Hendry, 2005; Krambia-Kapardis and Psaros, 2006;
Roberts, 2004) which argues that in the modern corporation, in which share
ownership is widely held and management roles are separated from ownership
functions, managerial actions may depart from those required to maximize
shareholder returns (Berle and Means, 1932). Jensen and Meckling (1976) introduce
the ‘principal-agent’ framework and state that “agency theory identifes the agency
relationship where one party, the principal, delegates work to another party, the
agent” (Mallin, 2004, p.12); the agency relationship is thus seen as a contractual link
between the principals and the agents who are appointed by the principals and
delegate some decision making authorities (Shankman, 1999).
According to this dominant theory, universal agency problems arise because
individuals are opportunistic and individuals in an agency relationship have
diferent goals and interests. Thus it is very unlikely that agents will always act in the
best interests of the principal (Jensen and Meckling, 1976). Due to this constant
temptation for agents to maximize their own interests, the agency relationship is the
potential for losses to occur to shareholders (Fama, 1980; Fama and Jensen, 1983;
Hendry, 2005; La Porta et al., 1998). Agency theory thus suggests that
managers/agents must be monitored and institutional arrangements must provide
some check and balances to make sure they do not abuse the power (Blair, 1995;
Hart, 1995; Mallin, 2010; Shleifer and Vishny, 1997). Agency cost arises from
managers’ misuse of their position, and also from the costs of monitoring them to
prevent abuse (Mallin, 2004, p.13).
1.5.2 Stakeholder Theory and Stakeholder Perspective of Corporate Governance
“Stakeholder theory views the corporation as a locus in relation to wider external
stakeholders’ interests rather than merely shareholders’ wealth” (Letza et al., 2004a,
p.243). In its basic form the theory states that the successful management of
stakeholder relationship is the key for frms’ success (Donaldson and Preston, 1995;
Jansson, 2005; Letza et al., 2004a; Sternberg, 1997). The concept ‘stakeholder’ frst
appeared in the management literature in 1963 and was indicated to generalize the
notion of stockholder “to those groups without whose support the organization
would not exist” (Freeman and Reed, 1983). However, nowadays the concept is more
specifc as it is clearly been referred to as those groups or individuals who can afect,
or are afected by, the achievement of the organization’s objectives (Freeman, 1984;
Sternberg, 1997); and thus it includes diferent interest groups such as employees,
customers, suppliers, government, and society at large. Stakeholder perspective of
governance argues that corporate governance issues can be better resolved through
encouraging stakeholders’ participation and by establishing an environment where
business ethics, employees’ participation, inter-frm co-operation, trust and long
term relationships are encouraged (Blair, 1995; Keasey et al., 1997). If implemented
properly, the advocates of the stakeholder model believe this wide approach of
governance is able to ofer a certain competitive edge to companies.
Bangladesh is one of the third world countries having many opportunities in
corporate sector. E-business, e-commerce, and e marketing have been promoted as
the rescuer of the business world and a catalyst to twenty-frst century performance
in the global marketplace. Now we have new word corporate Governance in the
Bangladesh context. Successful corporate governance depends largely of trade-of
among the various conficting interest groups like Government, Society, Inventors,
Creditors, and Employees of the organization. The basic governance issues related to
the efectiveness and accountability of board of directors.
It is the top management's responsibility to ensure good corporate governance
within the organization whether it is public or private, state-owned enterprise or
non-governmental organizations. Because corporate governance encompasses all
tasks and activities that are intended to supervise and steer the behavior of top
management. For good corporate governance corporate board should set internal as
well as external mechanism. Modern corporations are disciplined by internal as well
as external factors. Recruitment of the board members should be more selective.
Increasingly directors are being chosen for specifc skills in order to provide a
broader base of experience among the directors group. Choosing directors who have
worked in a company's at some point in their careers or are knowledgeable in some
collateral organizations should also be more efective. Companies should restructure
their management systems for sustainable competitive advantages. They should also
apply high ethical standards; provide accurate, relevant and timely information in
order to fulfll their responsibilities. Management must be accountable to the Board
of Directors and Board of directors must be accountable to the shareholders.
How we have addressed our corporate governance with its basic framework and
how it can be resolved and updated are a very contemporary agenda today,
especially after the corporate scandal of Enron, Peregrine Systems, WorldCom and
Tyco in 2001 and 2002 in the USA. In our country recently the Sonali Bank loan scam
by Hallmark Group is a great default on corporate governance in the bank.
2.2 Corporate Governance Codes
‘Codes’ of corporate governance are intended to specifcally guide behavior where
the law is ambiguous, or where a higher level of behavioral prescription is needed
than can be provided for in company legislation. The Bangladesh Code of Corporate
Governance (2004) explains this well:
‘The obvious function of a Code of Corporate Governance… is to improve the
general quality of corporate governance practices. The Code does this by defning
best practices of corporate governance and specifc steps that organizations can take
to improve corporate governance. The Code, thereby, begins to raise the quality and
level of corporate governance to be expected from organizations; in some areas the
Code specifes more stringent practices than is required by Bangladeshi law, but it
should be emphasized that these additional requirements are in keeping with
international best practices.’
A corporation or company, whatever term is used for a legal entity of business as per
statutory law of any jurisdiction, generally has two principal governing codes: (i) the
statutory incorporating law or the Companies Act and (ii) Constitution or Corporate
Charter termed Memorandum and Articles of Association of the company. These
two codes are in general the statutory corporate governance codes unless any
additional code or guidelines are adopted considering the necessity (i) to stand
Corporate Governance on four pillars-Accountability (answerable or reportable to
someone), Fairness (impartial, equitable & justifed), Transparency (openness to
disclose) and Responsibilities (obligation to do), and (ii) to follow the fve elements-
Good Board Practices, Efective Control Process, Transparent Disclosure, Well-
defned Shareholders' Rights and Board Commitment. Corporate governance would
not be sound unless it stands on these four pillars and encompasses these fve
elements. The four pillars involve the ethical and value aspects and the fve elements
are the bases of responsibilities of the Board of Directors, the leader of the operation.
The ethics and value of the Board of Directors are designed to meet high standard
and integrity that lead them (directors) to operate business with fve guts elements of
corporate governance to reach the ultimate goals of the company.
It is apparent that the code of corporate governance would be for Bangladesh (i) The
related provisions of the Companies Act 1994 together with regulations thereof, (ii)
SEC guidelines for Corporate Governance, either covering all issues taking the
contents of the companies act or any additional issues above that act essentially
required to sustain and attract interest of investors ; and (iii) other operating laws for
any specifc type of companies like banks, fnancial institutions, insurance
companies, generation or supply of electric companies or any other company having
a separate law of operation along with separate regulations or rules of operation. The
Companies Act 1994 is the basic code of corporate governance and applicable to all
types of companies. In many respects the existing Companies Act 1994 has been
outdated and obsolete and hence it needs to be modernized.
2.3 Corporate Governance Scenario in Bangladesh
Corporate governance practices in Bangladesh are quite absent in most companies
and organizations. In fact, Bangladesh has lagged behind its neighbors and the
global economy in corporate governance (Gillibrand, 2004). One reason for this
absence of Corporate Governance is that most companies are family oriented.
Moreover, motivation to disclose information and improve governance practices by
companies is felt negatively. There is neither any value judgment nor any
consequences for corporate governance practices. The current system in Bangladesh
does not provide sufcient legal, institutional and economic motivation for
stakeholders to encourage and enforce corporate governance practices; hence failure
in most of the constituents of corporate governance is witness in Bangladesh. Poor
bankruptcy laws, no push from the international investor community, limited or no
disclosure regarding related party transactions, weak regulatory system, general
meeting scenario, lack of shareholder active participations are some of the individual
constituents that have been identifed by Mamtaz Uddin Ahmed and Mohammad
Abu Yusuf in their research study “Corporate Governance : Bangladesh Perspective”
(Mamtaz and Yusuf, 2005).
Corporate governance in some organizations of Bangladesh –
1.British American Tobacco Bangladesh Company (BATBC)
In order to comply with laws, regulations, rules; corporate governance codes;
articles of association; policies and procedures; the Company constantly exercises
good Board practices, efective control processes, transparent disclosures, well-
defned shareholders’ rights and Board commitments. This statement outlines the
adherence to these corporate governance elements are as follows -
a.Good Board Practices
Board Composition, Principal Responsibilities of the Board, Board
Committees, Audit Committee, Board Compensation Committee, CSR
Committee, Board and Committee Meetings.
b.Efective control processes
Executive Committee, Internal Control Process, Risk Management, Standards
of Business Conduct, Statutory auditor.
c.Transparent disclosure
d.Well-defned shareholders’ rights
e.Board commitments
2.Titas Gas Transmission and Distribution Company Limited
According to the status report on compliance with the conditions imposed by
SEC - Board size, Number of independent directors and appoinment of
independent directors, directors’ report to the shareholders is, Board meetings,
Audit committee, Reporting of the Audit Committee, External/Statutory auditors
and other principles of corporate governance is maintained in this company with
compliance status. According to our study some corporate governance elements
are missing in their report like CSR committee, Risk Management etc.
3.Janata Bank Limited
Reviewing the annual report the corporate governance elements we found are -
Risk management (Credit risk, Foreign Exchange Risk, Assets- Liability Risk,
Money Laundering Prevention Risk, Internal Control and Compliance Risk),
Transparent disclosure by Audit committee, External auditors, Corporate Social
Responsibility (CSR).
4.Corporate governance in state owned commercial banks – Sonali Bank
Sonali Bank is a commercial bank, and hence falls under the purview of the
corporate governance guidelines issued by the Bangladesh Bank. Therefore, the
bank has a board of directors comprising mostly of independent directors, and an
audit committee. Also, in addition to internal audits, the Companies Act requires
the bank to be periodically audited by independent external auditors. It is,
therefore, difcult to understand why any of these corporate governance
mechanisms could not prevent or detect the massive amount of fund
embezzlement that has taken place in the bank. Therefore, the prospect of
political infuence and collusion between top management and branch level
employees, as suggested by newspaper reports, cannot be completely ruled out.
Conducting the study among diferent sectors of Bangladesh we did fnd some
problems, challenges and also some prospective approaches towards good corporate
governance in Bangladesh. Due to the failure to execute structural and basic
framework of corporate governance in organizations problems usually arise.
3.2 Problems of corporate governance in Bangladesh
Corporate sector in Bangladesh is yet to be capable enough to provide a setup for
good corporate governance institutionally. Most importantly, the listed companies do
not supply actual and adequate information to the investors, employees and other
stakeholders. In many cases, stakeholders' interest is overlooked and not given
1.Insider Trading
Private information supplied by the management of the corporations for
individual beneft is benefting their own interest but at the same time damaging
the corporations' and stakeholders' interests.
2.Fabricated fnancial statements
There are many companies who provide fnancial statements prepared at the
management's discretion where numbers and fgures are artifcial and fabricated
that do not represent the true and real picture of the frm.
3.Disseminating inadequate Information
Corporations in Bangladesh do not tend to let free fow of information and hence,
violates the norms to protect the stakeholders' interests and value their goals.
4.Family ownership
Many public listed companies are closely held and their owners hold majority
share of the ownership which gives them the power to decide for their own
5.Non-compliance with laws
Listed companies in Bangladesh are often accused of non-compliance with the
rules, regulations and laws enforced by the regulatory agencies such as Dhaka
Stock Exchange (DSE) or Securities Exchange Commission (SEC). In many cases,
listed public limited companies do not provide dividend regularly, fail to hold
AGM for years or do not send fnancial statements to the stakeholders.
However, the list can be prolonged with numerous problems associated with the
governance status of corporations in Bangladesh. As a matter of fact, principles
developed by diferent institutions have addressed very successfully almost all key
aspects. But corporations in Bangladesh are still reluctant to follow those. Therefore,
problem largely lies with the enforcement of these principles by the regulatory
3.3 Challenges of corporate governance in Bangladesh
In the context of Bangladesh, the "unprepared" structure has been unable to address
the corporate governance challenges to make it efective and efcient. We should frst
identify the challenges before pointing out the unprepared structure.
3.3.1 Implementation of a standard framework
The frst challenge is to adopt corporate governance in line with standard framework
making the management responsible to the Board and the Board to the
shareholders/stakeholders. Some problems associated with the board –
• Generally board acts as a self-declared leader. As such the Board likes to stay
beyond accountability and perform its duty in whatever way it likes. But
under good corporate governance, the Board is a corporate leader being
accountable to the shareholders having fduciary responsibilities to them.
• Sometimes, the Board emphasizes keeping the management under their
control with policy and procedures instead of making the Board members
accountable with any written policy and reporting framework.
Thus the levels of corporate responsibility and accountability do not work well,
which is not a good sign for the corporate governance and sustainable development
of the company.
3.3.2 Function of independent divisions
In corporate governance framework, there are some independent internal and
external wings for ensuring accountability in managing resources and reporting
thereof. The selection and appointment of independent directors stems from the -
• Requirement of Securities and Exchange Corporate Governance Guidelines,
where the Board appoints such director(s).
• Subject to approval at the Annual General Meeting (AGM).
• Internal control and compliance team.
• Other teams for other purposes and internal audit department may have just
only advices of regulators.
The regulator has very little strategy to strengthen these internal teams and
departments except dealing with them on reporting. The functions of the audit
committee have really been, in most cases, on papers and to present them in the
2.Independent Directors
The picture of independence of independent director(s), internal team and
department and the audit committee of the Board as stated above is a general
practice in our corporations or companies. Some companies may have sound and
remarkable independence in practice, but the number of such companies is really
3.External Audit
The role of external audit is also under a question mark of independence. If the
client is large for the auditor with a large amount of professional fee, the auditor
may lose its independence because of fear of losing audit engagement. In cases of
small clients, the auditor may overlook their professional responsibilities to
review and give views on fnancials.
For instance, In case of the Hall-Mark group loan scam involving the Sonali Bank
Ltd., independence of all of these wings is surely under question. If the internal
control and compliance system is strong, the process of in which the loan was
disbursed could be blocked. If the internal audit team had functioned well, they
could have checked the process of loan disbursement with documentation for big
chunks of money with diferent brunches and the scam could be unearthed on time.
If the external audit exercised the audit risk, they could fnd the Ruposhi Bangla
branch under risk having no internal audit done for a long period of time. Hence, to
work with independence with due professional care is a very big challenge in
3.3.3 Transparent disclosures
The top-most challenge in Bangladesh to implement corporate governance is to
disclose the appropriate information in the fnancials. Very few companies as listed
with Stock Exchanges excepting some large reputable companies disclose
information correctly. If we consider the similar pattern of reporting on the same
information as required by law, Bangladesh Financial Reporting Standards (BFRS),
and regulations of regulators most of the companies are found to be varied in
presentation with adequate and appropriate information from each other excepting
banks and fnancial institutions.
In case of banks or fnancial institutions, the similarity in presentation is found as per
regulations of the Bangladesh Bank. The adequacy and appropriateness of this
information are, of course, challenging to all companies even to the banks and
fnancial institutions.
For instance, the bank may show classifed loans under upper ranks of non-
performing, substandard and bad. The loan may be shown as unclassifed in spite of
non-performing positions through transaction or accounting engineering. The
company may not present actual positions of receivable or payables of of-balance
sheet assets or liabilities-with a bad intention. The role of the external auditor in
many cases is questionable. If the senior management fnds any issue to present in
the fnancial statements as per law, regulations or BFRS to make it genuine and fair,
the Board may interfere not to present and to draw the attention of the auditor. If the
auditor brings it to the notice of senior management or directors, the Board may
interfere with the auditors. Very few auditors can be strong in their professional
integrity presenting facts in the fnancial statements, going against the Board.
3.3.4 Protecting shareholders' interest
In protecting the interest, challenges arise in order to ensure compliance of laws and
policies. The nomination committee may be biased to nominate any directors instead
of someone who may act for the interest of shareholders.
The company meets for exercising their right on time, protection of related party
transactions and disclosures. Extraordinary transactions, either income or expenses,
may not be provided properly or may not be brought to the notice of the
shareholders. It is really very challenging to work for a company sustaining interest
of all shareholders, where the Board or members of the Board do not care about
shareholders' interest and act for their own beneft using the platform of the
3.3.5 Focus on short-term proft
The Board has a tendency to gain proft. Therefore, it moves with a strategy to
capture and sustain market position in any situation with diversifed products and
service qualities and other strategies attaining competitive advantage.
A developing country like Bangladesh, fghting against challenges is really difcult
due to (i) proprietorship or partnership or limited-liability company having capital
market participation but wanting to hold family business control; (ii) government's
political participation in the Board of state-owned banks and fnancial institutions or
any other state-owned organizations; (iii) outdated laws to govern and cater to
corporate governance framework and the failure to face the challenges on many
grounds and to establish the rule of law, and (iv) substandard human resources or
badly cultured workforce who fail to adopt the changes or accept challenges with
professional integrity and ethical value.
4.2 Suggestions
Our laws should be updated to cater to corporate governance framework and make
the Board of directors liable and committed to compliance of the Corporate
Governance code meticulously. The regulators, Securities and Exchange Commission
(SEC), Bangladesh Bank, Insurance Regulatory and Development Authority (IRDA)
etc. have to be strict in enhancing their capacity to monitor the corporate governance
There are some suggestions that we would like to mention for better corporate
governance that have been realized so far from our study.
1.Enforcement of corporate governance rules
To mitigate poor governance structure of corporations, regulators have to look for
enforcement of rules and regulations. Though some corporations are complying
with the laws on explanation basis, regulatory enforcement is evidently necessary
to strengthen the governance structure in corporations. Some such enforcement
instruments are put forward here.
2.Corporate Governance Rating
Since general stakeholders may not be aware of hundreds of principles to
evaluate a company's governance structure, Corporate Governance Rating can be
introduced. The rating has to be initiated and administered by the SEC or BB or
any third party like rating companies under the supervision or regulators. This
rating also have to be mandatory, recognized and published regularly. Not only
this will be easy to understand, but also a corporation's functioning and
operation through access to fnance, issuance of securities, credit rating should
largely be a function of this rating.
3.Establishing separate monitoring unit
A separate "Corporate Governance Monitoring Cell" can be set with Stock
Exchanges or SEC that would closely observe the listed company activities. This
dedicated cell would make it mandatory to report regularly on their activities to
them, and also would accept complaints from the stakeholders on a corporation.
The settlement power of the complaints may also lie with this cell.
4.Corporate Governance Report and CSR
Corporate Governance Report and Corporate Social Responsibility Report must
be made mandatory for publishing by the companies that would be considered
while valuing the company by the stakeholders for a particular period. In many
countries like USA, Canada or Australia, regulators have clearly articulated the
length and contents of these reports. Regulators in Bangladesh may also enforce
it for understanding the progress in development governance structure in the
4.3 Policy Implications
Based on our study and analysis of corporate governance practiced and maintained
in diferent organizations of Bangladesh we would like to draw some policy
implications –
• Formulate a complete code of corporate governance at the governmental level
to improve disclosure standards and ensure transparency in the corporate
sector. A legal framework promotes the emergence of credible and efective
governance practices for the beneft of the economy and society as a whole.
Independent regulators in Bangladesh relevant to corporate governance
consist primarily of the RJSC, SEC, Bangladesh Bank, CSE, DSE and ICAB.
The RJSC and SEC are two government agencies which should be studied
further to develop recommendations for reform. These regulatory bodies
should exercise the enforcement of standards for accounting, audit and non-
fnancial disclosure. These bodies should have authority to impose
appropriate sanction for non-compliance. Regulatory bodies should take a
tough stance against public listed companies to bring back public confdence.
They should send the right signal through exemplary punishment. Honest
and good work should be positively reinforced, and dishonesty punished that
should be the basic principle of business. For instance, Saifur Rahman’s
initiatives to convert black money put honest people who have pail their taxes
so far at a disadvantage. In addition to the auditing profession, a full study of
accounting standards should identify priorities for adoption of international
accounting standards. Currently ICAB has adopted 30 the 41 lAS as BAS.
• The process of adoption of current lAS should be accelerated since the lack of
adoption creates loopholes for companies to hide afliations and liabilities.
ICAB and the auditing profession must also be a key participant in any efort
to improve corporate governance. Both government regulators and
stakeholders rely on auditors to ensure accuracy and authenticity of fnancial
accounts. ICAB needs strengthen its ability to train accountants and auditors
and enforce auditing standards. Bangladesh Bank should provide guidelines
for quality credit analysis and asset management practices in place. There is
designated Money Loan Court for pursuing loan defaulters; it should provide
prompt judgments and actual recovery rates. New accounting standards and
initiatives from Bangladesh Bank may begin to improve the situation of asset
quality at banks, but there is still considerable scope for banks to include
stringent fnancial requirements as well as corporate governance factors in
their evaluation of companies (Sobhan, Farooq, et al, December 2002).
• Proper mechanism should be developed for monitoring the management of
the board and monitoring of the board by the shareholders. AGMs should be
an efective forum for communication between boards and shareholders.
Directors should be educated, qualifed and independent. Furthermore, there
should be an outline for professional qualifcation requirements or
prerequisite training for directors, although banks have begun to introduce
some requirements. There should be requirements that allow boards to
include independent directors.
• The books of account should be kept at the registered ofce of the company
and should be available for inspection during ofce hours for directors and
any authorized Government ofcial.
Finally, business ethics and corporate awareness of the environmental standards and
other societal interests of the communities in which they operate — sometimes called
“good corporate citizenship” - also can have an impact on the reputation and long-
term success of a company.
We want sound corporate governance practice fghting against challenges of
implementation. For that, let us update the laws and enhance the monitoring
capacity of regulators. We should not attain corporate governance only; we should
also be enriched with corporate efciency.
At present the need for strengthening the corporate governance in Bangladesh arises
with a global demand for a sound and transparent corporate world system.
Corporate governance was viewed as the total system or control mechanisms,
external or internal, that provided an efective means of good corporate behavioral
process. This process ensures accountability of those who matter most in the process
and maximizes the value for the shareholders in a fully transparent manner. Failure
in institutions, legal enforcement and market behavior resulted in weak corporate
governance in Bangladesh. A large number of companies listed in the stock exchange
in Bangladesh pay inadequate attention to follow the ‘rules of businesses’ and full
disclosure of information and demonstrate lack of corporate norms and
responsibility. But this is hopeful that there is no serious scandal in respect of
corporate governance in Bangladesh. It is seen that in many areas, system did not
provide adequate incentives and motivations in terms of legal, institutional or
economic, for the shareholders to encourage and enforce good corporate governance.
As a result, they added, there were hardly any rewards for the companies that
instituted good corporate governance practices and no penalties for failing to do so.
Dhaka Stock Exchange is going to incorporate corporate governance principles in the
list of the stock exchange to ensure a competitive atmosphere in the capital market.
To conclude, government cannot control the personal integrity of key players and no
amount of legislation can substitute trust, faith and confdence necessary for good
corporate governance practice. But as the lead regulatory body overseeing corporate
accounting and reporting, the SEC has a critical role to ensure that public company
boards are properly structured and organized and have the resources to accomplish
the objectives of adding value to shareholders, minimize risk of key shareholders
and hold management responsible for corporate results. Ruthless monitoring of
compliance and severe punishment of transgressors can ensure good corporate
governance. However Bangladesh has to wait a lot to ensure enforcement of any
corrective measures properly.
1.International Conference on Corporate Governance in Bangladesh, Dhaka,
July 30-31, 2005.
2.Khan Zaman Habib-uz-Zaman., Ghosh Kumar Sunto., Akter Shahriar .,
2006, Corporate Governance Reporting as a Voluntary Disclosure: A Study
of the Annual Reports of Square group, BRAC University Journal,Vo.III
3.Chaudhury, A.M. (2004), Corporate Governance – An Industry Perspective
The Bangladesh Accountant, October-December
4.Banking Reform Commission 1999: The Report of the Banking Reform
Commission, formed by the Government of Bangladesh
5.Bangladesh Enterprise Institute (BEI) (2003) A Comparative Analysis of
Corporate Governance in South Asia: Charting a Roadmap for Bangladesh
BEI, Dhaka, Bangladesh.
6.Sarkar, J.B. and Ahmed H. (2007), Disclosure of Corporate Governance by
public limited companies in Bangladesh, The cost & management,
7.Sarkar, J.B., Khan, S.R. and Alam, I. K. (2007), Compliance status of
Corporate Governance Guidelinespublic listed companies of Bangladesh,
The Chartered Secretary, October- December.