Corporate Governance

CORPORATE GOVERNANCE

The term Corporate Governance is used to describe good corporate governance or good practices in corporate environment, it concerns the good relationship among the management, board of directors, controlling shareholders, minority shareholders and other stakeholders in an entity. Good corporate governance serves a number of public policy objectives. It reduces vulnerability of the financial crises, reinforcement property rights, reduces cost of capital and leads to capital market development.

Corporate governance system is generally comprised of a wide range of practices including accounting standards and laws concerning financial disclosure, executive compensation, size and composition of corporate boards etc.

Securities and Exchange Commission of Pakistan (SECP) being the regulator of companies, issues Code of Corporate Governance for listed companies and makes required changes from time to time to meet the needs of current market practices.

Securities and Exchange Commission of Pakistan (SECP) initially issued Code of Corporate Governance in March 2002 which was the outcome of the joint effort of SECP, Institute of Chartered Accountants of Pakistan (ICAP), Institute of Cost and Management Accountants of Pakistan (ICMAP) and three Stock Exchanges (now merged into one entity; “Pakistan Stock Exchange”). The main objective of the code was to improve transparency, governance and protect the interest of the investors by improving the disclosure in financial reporting of companies.

In Pakistan, Corporate Governance is being regulated under the provisions of Listed Companies (Code of Corporate Governance) Regulations, 2019 and this Code of Corporate Governance includes many recommendations in line with international good practice. The notion behind the enforcement of Corporate Governance regulations is to deter and prevent corporate wrongdoing and to encourage and enable corporate executives to be ethical and socially responsible.

The Listed Companies (Code of Corporate Governance) Regulations apply to all listed companies based on “comply or explain approach” except the requirements for which it is explicitly stated as “mandatory” and it shall be the responsibility of the board of directors to use this approach wisely. Comply or explain approach offers discretion to a company with respect to non-mandatory provisions of Corporate Governance Regulations either to comply or provide appropriate explanation as to any impediment in its compliance.

Good Corporate Governance of banks and other financial institutions has also fundamental importance for emerging Economies. State Bank of Pakistan restructured the regulatory framework governing the commercial banking industry and issued some guidelines for corporate governance.

Good Corporate governance stand on the principle of transparency, accountability, responsibility and fairness. It is very crucial for sustainable economic development as it increases companies’ access to finances by increasing credibility of business among general public. Good Corporate governance can help Pakistani companies for attaining better position in the global market.

IBI-Remedium provides corporate governance consultancy of a wide range of practices, from accounting standards and laws concerning financial disclosure, executive compensation, Board of Directors size and composition etc. to implement applicable code of corporate governance regulations in a cost-effective manner.