Chapter 2

A BRIEF OVERVIEW OF ABL

2.1 BRIEF OVERVIEW OF ABL

Agrani Bank Limited a nationalized commercial bank (NCB) of Bangladesh established on 26 March
1972 under the Bangladesh Banks (Nationalization) Order 1972 by taking over two abandoned
Pakistani banks Habib Bank and Commerce Bank. The bank has been converted to a Public Limited
Company with 100% ownership of the government and started functioning as Agrani Bank
Limited (ABL) from 15 November, 2007 taking over all assets, liabilities and business of
Agrani Bank on the basis of Vendors Agreement signed between the Government and the Agrani
Bank. After corporatization, the management of the bank has been given autonomy to make the bank
competitive and to run its business effectively. This bank with 935 outlets strategically located in
almost all the commercial areas throughout Bangladesh, overseas Exchange Houses and hundreds of
overseas Correspondents. Agrani Bank Limited is governed by a Board of Directors consisting of 12
members headed by a chairman. The Bank is headed by the Managing Director & Chief Executive
Officer; Managing Director is assisted by Deputy Managing Directors and General Managers. The
bank has 11 Circle offices, 34 Divisions in head office, 62 zonal offices and 935 branches including
27 corporate and 40 AD (authorized dealer) branches.
2.2 HISTORY OF AGRANI BANK
Agrani bank, in pursuance of Bangladesh banks (nationalization) order 1972 (P.O. No-26 of 1972)
came into being in 1971 taking over the assets and liabilities of the east while Habib bank ltd. And
commerce bank ltd. Functioning in the then East Pakistan. The bank started operation with 249
branches with its head office in Dhaka. In principle, it changed its motto from class banking to mass
banking. As there had been poor banking structure and it failed to build sound banking
infrastructure by local entrepreneurs before independence and the newly born independent country
was down with enormous economic problem, the new govt. Agrani Bank being one of the largest
nationalized commercial bank must shoulder the responsibility of expanding its network in rural area.
Presently bank has its 561 branches out of total 891 branches located in rural areas implementing
as many as 29 programs targeting rural people. During my internship at Agrani Bank Ltd, I was
placed in the Jahangirnagar University branch of ABL. I enjoyed my total working with the young,
skilled & professional employees and earn my knowledge regarding daily general banking
performance of Agrani Bank ltd. Bangladesh.

2.3 HIERARCHY
Agrani Bank Limited is governed by a Board of Directors consisting of 13(thirteen) members
headed by a chairman. The Bank is headed by the Managing Director & Chief Executive Officer;
Managing Director is assisted by Deputy Managing Directors and General Managers. The bank has 10
Circle offices, 30 Divisions in head office, 53 zonal and 867 branches including offices 27 corporate
and 40 AD (authorized dealer) branches.
Hierarchy of Agrani Bank Limited

Board of Directors
Chairman

Managing Director

Deputy Managing Director

General Manager

Deputy General Managers

Assistant General Managers

Senior Principal Officers

Principal Officers

Officers/Officers (cash)

Attorney Assistants

Clerical Staff Members

Non-clerical Staff Member

 2.4 VISION

To become a leading bank of Bangladesh operating at international level of efficiency,

quality and customer service.

It signifies to become the best leading state-owned commercial bank of Bangladesh operating
at international level of efficiency, quality, sound management, customer service and strong
liquidity.
2.5 MISSION

Fusing ideas and lessons from best practice to explore new avenues to stay stronger and
more efficient and competitive as well as applying information and communication
technology for the benefit of customers and employees.

This refers to operate ethically and fairly within the stringent framework set by our regulators
and to assimilate ideas and lessons from best practices to improve our business policies and
procedures to the benefit of our customers and employees.

2.6 VALUE

Agrani Bank believes in integrity, transparency and accountability, and also value professionalism
that will provide a high standard of service to all customers and stakeholders.

They believe value in integrity, transparency, accountability, dignity, growth and professionalism
to provide high level of service to all their customers and stakeholders inside and outside the
country.
2.7 STRATEGIC OBJECTIVES

Agrani Bank provides commercial banking services to almost every types of people. The
range of services provided by the Bank includes- making loans and advances, accepting
deposits discounting bills, directing domestic and international money transfers, carrying
out foreign Exchange transactions in addition to international money transfers, and offering
other customer services such as safe keeping, collections and issuing guarantees, acceptances
and letters of credit. Core business of the Bank includes- deposit mobilization and lending
activities including short- term, long- term, import and export financing. Financing activities
are extended to different sectors of the economy that could be grouped in to several sectors
including Rural & agriculture, Garments & Textiles, Jute, Cement & Bricks, Tannery, Steel
& Engineering ,Food & Beverage, Chemical & Pharmaceuticals, Printing & Packing,
Glass & Ceramics and miscellaneous.
The core and highlighted strategic objectives are:-
1) Winning at least 6.50 percent share of deposits and 5.50 percent share of loans and
advances of Bangladeshi market.

2) Gaining competitive advantages by lowering overall cost compared to that of

competitors.

3) Overtaking competitors by providing quality customer service.

4) Achieving technological leadership among the peer group.

5) Strengthening the Bank’s brand recognition.

6) Contributing towards the economic well-being of the country by focusing particularly on

SME and agricultural sectors.

7) Strengthening research capability for innovative products and services.

8) To facilitate and handle all kinds of commercial banking services to its customer
authorized by Bangladesh Bank
.
9) To handle the export and import trade of Bangladesh.

10) To take part in international banking etc.

 Chapter 3
Theoretical Framework
3.1 Literature Review

The purpose of the literature review is to assist the reader in understanding all of the
conceptual terms used in this study, such as Corporate Governance so that any reader of the
report can easily understand all of the critical concepts of the report as well as the Corporate
Governance of the Agrani Bank during the last five years. The purpose of corporate
governance is to facilitate effective, entrepreneurial, and prudent management that can
deliver the long-term success of the company. Corporate governance is the system by which
companies are directed and controlled. Corporate governance practices can determine the
ease with which companies are able to access capital markets. Well-governed firms are
perceived as investor friendly, providing greater confidence in their ability to generate returns
without violating shareholder rights. Good corporate governance is based on the principles of
transparency, accessibility, efficiency, timeliness, completeness, and accuracy of information
at all levels. With the enhancement of transparency in a company, investors benefit from
being provided with an opportunity to gain insight into the company’s business operations
and financial data. Even if the information disclosed by the company is negative,
shareholders will benefit from the decreased risk of uncertainty. Of particular note is
observable, if recent trend among investors to include corporate governance practices as a
key decision-making criterion in investment decisions. The better the corporate governance
structure and practices, the more likely that assets are being used in the interest of
shareholders and not being tunneled or otherwise misused by manager. Finally, new listing
requirements on many stock exchanges around the world require companies to adhere to
increasingly strict standards of governance. Companies wishing to access both domestic and
international capital markets will need to adhere to specific corporate governance standards.
Corporate Governance is a broad term defines the methods, structure and the processes of a
company in which the business and affairs of the company managed and directed. Corporate
governance also enhances the long-term shareholder value by the process of accountability of
managers and by enhances the firm’s performance. It also eliminates the conflict of
ownership and control by separately defines the interest of shareholders and managers. This
paper reviews the extensive literature of corporate governance practices to find out the
effectiveness of corporate governance mechanism in the companies and institutions. The
paper also focuses on reducing the principal-agent problem due to the effective corporate
governance mechanism in the organizations.
 3.2 The concept of Corporate Governance

There is no single definition of corporate governance that can be applied to all situations and
jurisdictions. The various definitions that exist today largely depend on the institution or
author, as well as country and legal tradition.
Corporate governance is a set of relationships between a company’s management, its board,
its shareholders and other stakeholders. Corporate governance also provides the structure
through which the objectives of the company are set, and the means of attaining those
objectives and monitoring performance are determined. Good corporate governance should
provide proper incentives for the board and management to pursue objectives that are in the
interests of the company and shareholders, and should facilitate effective monitoring, thereby
encouraging firms to use resources more efficiently.
Corporate governance is a term broadly used to describe the way in which companies are
directed and controlled. Some theories are discussion now:
●Agency theory.
● Stakeholder theory.
● Stewardship theory
● Resource Dependency theory

3.3 Agency Theory

Agency theory has its rout in economic theory and was first developed by Alchian and Demsetz
(1972) and further developed by Jensen and Meckling (1976). It is defined as “the relationship
between the principals, such as shareholders and agents such as the company executives and
managers”
This theory discusses the problems that are being faced in the firm. Basically, the problem related to
the separation of ownership and management. Agency theory focuses on mitigating those problems.
Two factors can influence the prominence of agency theory. First, the theory is conceptually and
simple theory that reduces the corporation to two participants of managers and shareholders. Second,
agency theory suggests that employees or managers in organizations can be self-interested. In agency
theory the stakeholders expect that the agent or employees will work on their behalf or their best
interest On the contrary, the agent may not necessarily make decisions in the best interests of the
principals (Padilla, 2000). In agency theory the agent may be influenced by self-interest and
opportunistic behavior. Even the understanding of risk differs in this approach. Despite of this fact’s
agency theory was first introduced with a moto of separation of ownership and management. The
agency model is applied to align the goal of the owners with that of the management.
Agency theory can help to explain the actions of the various interest groups in the corporate
governance debate.

Agency theory can be applied to the agency relationship deriving from the separation
between ownership and control.

Agency theory; Limitation on monitoring: limits on board effectiveness (Lipton & Lorsch,
1992)

•Lack of time & board size.

•Complexity of information

•Lack of cohesiveness
•Power of top management

•Confused accountabilities.
Agency problem resolution measure:

•Meetings between the directors and key institutional investors.

•Voting rights at the AGM in support of, or against, resolutions.

•Proposing resolutions for vote by shareholders at AGMs.

•Accepting takeovers.

•Divestment of shares is the ultimate threat.

3.4 Stakeholder Theory

The basis for stakeholder theory is that companies are so large and their impact on society
so pervasive that they should discharge accountability to many more sectors of society than
solely their shareholders.

So, it facilitate consideration of a wider range of CG issues, contributes to stakeholder

management decision on who and what really counts (Mitchell et all 1997 in mason and Simons
2014) and extends company directors duties to include formal consideration of stakeholder
perspective and agendas’ board of directors take decision who is important, who is not
important, who can be considered as stakeholder, which stakeholder interest keep in mind,
because the company cannot keep everybody interest .so the company have to create a
balance between the interest of those who are going to directly affect the profits the interest and
putting money into organization. Stakeholder theory may be the necessary outcome of agency
theory given that there is a business case in considering the needs of stakeholders through
improved customer perception, employee motivation, supplier stability, shareholder conscience
investment. Agency theory is a narrow form of stakeholder theory.
 3.5 Stewardship theory

Stewardship theories describe executives & directors as frequently having interests that are
isomorphic with imitable similar to those of shareholder (e.g., Davis et al, 1997.in Dalton &
canella 2003)
stewardship theories recognize that there are many situations in which executives conclude
that serving shareholder interests also serves their own interest” (lane, canella, & lubatakin
1998, in Daly Dalton & canella 2003)

3.6 Resource Dependency Theory

Organizations are dependent on their environments

•They need resources to survive and grow
Environment becomes poor if:
•Important customer is lost or new competitors entre.
Organization manages their transaction with the environment
•The goal: Ensure predictability of access to resources reduce uncertainty and
Dependency.
Resource dependence theory has been under scrutiny in several review and meta-analytic studies:
Hillman et al. (2009); Davis and Cobb (2010); Drees & Heugens (2013); Sharif & Yeoh (2014).
Which all indicate and discuss the importance of this theory in explaining the actions of
organizations, by forming interlocks, alliances, joint ventures, and mergers and acquisitions, in
striving to overcome dependencies and improve an organizational autonomy and legitimacy.
While resource dependence theory is one of many theories of organizational studies that
characterize organizational behavior, it is not a theory that explains an organization's performance per
se. But still in many ways, resource dependence theory predictions are similar to those of transaction
cost economics, but it also shares some aspects with institutional theory (Nienhuser, 2008)

3.7 The Role of Stakeholders

Many international codes, including the OECD Principles, discuss the role of stakeholders in the
governance process. The role of stakeholders in governance has been debated in the past, with some
arguing that stakeholders have no claim on the enterprise other than those specifically set forth in law
or contract. Others have argued that companies fulfill an important social function, have a societal
impact, and must, accordingly, act in the broad interests of society. This view recognizes that
companies should, at times, act at the expense of shareholders. Interestingly, there is a consensus that
modern companies cannot effectively conduct their businesses while ignoring the concerns of
stakeholder groups. However, there is also an agreement that companies that consistently place other
stakeholder interests before those of shareholders cannot remain competitive over the long run.
 3.8 Role and responsibility of the Board Members

Corporate boards have many duties and responsibilities. In every decision the board makes, they must
consider how it will affect their employees, customers, suppliers, communities and shareholders.
Good corporate governance relies on distinct differences in the roles between board directors and
managers. It was never intended for board directors to be directly involved in the daily operations of a
corporation, and they certainly shouldn't engage in micromanaging the management. The main role of
board directors is oversight and planning — oftentimes made easier with the help of board
management tools. Despite the differences, board directors may delegate certain powers to the CEO
or CFO under certain circumstances.
Boards also regularly delegate some of their duties to board committees. Corporate board committees
act as a subset of the full board. Committees devote the necessary time and resources to issues for
which the full board doesn't have time. Committees delve deep into issues, often calling in experts to
assist them. Committees provide regular reports to the board on the matters they're charged with
handling.

3.9 Management Responsibility

CEO is responsible for setting, managing, and executing the strategies of the company, including but
not limited to running the operations of the company under the oversight of the board and keeping the
board informed of the status of the company’s operations. Management’s responsibilities include
strategic planning, risk management, and financial reporting. An effective management team runs the
company with a focus on executing the company’s strategy over a meaningful time horizon and
avoids an undue emphasis on short-term metrics.

3.10 Scope of Corporate Governance

Corporate governance is therefore about what the board of a company does and how it sets
the values of the company, and it is to be distinguished from the day-to-day operational
Management of the Bank by full-time executives. All three are critical in successfully
running a Bank and forming solid professional relationships among its stakeholders which
include board directors, managers, employees, and most importantly, shareholders.

Transparency
Transparency is a critical component of corporate governance because it ensures that all of a
Bank action can be checked at any given time by an outside observer. This makes its
processes and transactions verifiable, so if a question does come up about a step, the Bank
can provide a clear answer. And after the Enron scandal in 2001, transparency is no longer
just an option, but a legal requirement that a Bank has to comply with.
 Accountability

It takes more than transparency to build integrity as a Bank. It also takes accountability,
which can also mean answerability or liability. Shareholders are deeply interested in who will
take the blame when something goes wrong in one of a Bank’s many processes. And even
when everything goes smoothly as expected, knowing that someone will be held accountable
for future mishaps increases shareholders’ confidence, which in turn increases their desire to
invest more.

Security

A Bank is expected to make its processes transparent and accountable while keeping data secure from
unauthorized access. There is simply no compromise for this. A bank that experiences security
breaches involving the exposure of its client’s personal information quickly loses its credibility.
 Chapter 4
Corporate Governance of Agrani Bank

4.1 Financial Performance of Agrani Bank

The Board approves the annual budget and the statutory financial statements. It also
reviews/monitors the positions in respect of bank’s income, expenditure, liquidity, non-
performing asset, capital base and adequacy, maintenance of loan loss provision and gives
directives to take steps for recovery of defaulted loans including legal measures. The Board
also frames the policies and procedures for bank’s purchase and procurement activities and
approves the delegation of power for making such expenditures. The maximum possible
delegation of such power rests on the CEO and his subordinates. The decision on matters
relating to infrastructure development and purchase of land, building, vehicles etc. for the
upgradation of bank’s business is adopted with the approval of the board.

4.2 Current practices in corporate governance in Bangladesh

Corporate governance is an important effort to ensure accountability and effort to ensure

accountability & responsibility & is a set of principles which should be incorporated into
every part of an organization. Bangladesh is still at an emerging stage with market
capitalization amounting to only 8.13% of GDP with low investor confidence
on corporate governance and financial disclosure practices in many companies listed in the
stock exchange. The neighboring countries are well ahead vis-à-vis Bangladeshi terms of
depth of capital market. However, Awareness of the importance of corporate
governance in Bangladesh is growing. Securities and Exchange Commission of
Bangladesh issued a notification on Corporate Governance Guidelines (CG
Guidelines) for the publicly listed companies of Bangladesh under the power vested on the
Commission by Section 2 of the Securities and Exchange Ordinance, 1969. The CG
Guidelines were issued on a ‘comply or explain’ basis, providing some ‘breathing space’ for
the companies to Implement on the basis of their capabilities. The current system in
Bangladesh does not provide sufficient legal, institutional and economic motivation for
stakeholders to encourage and enforce Practice.
 4.3 Board of Directors of ABL

 Zaid Bakht
 Biswajit Bhattacharya Khokon
 Mafiz Uddin Ahmed
 Kashem Humayun
 K.M.N Manjurul Hoque Labloo
 Khondker Fazle Rashid
 Tanjina Ismail
 Md. Shahadat Hossain
 Mohammad Masud Rana Chowdhury
 Md Murshedul Kabir

4.4 Major Duties of the Board of Directors

1.Provide continuity for the organization by setting up a corporation or legal existence, and to
represent the organization’s point of view through interpretation of existence its products and
services, and advocacy for them.
2. Select and appoint a chief executive to whom responsibility for the administration of the
organization is delegated, including
• to review and evaluate his/her performance regularly on the basis of a specific job
description, including executive relations with the board, leadership in the
organization, in product/service/program planning and implementation, and in
management of the organization and its personnel
• to offer administrative guidance and determine whether to retain or dismiss the
executive
3. Govern the organization by broad policies and objectives, formulated and agreed upon by
the chief executive and employees, including assigning priorities and ensuring the
organization’s capacity to carry out products/services/programs by continually reviewing its
work.
4. Acquire sufficient resources for the organization’s operation and to finance the
products/services/programs adequately.
5. Account to the stockholders (in the case of a for-profit) or public (in the case of a non-
profit) for the products and services of the organization and expenditures of its funds,
including:
• To provide for fiscal accountability, approve the budget, and formulate policies
related to contracts from public or private resources
• To accept responsibility for all conditions and policies attached to new, innovative, or
experimental products/services/programs.
 4.5 Major Responsibilities of Board of Directors

Major responsibilities of board of directors are given below:

• Determine the organization's mission and purpose.
• Select the executive.
• Support the executive and review his or her performance.
• Ensure effective organizational planning.
• Ensure adequate resources.
• Manage resources effectively.
• Determine and monitor the organization's products, services and programs.
• Enhance the organization's public image.
• Serve as a court of appeal.
• Assess own performance.

4.6 Managing Directors of ABL Management team

Mr. Shahid Hossain

Mr. Mohammed Gofran
Mr. S.M. Mainuddin Chowdhury
Mr. Muhammad Shahjahan
Mr. M. Kamal Hossain
Mr. A. K. M. NurulAlam
 Chapter 6
SWOT Analysis
SWOT Analysis of Agrani Bank Ltd SWOT analysis is the detailed study on the
organization’s exposure and potential in perspective of its strengths, weakness, opportunity
and threat. These facilities the organization to make their existing line of performance and
also foresee the future to improve their performance in comparison to their competitors. As
though this tool, an organization can also study its current position, it can also be considered
as an important tool for making changes in the strategic management of the organization.

Identification of Strengths, Weaknesses, Opportunities and Threats of the Organization

Strength.

 Agrani Bank has a research division

 Agrani Bank has already achieved a goodwill among the clients
 Agrani Bank provides its works force an excellent and consistent quality in every
service
 Low transaction charges and diversified benefit schemes
Weakness:

 Employees are not motivated in some areas.

 Agrani Bank lacks aggressive advertising.
 Insufficient marketing campaigns
 Agrani Bank lacks well trained human resource in some area.
 The procedure of credit facility is too long.

Opportunities:

 Agrani Bank can introduce more innovative and modern customer service
 Agrani Bank can recruit experienced, efficient work force by offering good working
environment
 Many branches can be opened in remote location
 It has opportunity to penetrate all over the country.

Threats:

 The worldwide trend of mergers and acquisition in financial institution is causing

problem.
 Frequent rate devaluation and foreign exchange rate fluctuation is causing problem.
 Lots of new banks are coming in the scenario with new service.
 Government is imposing newer and harder rules and regulations
 Chapter Seven

7.1 The Most Important Findings

• Corporate ownership structure in ABL is dominated by few family members. So,

there is a scope of biasness to lending loan and conduction of the bank. So, board
member need to carefully handle this matter.
• Management standards and its impacts on corporate governance and management
practice in ABL are mixed.
• Weak regulatory system is also found in the ABL.
• Weak capital market role of ABL.
• No market for corporate control in ABL.
• Lack of Shareholder’s Activism practice in ABL.
• Weak pressure group.
• Lack of Auditor Independence.
• Poor Audit report

7.2 Recommendations

On the basis of gathered data, observation, expert staff opinion, and my expertise and
judgment, some important measures are indicated below for the likely remedies to the
identified difficulties to assure better future success for Agrani Bank.
• ABL need to carefully handle the corporate ownership structure that is controlled by
its few boards’ members family.
• ABL need to improve its management standards and its disclosure system. It also
separates those from corporate governance.
• As its bankruptcy laws are insufficient. So, laws of bankruptcy should be improved in
ABL.
• ABL need to work to improve its regulatory system so that proper laws are
implemented.
• Strong capital market role should be enhanced in the ABL.
• ABL must create market for corporate control.
• Shareholders must increase its involvement in the ABL decision making.
• As pressure groups of ABL are too weak. So, pressure group of ABL must implement
its power so carefully.
• ABL should give adequate independence to the Auditors.
• ABL must improve its Audit report to improve Audit report reliability
 7.3 Conclusion

Corporate governance is a technique by which a business corporation are directed and

controlled. This technique specifies the distribution of rights and responsibilities among
company’s different actors including board, management, shareholders and stakeholders.
Good corporate governance practice enhances transparency and accountability. This system
increases long term shareholder value while at the same time protecting the interest of the
other stakeholders. Corporate governance separates the ownership and control between the
shareholders and management body. The owners or shareholders of these joint stock
companies, who were not involved in day-to-day operational issues, required assurances that
those in control of the company, the directors and managers, were safeguarding their
investments and accurately reporting the financial outcome of their business activities.
Corporate governance assures that board of directors or management body are designed in
such a way that protects the best interest of the shareholders. Because, shareholders are the
actual owner of the company.
 References

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The History of Modern Corporate Governance: Organizational Behaviors. New York: Edward Elgar
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Bangladesh bank, (2015), Corporate Policy, URL: www.bangladeshbank.org.bd.
ABL, (2015), Board of Directors of ABL, URL: www.southeastbank.com.bd.Chowdhury, Dhiman.
(2009),
Overview of Corporate Governance: Definition. Dhaka: Agrohory Prokash, 2009.
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