Daily Times

ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP), International Finance Corporation (IFC), and the Centre for International Private Enterprise (CIPE) are collaborative partners in creating an awareness on Principles of Corporate Governance for Non-listed Companies (Principles).

As part of the mutual agreement, a third roundtable has been conducted by the SECP in collaboration with IFC in Islamabad to create awareness about Principles. Taking advantage of large participation from the corporate sector, the SECP also arranged stakeholders’ consultative session on the draught of Companies Bill, 2016. The roundtable conference was attended by distinguished guests, including renowned corporate governance practitioner Mr Zaffar Khan, former chairman of Pakistan Telecommunication Company Limited, and representatives from industry, accounting and trade bodies, and academia.

Ms Maheen Fatima, SECP director, highlighted the significance of the proposed principles for family-owned and small businesses. She said that the proposed principles would help formulate the procedures, and shall refine the corporate governance practices. While appreciating the IFC and CIPE for providing a debating forum for the consultative process, she also stated that feedback from the participants would also be taken into consideration while finalising the proposed principles. Mr Khawar Ansari, a member of the IFC, also said that family bonds and structures were sound in Pakistan. He was of the opinion, “in view of our social structure, the proposed principles will meet the need to define some standard rules of practice to run corporate matters of small and medium enterprises and non-listed companies.” He informed the participants that Dubai is one of the pioneers to implement Principles of Corporate Governance for SMEs and after every two years top 100 SMEs list is published in order of merit for compliance. Therefore, he proposed that in order to encourage compliance some sort of enforcement or compliance mechanism should be devised in order to encourage industry acceptability. Mr Zaffar Khan also shared his experiences about the corporate governance practices and postulated that the female representation should be encouraged on the boards of corporate entities.

Mr Mohsin Chaudhary, of the IFC and Hammad Siddiqui, of the CIPE, also highlighted international practices and benefits accrued through following corporate governance principles. While briefing the participants on proposed Companies Bill, 2016, Mr Jawed Hussain, SECP executive director, said that the new company law is facilitative and would encourage the corporate sector growth due to reduced costs of documentation, ease of enforcement, quick access to information and by extensive use of technology. In light of the stakeholders’ comments, the SECP has adopted a holistic approach to draught the Companies Bill, he stated. He highlighted key changes being introduced in Companies Bill. Participants took a keen interest in the proposed reforms being introduced through Companies Bill, and asked questions about enforcement mechanism, filing regime, valuer’s regime, the SECP’s collaboration with bodies such as the Intellectual Property Organization and the FBR.

The roundtable concluded with agreement to strengthen corporate governance regime for non-listed companies and recommendations on following priorities:

(a) Authority matrix for shareholders and board members be defined in the light of legal provisions and should be part of the constitutive documents;

(b) Paper boards be discouraged and instead, boards should play an effective role in discharging their duties to shareholders and other stakeholders of the corporates;

(c) Remuneration benchmarking for executives and boards be made in order to retain productive employees and board members;

(d) The formal arrangement must be put in place to encourage internal control and risk management functions to avoid legal and reputational risks;

(e) Chairman of the board of directors must ensure holding of general meetings to encourage a dialogue between shareholders and
directors, and

(f) Induction training of board members be encouraged to familiarise new members with the roles, functions and working environment of companies.