Emblazon Paints, Pakistan Case Study: Director s Remuneration

Introduction
Emblazon Paints Pakistan Limited is a Pakistani paint company that operates chiefly in Pakistan and is headquartered in Lahore, Pakistan. It has come a long way since its inception in the year 1923. Pakistan s second largest decorative paint player, Emblazon Paints services the market through a distribution network of 82 stock points and 12,000+paint retailers. Mr. Bilal Ahmed took over as the Chairman in the year 1995. Under him the company became the fastest growing company in the paint industry as sales figures reached over Rs. 160 million by 2000. The dawn of new century saw the launch of many new products such as emulsions and distempers. The COLOR BANK tinting system was launched through which the consumer can select from a range of over 5000 colors. Apart from operations in Pakistan, with a production facility at the Berger manufacturing unit at Mureedkay, Berger has also expanded its footprint in Nepal by setting up a second unit. Today Emblazon s sister company in Nepal is the dominant leader with over 65% market share. In keeping with the Company s dynamic growth plan, Emblazon has also acquired majority shares in Bolix SA of Poland, a leading provider of External Insulation Finishing Systems (EIFS) in Eastern Europe. As Berger continues to grow internationally it also continues to be the second largest paint company in Pakistan. In 2000, the price of company share was Rs. 183. Mr. Bilal Ahmed holds 5% share of the company, RSN Investment bank hold 20% of its shares. JS mutual fund hold 25% of its shares and rest are held by public and other minority shareholders.

Board Structure
The board of Emblazon Paints consisted of nine members, Bilal Ahmed as Chairman, Jazib Khalid as CEO, four executive, Mr. Asad, Mr. Ahmed, Mr Jawad, Mr. Hassan and 3 non executive directors, Mr Harris, Mr. Saad, Mr. Asim. Jazib Khalid joined company in

1992 as financial officer, got promoted as head finance and then CEO of the company. Similarly all four executive directors, Mr. Asad, Mr. Ahmed, Mr. Jawad and Mr. Hassan, were people who had joined company with small time jobs and had worked their way up the ranks of the company to executive positions. Mr. Harris was CEO of CB Engineering And Construction Company. Mr. Saad was owner of Lahore Paper Mill and Mr. Asim was in schooling business with his school franchises all over Pakistan. All these guys were Hand picked by Mr Bilal Ahmed as non executive directors of the company

History of Mr Bilal Ahmed with the Emblazon

Mr. Bilal Ahmed was a student of business at PUGC. He was a very intellectual and hardworking person but he didn't have much luck in studies. He started a side business in addition to his studies; he started trading in thinner and related chemicals. He earned good profits so he quit his studies and engaged himself full time in his business. His business grew and he stepped in other related businesses like trading of paints. In 1990, he was given a sales franchise of Gujranwala by Emblazon paints and he entered in a job contract with them, due to his hard work and determination he got promoted as assistant manager of sales department, then director of sales department and finally Chairman of the company in 1995. Emblazon was a small scale company private company when Mr. Bilal Ahmed joined it. After that the company grew, went public and got listed at stock exchange. Today Bilal Ahmed was the key player in the company. Due to his history in the company and the fact that he played an important role in success of this company, he held a very dominating position among the board of directors and rest of the organization.

Problem Overview
After Mr. Bilal took charge as Chairman of the company in 1995, company earned huge profits and its share price in stock exchange improved smoothly. It rose from Rs. 75 in 1995 to Rs. 183 in 2000, and sales from Rs. 45 million in 1995 only from Pakistan to Rs. 160 million from all over the world.

Recently the company is facing a downfall in its share price. It was Rs 183 in 2000, Rs 145 in 2003 and today in 2005 it is at its record lowest in last 7 years at Rs 115. Financial analysts are linking diminishing stock price of Emblazon Paints with the constantly decreasing amount of dividend management of the company is announcing every year. Dividend per share announced by the company in 2000 was Rs 62, in 2003 it was Rs 45 and in 2005 it was Rs 24, despite the fact that company was earning as much profits as before.

200 180 160 140 120 100 80 60 40 20 0 2000 2001 2002 Share Price Dividend per Share 2003 2004 2005

Share Price and Dividend per Share for Emblazon from 2000 to 2005 in Rs.

All four executive directors were people who had previously worked under him previously in the company and would never raise their voice against Bilal Ahmed.