Pakistan forms institute of corporate governance

[Mahtab]

AOA Quote from UN online

"During the past few years, the financial and corporate world has

witnessed significant changes. Following the Asian financial crisis,

recent accounting scandals have brought to light the importance of an

effective institutional framework that would help corporate management

increase shareholder value while protecting the interests of other

stakeholders. To achieve this goal, the Securities and Exchange

Commission (SEC) of Pakistan (www.secp.gov.pk), in partnership with

the United Nations Development Programme (UNDP) and the Economic

Affairs Division of the Government of Pakistan, launched the SEC-UNDP

Project on Corporate Governance in August 2002. Under the purview of

the Project, 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. In order to attract sustainable capital, it is

imperative for economies in transition to focus on evolving a system

that ensures good corporate governance. As the dust settles after the

Asian financial crisis, most economic and development commentators

feel that a major determinant of the relationship between long-term

economic growth and poverty reduction is a well-functioning financial

and corporate sector. The inflow of foreign capital brings with it a

transfer of technology and managerial skills—factors crucial to the

developing countries in their economic progress. At the same time, the

confidence of local investors also heightens. This increased economic

activity improves human welfare in the form of an efficient allocation

of resources and more employment. Therefore, implementing good

governance practices has a positive impact on economic growth, which

creates opportunities and brings people above the poverty line.

The SEC-UNDP Project aims to make a positive contribution towards

economic growth in Pakistan by developing a stronger financial and

corporate sector. A Corporate Governance Cell has 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.

Guidelines and newsletters are also being distributed to the corporate

community for a better understanding of the issue, and research is

being carried out for the harmonization of the provisions of the Code

with corporate laws and an assessment of the state of corporate

governance. The Cell also aims to prepare groundwork for the

establishment of an institute of corporate governance. A monthly

briefing series has been initiated to further increase public

awareness on various aspects of corporate governance. In order to

generate meaningful debate, extensive research work is in progress for

a working paper series, the first focusing on the role of

institutional shareholders in the promotion of corporate governance in

Pakistan. Another major initiative of the Cell is the development of

corporate governance index, where work has already started, to

indicate assessment of practices and policies and to reflect the

relative level to which a company accepts and follows the Code and

guidelines of corporate governance. An important part of the Project

is the exchange of contemporary ideas and collaboration on key issues.

SEC officials have been participating in study tours to leading

international institutions that are involved in the promotion and

development of sound governance practices. In order to encourage

participation of stakeholders in the system, it is essential to

broaden their understanding of the subject. In this regard, the SEC

has been conducting several activities, including seminars and

workshops, to increase the awareness of the directors and management

of listed companies of their statutory and fiduciary duties. The first

seminar under the Project-Strengthening Corporate Governance in

Pakistan—was held on 28 November 2002 and included local and foreign

participants, who gave an international perspective on corporate

governance. Three workshops have already been organized—in Islamabad,

Karachi and Lahore—on the "Responsibilities of Directors and

Management of Listed Companies". An important aspect of these

workshops was the utilization of the case study method in order to

draw lessons from corporate failures in the country and other parts of

the world. Participants lauded the efforts being undertaken by the SEC

to improve good governance practices. The SEC is also planning to

publish a manual that will highlight the role and responsibilities of

directors, keeping in mind the economic and legislative conditions

prevailing in Pakistan. In addition, it plans to hold a conference

involving key players in the country and abroad. By complementing

resources with UNDP, SEC has managed to act as an agent for bringing

positive change in the corporate culture of Pakistan. A more

transparent and efficient corporate sector would thus gain investors'

confidence and yield positive results towards growth. Author Shahnawaz

Mahmood of the SEC of Pakistan is working as research officer on the

UNDP Project on Corporate Governance.

Regards

Mahtab