Regulatory system should be voluntary rather than governed by laws
Sep 20 - 27, 1999
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,"
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
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
The MAP President, Moin F. Fudda conducted the proceedings of the
seminar attended by a large number of members and participants.