CORPORATE GOVERNANCE

1
CORPORATE GOVERNANCE

•  
• Mehmood Mandviwalla
• Barrister at Law
• President SAARCLAW

2
Code of Corporate Governance

• - Consensus emerged that it would be unhelpful to
  put The Code into Companies Ordinance.
•  
• - The need for flexibility in company governance
  was very strong.
•  
• - The Code derives its strength from widespread
  support which it is now receiving.

Corporate Governance
Mehmood Mandviwalla
3
Purpose of the Code

•  - Where public investment is being sought the
  obligation of the State is to protect investors
  against malpractices.
• - Composition of Board their responsibilities
  eligibility.
• - Periodic meetings appointment of CFO and
  Company Secretary Audit Committees and change
  of External Auditors.
• - Disclosure of interest by directors and
  divestment of shares
•  

Corporate Governance
Mehmood Mandviwalla
4
Duties and Responsibilities of Directors

• - A company is an abstract entity which can only
  act through individuals.
•  
• - Companies Ordinance has many specific
  provisions about the responsibilities of
  directors and reliance is made on
•  
• (i) Articles of the company
• (ii) Complex and inaccessible case law defined
  a directors propriety of conduct or the
  standard of skill and care that is required of
  directors.
•  
• - As a result of this problem, directors were
  never clear about what their general duties were
  and to whom they owed such duties.

Corporate Governance

Mehmood Mandviwalla
5
Increased Role of Non-Executive Directors

• 1. Directors are no longer rubber stamps or hold
  ceremonial positions.
•  
• 2. Directors are no longer spectators. They are
  now required to participate in operational
  detail.
•  
• 3. Greater Accountability of Directors will
  result in higher responsibilities.
•  
• 4. Directors need to give more time and attention
  and carry out duties in a fiduciary manner.
•  
• 5. Directors have to now form part of the
  majority of the Audit Committee.
•  
• 6. Directors should give advice, make judgments
  and oversee commitment of corporate resources.

Corporate Governance

Mehmood Mandviwalla
6
Increased Role of Non-Executive Directors

• 7. Directors are now responsible for oversight.
• 8. Directors are responsible for assuring long
  term survival.
• 9. Managements may come and go internal
  structures may shift and change. The Directors
  responsibility to ensure long term survival
  continues.
• 10. Directors should act in the best interest of
  the shareholders.
• 11. Directors need to study the information
  provided to them and call for more information
  from management if they want it. The contents of
  Directors Report are set out in detail in The
  Code.

Corporate Governance
Mehmood Mandviwalla
7
Role of the CEO

• 1 CEO is the one man agent of the Board.
• 2. CEO exercises the powers delegated by the
  Board.
• 3. No surprises. Board should know when and
  where trouble is brewing. Board needs to be
  fully informed.
• 4. CEO develops and implements an effective
  corporate strategy while the Board takes the
  responsibility of approving how risky a strategy
  the company will follow.

Corporate Governance
Mehmood Mandviwalla
8
Minutes of Meetings Section 173

• Copy of Minutes of Board Meeting to be
  furnished to every Director within 14 days of
  date of meeting.
• Contents of the Minutes
• Fair and Accurate Summary
• Arguments, observations, criticism

Mehmood Mandviwalla
Corporate Governance
9
Company Secretary-Section 204

• Mandatory full time secretary for listed
• companies
• Qualified as per the specifications given
• in the Code of Corporate Governance
• Terms and Conditions of Appointment
• and remuneration to be determined by the
• Board of Directors

Mehmood Mandviwalla
Corporate Governance
10
Removal of Auditors - Section 252

• Powers given to shareholders to remove auditors
  by special resolution
• Negative control with the Audit Committee
• Disqualification of Auditors - Section 254
• Auditors cannot hold shares of any audit client

Mehmood Mandviwalla
Corporate Governance
11
SECP and SBP Liaison

• Code of Corporate Governance also adopted by SBP
  in Prudential Regulations

Mehmood Mandviwalla
Corporate Governance
12
THE OATH

• I swear that to the best of my knowledge (which
  is pretty poor and may be revised in future) my
  Company accounts are (more or less) accurate. I
  have checked this with my auditors and directors
  who (I pay) agree with me.

Corporate Governance
Mehmood Mandviwalla