Regulatory system should be voluntary rather than governed by laws

Sep 20 - 27, 1999

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Chairman Securities and Exchange Commission of Pakistan (SECP) Shamim Ahmed Khan said that government believes the corporate governance should be voluntary initiatives. The 'Best Practice Code' adopted by the companies is expected to diminish the role of regulatory authorities. The SECP has prepared a "Corporate Plan" to improve corporate culture in the country. He was addressing a seminar on "Corporate Governance", organized by the Management Association of Pakistan (MAP).

The SECP Chairman informed that the commission was also improving its working. "We have tried to be transparent in our policies and all our information. All the actions taken against the companies have been put on the web site. Besides information regarding regulatory framework and policies are available on Internet," he added.

Khan asked the auditors and accountants to play their role for improvement of confidence of investors in the corporate sector. "People expect the auditors and accountants to be fair and tell the exact picture of a company."

He referred to the example of companies in the United Kingdom which frame their own regulations and there is least interference from the regulators. Similarly, in Pakistan it should not be, expect that government will come up with new regulations and laws." Companies and institutions are free to frame their own regulations. There are models available in Pakistan and let us see how they are running their companies. In Pakistan, stock exchanges frame their own regulations and they have been given the liberty by the SECP to introduce improvised regulations regarding listing of companies.

He pointed out that the main responsibility of the regulatory body was to provide an enabling environment and legal framework to companies. He appreciated the efforts being made by Karachi Stock Exchange (KSE) which has done an extensive work regarding regulations of the listing companies. The minority shareholders have now become more conscious about their rights.

The Managing Director of the KSE Shahid Ghaffar said that out of total 770 listed companies at the Exchange, one-third had not been paying dividend to their shareholders. The names of over 120 companies have been placed on defaulters' list of the KSE. Out of these, 67 companies have not held their annual general meetings (AGM) or published their balance sheets for the last years.

The Chairman of Engro Chemical Pakistan Limited, Shaukat R. Mirza said that most of units have become sick due to lack of good corporate governance. The lack of accountability of the board of directors to all stake holders is the main reason for poor governance. The directors are responsible for protecting interests of all the stakeholders. In Pakistan, it is often believed that the board is accountable to the shareholders only. According to Mirza, the stake holders are: the shareholders, the employees, the customers, the suppliers, the community and the government.

Chairman, Atlas Group of Companies, Yusuf H. Shirazi said, "If the government follows good governance, the corporate governance is expected to improve automatically." Referring to the performance of corporate sector during the era of Ayub Khan, he said that it was the good governance that resulted in massive industrialization in the country at that time.

Chief Operating Officer, Aga Khan University Hospital, Nadeem Mustafa Khan said, "Pakistan has a talented and professional corporate sector but often the lack of expertise to identify the issues has resulted in poor planning." He explained various models of management being followed in the country. However, these models have witnessed significant transition over the years. Each model has its own strength and weakness.

The MAP President, Moin F. Fudda conducted the proceedings of the seminar attended by a large number of members and participants.