Corporate Governance Practices: Ceramic Industry

Corporate Governance
Corporate Governance refers to the structures and processes for the direction and control of
companies. Sound corporate governance is a fundamental part of the culture of the company
and ensures long term success. The company believes in adopting the best practices in the
area of Corporate Governance and follows the principles of transparency and accountability,
thereby protecting the interests of management, Board of Directors, controlling
shareholders, minority shareholders and other stakeholders. Strong corporate governance
works as the backbone of an upright organization.

Current practices of Corporate Governance in Bangladesh

On June 03, 2018, Bangladesh securities and exchange commission published newly revised
CG code for every listed companies as guideline. In Bangladesh this code is a guideline not
law. The guidelines are suggested to follow to get competitive advantage,listing benefits and
to protect shareholders rights. The regulator’s expectation from these changes is to ensure
four pillars of corporate governance–fairness, accountability, transparency, and
responsibility–in the listed companies’ operations and management. A brief summary of the
conditions of that code is cited below-
1. Board of directors
1.1 Board size
1.2 Independent Directors
1.3 Qualification of independent directors
1.4 Chairman of the board and Chief Executive Officer
1.5 The directors` report to the shareholder
1.6 Meetings of the Board of Directors
1.7 Code of conduct for the chairperson, other board members and chief executive
officer.
2. Governance of Board of Directors of Subsidiary Company
3. Managing Director(MD) or Chief Cxecutive Officer(CEO), Chief Financial
Officer(CFO), Head of Internal Audit and Compliance(HIAC) and Company
Sectary(CS).
3.1 Appointment
3.2 Requirement to attend Board of Directors` Meetings.
3.3 Duties of Managing Director (MD) or Chief Executive Officer (CEO) and Chief
Financial Officer (CFO)
4. Board of Directors Committee
4.1 Audit Committee
4.2 Nomination and Remuneration Committee.
5. Audit Committee
5.1 Responsibility to the Board of Directors
5.2 Contitution of Audit Committee
5.3 Chairperson of the Audit Committee
5.4 Meeting of the Audit Committee
5.5 Role of Audit Committee
5.6 Reporting of the Audit Committee
 5.7 Reporting to the Shareholders and General Investors
6. Nomination and Remuneration Committee(NRC)
6.1 Responsibility to the Board of Directors
6.2 Constitution of the NRC
6.3 Chairperson of the NRC
6.4 Meeting of the NRC
6.5 Role of the NRC
7. External and Remuneration Committee
8. Maintaining a website by Company
9. Reporting and Compliance of Corporate Governance.

Ceramic Industry in Bangladesh

The ceramic industry is a booming manufacturing sector in Bangladesh. Over the yearsthe
industry has flourished immensely. While it saters to 85 percent of local demand it also
export quality ceramic products to international markets. The growth trend is an indication
of the industry`spontantial to be one the top foreign exchange earners of the country.
There are over a dozen of ceramic factories in Bangladesh, which produce over 40000 tone
ceramic products a year. There are five ceramic companies are listed in the Dhaka Stock
Exchange.
1. Fu-Wang Ceramic Industries Ltd.
2. Monno Ceramic Industries Ltd.
3. RAK Ceramics (Bangladesh) Limited.
4. Shinepukur Ceramics Limited.
5. Standard Ceramic Industries Ltd.

A summary report on the compliance of the above 4 companies- All sections are not
reported, only important section are reported.
C=complied
NC=Non Complied

Company Name Size of Independence Duality of Number of meetings

board directors chairperson of of the board of
board of directors directors
and CEO/MD
CG Code NO. 1.1 1.2.a 1.4.a 1.6
Fu-Wang Ceramic C C C Not Available
Industries Ltd.
Monno Ceramic C C C C
Industries Ltd
RAK Ceramics C C C C
(Bangladesh) Limited
Standard Ceramic C C C Not Available
Industries Ltd
remuneration to NrC
 Company Name Code of conduct for CFO, Certificate No. Of Chairperso
Chairperson,other CS,HIA of members n of the
Board members by Md\CEO In Audit Audit
and CEO website different and CFO Committee Committee
posting individual
CG Code NO. 1.7 3.1.b 3.3.a 5.2.A 5.3.a
Fu-Wang Ceramic Not Available in A. C C C C
Industries Ltd. Report
Monno Ceramic Not Available in A. NC(no C C C
Industries Ltd Report HIA)
RAK Ceramics Not Available in A. C C C C
(Bangladesh) Report
Limited
Standard Ceramic C C C C C
Industries Ltd.

Company Name No. of Audit NRC Constitution Chairperson Meeting

meeting of Committee Committee of the NRC of the NRC of the
the Audit Report NRC
Committee
CG Code NO. 5.4 5.7 6.1.a 6.2.a 6.3.a 6.4.a
Fu-Wang Ceramic Not C NC NC NC NC
Industries Ltd Available
Monno Ceramic C C NC NC NC NC
Industries Ltd
RAK Ceramics C C NC NC NC NC
(Bangladesh)
Limited
Standard Ceramic C C C C C NC
Industries Ltd.

Company Name Role of NRC Remuneration Any service Maintaining Auditor

Disclose in to NRC from any website of Certificate
Annual Report Statutory the company on CG
Auditors
CG Code NO. 6.5.c 6.2i 7.1 8.1 9.1
Fu-Wang Ceramic NC NC Not Available C C
Industries Ltd.
Monno Ceramic NC Not Available NC NC
Industries Ltd
RAK Ceramics NC NC Not Available C C
(Bangladesh)
Limited
Standard Ceramic NC C Not Available C C
Industries Ltd.
Source: Md. Imranul Islam (23 April, 2019) Corporate Governance Practice in
Bangladesh: Overview of Pharmaceutical & Chemical industry and Ceramic industry of
Bangladesh.
Percentage of Director`s Report Compliance

Company Name Number of Applicable Complied %

Sections Among 27 Sections Complied
Fu-Wang Ceramic Industries Ltd 21 21 100%
Monno Ceramic Industries Ltd 23 21 91%
RAK Ceramics (Bangladesh) Limited 23 19 83%
Standard Ceramic Industries Ltd. 24 24 100%

Board Structure and its Qualification:

The board of directors of ceramic industry is higher educated, experience, functional
knowledgeable, diversified and having strong social tie that supports the resource
dependency theory of corporate governance. The average board size of selected sample
from this industry is 7.25 and where both independent and executive directors have 1.75 or
24.14% each of board size. The non-executive directors are 50% of board.

Average
Board Structure Number Percentage
Board Size 7.25 100.00%
Independent Directors 1.75 24.14%
Executive Directors 1.75 24.14%
Non- Executive Directors 3.75 51.72%
Table: Board Structure and its Qualification of
ceramicIndustry

AveragePercentage AverageNumber

Figure: Board Structure- Ceramic Industry

Source: Md. Ismail Hossain “BOARD SIZE AND NON-EXECUTIVE DIRECTORS AS

MECHANISMS OF CORPORATE GOVERNANCE & CURRENT SCENARIO OF
BANGLADESH”