Pakistan Institute of Corporate Governance (PICG) with a view to achieving its broad-based objective of increasing awareness of good governance

practices seeks to engage companies, corporations, institutions and individuals by inviting them to join its membership. It has accordingly established a coherent membership regime and the Rules for Membership. There are different categories of membership being offered to suit broad spectrum of companies and individuals. The members can enjoy the benefits of access to best practices in good governance as well as price privileges on all directors training and other events, roundtables, seminars and international conferences. Additionally PICG offers networking opportunities at the highest corporate level and platform to help influence and improve corporate governance standards in Pakistan. The two broad categories include:

Corporate membership Individual membership

Founder Member Institute of Chartered Accountants of Pakistan Chartered Accountants Avenue, Clifton, Karachi Institute of Cost and Management Accountants of Pakistan ST-18/C, Block-6, Gulshan-e-Iqbal, Karachi Insurance Association of Pakistan 1713 - 1715, 17th Floor Saima Trade Tower - A I.I. Chundrigar Road, Karachi Investment Banks Association of Pakistan 606, 6th Floor, Uni Towers, I.I. Chundrigar Road, Karachi74000 Islamabad Stock Exchange (Guarantee ) Limited Stock Exchange Building, 101-E, Fazal-ul-Haq Road, Islamabad Karachi Stock Exchange (Guarantee) Limited Stock Exchange Building, Stock Exchange Road, Karachi Lahore Stock Exchange (Guarantee) Limited 19, Khayaban-e-Aiwan-e-Iqbal, Lahore. Lahore University of Management Sciences Opposite Sector U, DHA, Lahore. Leasing Association of Pakistan 602, 6th Floor, Progressive Centre, 30-A, Block 6, PECHS, Shahrah-e-Faisal, Karachi-75400. Founder Member Founder Member Founder Member Founder Member Founder Member Founder Member Founder Member Founder Member

nstitute of Business Administration, Garden/Kiyani Shaheed Road, Karachi

1 0

On Corporate Governance

Mr. Hussain Dawood is Chairman of Dawood Hercules Chemicals Ltd., Engro Corporation Ltd, Karachi Education Initiative/Karachi School of Business and Leadership and the Pakistan Poverty Alleviation Fund, which is, globally, the largest World Bank financed social fund.

profile Mr. Hussain Dawood spoke about Corporate Governance in Pakistan to the Knowledge Center staff in an exclusive interview. The Pakistan Institute of Corporate Governance (PICG) is a not-for-profit company, limited by guarantee and without share capital, setup under section 42 of the Companies Ordinance, 1984. The Institute is charged with promoting good corporate governance practices in Pakistan. Good corporate governance is an essential prerequisite for the integrity and credibility of financial institutions, stock exchanges, incorporated companies and the whole market economy. It builds greater confidence and trust by ensuring transparency, fairness and accountability with respect to shareholders and other stakeholders. PICG is involved in training and education, creating awareness, undertaking research, publishing guidelines and other resource material. It provides a forum for discussion on corporate governance. We are a public-private partnership. In addition to the Securities and Exchange Commission of Pakistan (SECP), our founding shareholders include the State Bank of Pakistan (SBP), the three stock exchanges in Pakistan, banking and insurance associations, apex bodies of the corporate businesses and Non-Bank Financial Institutions (NBFIs) as well as the leading business educational institutions. Founder Members of PICG:

01 02 03 04 05 06 07 08 09 10

Institute of Business Administration, Karachi Institute of Chartered Accountants of Pakistan Institute of Chartered Secretaries & Managers Institute of Cost & Management Accountants of Pakistan Insurance Association of Pakistan Investment Banks Association of Pakistan Islamabad Stock Exchange (Guarantee) Limited Karachi Stock Exchange (Guarantee) Limited Lahore Stock Exchange (Guarantee) Limited Lahore University of Management Sciences

11 12 13 14 15 16 17 18 19

Leasing Association of Pakistan Modaraba Association of Pakistan Mutual Funds Association of Pakistan Overseas Investors Chamber of Commerce and Industry Pakistan Banks Association Securities & Exchange Commission of Pakistan State Bank of Pakistan The Federation of Pakistan Chambers of Commerce & Industry The Institute of Corporate Secretaries of Pakistan

services
The PICG acts as a platform to provide its members as well as non-members, value-added services and regular activities that in addition to other benefits also offer networking opportunities.

Corporate Governance Leadership Skills Board Development Series (BDS) - Director Education Directors Orientation Workshop (DOW) Corporate Governance Assessment & Advisory Services Directors' Placement Service for Accredited Directors Research Services

Vision mission and objective

The PICG envisions becoming the leading provider of knowledge about best practices in corporate governance to all key stakeholders involved in or affected by corporate governance with the objective of bringing about national economic and social transformations by improving the quality of corporate governance in Pakistan. To achieve this, the objectives of the Institute are:

To represent, express and promote and give effect the findings and opinions of the members of the Institute on events and issues relating to the proper management of business affairs of corporations in Pakistan with the view to enhance long-term values of these incorporated bodies to shareholders while considering the financial viability of business.

To promote awareness of corporate governance and encourage professional interaction among members.

To encourage and provide a conducive environment for stakeholders to exchange opinions, knowledge and information on corporate governance issues.

To collect and circulate corporate information and data pertaining to corporate governance and provide research materials to members.

To enhance accountability of management to stakeholders including employees, customers, suppliers of the corporation and the environment in which the corporation does its business.

To strengthen compliance and conformance by corporations to laws and regulations and to enhance self- regulating practices.

To print and publish newsletters, periodicals, books and leaflets and disseminate the publications to the members.

To organise conferences, seminars, lectures and exhibitions either independently or otherwise for the members or public at large and to establish and maintain a library, research centre, reviews, periodicals, newspapers, investment updates, companies' statistics and data.

To strengthen performances of the Institute and enhance the global competitiveness of domestic corporations.

Corporate Governance Practices In Pakistan

Monday, 24 August 2009 09:16

Economic Updates - Exclusive Articles Corporate Governance is commonly referred to as a system by which organizations are directed and controlled. It is also a process through which company s objectives are established, achieved, and monitored. It is concerned with the relationships and responsibilities between the board, management, and other relevant stakeholders within a legal and regulatory framework. The standard definition of corporate governance by economists and legal scholars refers to the defense of shareholders interests (Jean Tirole, 2001). There is a growing interest in the concept of corporate governance in Pakistan mainly because corporate governance is a key to develop market economy and civil society in transitioning economics. Corporate governance is becoming increasingly important to investors, because well-governed companies having lower risks and fewer unexpected events can protect shareholders rights and provide better assurance that management will act in the best interest of the company and of all its shareholders. Since its inception in 1999, the SECP has focused its regulatory measures on fostering investor s confidence to encourage good corporate governance to ensure transparency and accountability in the corporate sector and safeguard the interests of all stakeholders, especially those of minority shareholders. In March 2002, the first code of corporate governance for Pakistan was finalized and issued by Security

and Exchange Commission of Pakistan (SECP). It was subsequently incorporated in the listing regulations of the three stock exchanges and is now applicable to all public listed companies. The main objectives of code of corporate governance are to: (a) Stimulate the performance of companies; (b) Limit insider s abuse of power; (c) Monitor manager behavior to ensure corporate accountability and protection of interest of investors and society; (d) Propose restructuring of the board of directors to introduce board based representation by minority shareholders and by executive and non-executive directors; (e) emphasize openness and transparency in corporate affairs and the decision making process; (f) Require directors to discharge their fiduciary responsibilities in the larger interest of all stakeholders in a transparent, informed, diligent, and timely manner. To achieve the goal of effective institutional framework, that would help corporate management, increase shareholder value while protecting the interests of other stakeholders, SECP in partnership with the United Nations Development Program (UNDP), and economic affairs division of the Government of Pakistan launched the SEC-UNDP project on corporate governance in August, 2002. UNDP has provided technical and financial assistance to the SEC for developing and implementing good corporate governance practices and establishing a sound regulatory framework for the corporate sector in the country. The work involves implementation of the code of corporate governance issued by the SEC in March 2002, creating stakeholder awareness, capacity building and networking with other emerging markets and a corporate governance cell has also been established at the SEC which acts as a resource centre and carries out research and awareness campaigns on various issues related to corporate governance. In 2004, the SECP took the initiative to establish the Pakistan Institute of Corporate Governance in Public Private Partnership. The establishment of the institute fulfils the need for an institutional arrangement where all major stakeholders jointly study governance practices in their respective roles, where necessary. Moreover, in 2006 International Finance Corporation (the private sector arm of the World Bank Group) launched the Pakistan corporate governance project (PCGP) to improve corporate governance practices in Pakistan and ACCA Pakistan (A part of Association of Chartered Certified Accountants) strongly supported the adoption of code of corporate governance in Pakistan and has been actively involved in arranging seminars and workshops to create awareness of best practices of corporate governance in Pakistan.

A survey of corporate governance practices in Pakistan 2007 was compiled and drafted by ACCA Pakistan with the association of International Finance Corporation (IFC), SECP, and PICG from listed and large (paid-up capital 500 million and above) listed companies and financial sector institutions of Pakistan. The survey aimed at to make stakeholders understand the extent to which financial institutions and companies in Pakistan follow good corporate governance practices. Being a front line regulator, SECP initiated an action against companies, which do not comply with the requirements of Listing Regulations, particularly Regulation No. 32, which includes a) failure to declare dividend or bonus for the last five years; b) failure to hold its annual general meeting for a continuous period of three years; c) has gone into liquidation either voluntarily or under court order; d) failed to pay the annual listing fees for 2 years; and e) failed to join CDS after its securities have been declared eligible security by the CDC. The Exchange after adopting the due process has placed a number of companies on the Defaulters Counter , whose names are quoted separately through the Daily Quotation of the Exchange along with nature of default(s) mentioned against each company. The purpose of placing the companies on separate counter Defaulters Counter is to create awareness amongst the shareholders / investors that the company is in default(s) of the Listing Regulations. In order to encourage good corporate governance and appreciate outstanding performance of the companies, the Exchange has a practice to give away the awards to top companies each year. The criteria for selection of top companies are regularly reviewed to ensure that only such companies are rewarded that not only pay good returns to their shareholders but also comply with the Listing Regulations, particularly the code of corporate governance. The Securities & Exchange Commission of Pakistan Act 1997 (SECP Act) established the SECP as the regulator of the capital markets and the controller of corporate entities. The code of corporate governance was issued in December 2002. The central bank of Pakistan is the regulator and was formed by the State Bank of Pakistan Act 1956. Compliance of the code of corporate governance has been made mandatory for Non-Banking Financial Institutions (NBFI) and Development Financial Institutions (DFI s). PICG was formed by 19 stakeholders in December 2004 as a Public Unlisted Company Limited by Guarantee to promote Corporate Governance in Pakistan. Institute of Chartered Accountant of Pakistan (ICAP) was founded in 1961 under the Chartered Accountants Ordinance 1961 to regulate the Auditing Profession. KSE has 75% of the trading volume of Pakistan. Stock exchanges are responsible to oversee the listing requirements including the compliance of the code of corporate governance since 2003. IFC S CORPORATE GOVERNANCE PROJECT IN PAKISTAN (PCGP) IFC s Private Enterprise Partnership for Middle East and North Africa (PEP-MENA) support the PCGP and aim to promote and support the corporate governance reforms in Pakistan. The World Bank in corporate governance assessment for Pakistan 2005 concluded that despite initial resistance to the code from issuers and market participants, compliance was improving. Multinational

companies, leading banks, and notable family controlled corporations were creating more transparent and modern corporate governance structures. Companies are arranging orientation seminars for their boards.There is also a need that regulatory bodies should keep check on the companies. SECP should ensure effective implementation of corporate governance practices and stock exchanges must implement listing rules relating to corporate governance.

4 Chi. J. Int'l L. 141 (2003) Cross-Listing and Corporate Governance: Bonding or Avoiding; Licht, Amir N.
article

The Advantages of Corporate Governance

1.

Corporate governance improves access to capital.

Corporate governance refers to the ability of companies to manage themselves effectively. Corporate governance is the collective system of leadership used by executives and all major leaders in the company, including important shareholders. It dictates how decisions are made and who holds the power in the company. A strong corporate governance system will be aware of the company's current progress and will have the ability to make many changes in corporate structure as needed.

2. Enhanced Performance
o

Corporate governance helps a company improve overall performance. Without corporate governance, a company tends to be weak and sluggish. Only a group of leaders working together can successfully foresee market changes and prepare the company to meet them ahead of time, while also managing the company in the here and now. It is too much work and too much responsibility for one person, or for only a loose body of leaders.

Access to Capital
o

The better corporate governance a company has, the more easily it can access outside capital that the business can use to fund its projects. Since corporate governance includes major shareholders, it connects investors with the business itself, and these investors use their resources and contacts to support the company monetarily. Due to these close connections, capital also tends to be less expensive to finance with a strong corporate governance system.

Better Standards

Corporate governance makes many decisions about business operations, but one of the most important decisions involves corporate standards. Standards affect the quality of products and the goals that the business has in technology, customer service, and marketing. The combined efforts of the business leaders allows the company to accurately judge competition and create standards that add value to the business's products or services.

Better Talent Utilization

o

Without a corporate governance, business leaders tend to flounder. The lack of clear organizational structure at the top of the company makes it difficult for people to move up the ladder or to aim for a particular position. With a strong corporate governance structure, however, people can find positions that utilize their talents more effectively, and the board of directors and top leaders of the business are always looking to add more talented people to their numbers.

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References

IFC: Corporate Governance FCGI: What is Corporate Governance

Photo Credit billion dollar corporation image by Augustus Saxton from Fotolia.com;

Three Types of Corporate Governance Mechanisms

Osmond Vitez started writing new media content in 2009. His articles have appeared on websites such as Think+Up and Houston's Chron.com. He is an adjunct accounting instructor and former corporate accountant, with experience ranging from small business to a Fortune 500 company. Vitez has two accounting degrees: a Bachelor of Science from Pensacola Christian College and a Master of Science from Liberty University. By Osmond Vitez, eHow Contributor
updated September 16, 2010

Print this article

1.
o

Corporate governance is the policies and procedures a company implements to control and protect the interests of internal and external business stakeholders. It often represents the framework of policies and guidelines for each individual in the business. Larger organizations often use corporate governance mechanisms to manage their businesses because of their size and complexity. Publicly held corporations are also primary users of corporate governance mechanisms.

Board of Directors
o

A board of directors is a corporate governance mechanism that protects the interests of a company's shareholders. The shareholders use the board to bridge the gap between them and company owners, directors and managers. The board is often responsible for reviewing company management and removing individuals who don't improve the company's overall financial performance. Shareholders often elect individual board members at the corporation's annual shareholder meeting or conference. Large private organizations may use a board of directors, but their influence in the absence of shareholders may diminish.

Audits
o

Audits are an independent review of a company's business and financial operations. These corporate governance mechanisms ensure that businesses or organizations follow national accounting standards, regulations or other external guidelines. Shareholders, investors, banks and the general public rely on this information to provide an objective assessment of an organization. Audits can also improve an organization's standing in the business environment. Other companies may be more willing to work with a company that has a strong track record of operations.

Balance of Power
o

Balancing power in an organization ensures that no one individual has the ability to overextend resources. Segregating duties between board members, directors, managers and other individuals ensures that each individual's responsibility is well within reason for the organization. Corporate governance can also separate the number of functions that one division or department completes within an organization. Creating welldefined roles also keep the organization flexible, ensuring that operational changes or new hires can be made without interrupting current operations.