LAHORE, May 31, 2006: Securities and Exchange Commission of Pakistan (SECP), Commissioner Salman Ali sheikh said a national corporate responsibility strategy was being evolved for long-term economic growth.

He was speaking as a Chief Guest at a One-Day Conference on “Corporate Governance” organized by the Escorts Investment Bank Limited and International Finance Corporation (IFC) here on Wednesday. Mr. Sheikh said promotion of Corporate Governance was necessary for ensuring sustainable economic growth through efficient utilization of resources, transparency and accountability.

The National Securities and Exchange Commission was encouraging corporatization of Trade and Industry through public-private partnership.

He said promotion of regulatory environment was necessary in the country because most of the businesses were being run or controlled by single families and lacked Corporate Culture. Protection of interests of share-holders in such businesses was a serious problem because the decision-making was concentrated in the hands of controlling families.

Investment Banks Association of Pakistan (IBAP), Chairman and President & CEO of Escorts Investment Bank Limited, Rashid Mansur said Corporate Governance has been evolved in the US and Europe for ensuring the most productive use of resources. With the growth of business units, de facto shareholder control has diminished resulting in the emergence of super powerful CEOs.

He said the CEO-dominant paradigm was neither present nor evident in Pakistan. The SECP had introduced regulation for strengthening the position of CEO, at the stock exchanges recently. There was also a dire need for demarcating the role of board of directors and executive management. Framing of the board policy and strategy, along with general stewardship of the company, fall in the domain of the board while the day-to-day operations rested with the executive management but the roles seemed to have been reversed in many companies, including the financial institutions.

He said financial institutions were built on values and their viability depended on know-how. Investor confidence rested on corporate governance, transparent and accurate financial information and system of check and balances.

Pakistan Institute of Corporate Governance CEO Zahid Zaheer said good corporate governance aimed at making the directors and financial managers accountable to shareholders. The role of CEO was dominant in corporate governance in the West; the boards were meant only for check and balance and intervened only in the event of crisis. The CEO must be willing to listen to accept criticism from the board. The directors were also required to have first-hand knowledge of business and demonstrate independence from the management.

He said policy was required to check false accounting and providing misleading information to investors who were the real owners of the businesses. Companies responsive to shareholders always earned higher profits.

IFC corporate governance programme manager Sebastian A-Molineus said corporate governance built reputation for companies.

He said over 85 percent businesses in Europe and the US were family run. There was a need to distinguish between company and family relationships in family-run businesses. Pakistan Corporate Governance project manager Kaiser H. Naseem said effective board of directors was necessary for setting strategic direction of the Company.

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(Source: Dawn Newspaper)