Transcript Definition of Corporate Governance

THE EFFECTIVENESS OF
CORPORATE BOARDS IN
PAKISTAN
ZAFFAR A. KHAN
30-November-2006
THE STUDY METHODOLOGY
o
Based on a questionnaire probing range of Board
Practices
o
Sent to 40 leading listed companies –mix of MNC’s,
SOE’s & Family Enterprises
o
Solicited responses from 2 Board Positions of each
company
o
35 companies / 54 Directors responded.
THE STUDY FINDINGS
The Responses
YES
NO
NR
Does the Board assess it’s own performance.
5
48
1
Is the CEO formally appraised each year.
27
25
2
Is the Board empowered to set CEO’s Compensation.
26
27
1
Does the Board engage in succession planning.
22
31
1
Is it good to separate the Chairman & CEO positions.
49
4
1
Should non-executive Directors receive compensation.
46
7
1
THE STUDY FINDINGS………..continued
The Responses
YES
NO
NR
Is the Board involved with debating and approving
key business strategies.
48
8
0
Does the Board have any retreat meetings.
7
47
0
Does the Board formally assess the Human Resource
Stock and employee morale.
10
42
2
Does the Board have a CSR policy.
22
31
1
FREQUENTLY CITED SUGGESTIONS FOR
IMPROVING BOARD EFFECTIVENESS
–
o
The need for more independent directors
professionals with relevant industry experience.
o
Instituting a self evaluation process of the Board’s
performance.
o
Better orientation and training of Directors.
o
Making effective use of Board Committees.
FREQUENTLY CITED SUGGESTIONS FOR
IMPROVING BOARD EFFECTIVENESS
…..continued
o
Less interference from government in Board’s
decision making in case of SOE’s.
o
Limiting number of Directorships a person can hold.
o
Greater focus by the Board on strategy as opposed to
management issues.
o
Boards should be required to set up HR Committees.
Give same status as the Audit Committee in the Code.
CONCLUSION
o
In our top Co’s there is appreciable recognition & a
desire to conform to principles of GCG.
o
There are, however, gaps and in some cases the
practice is superficial.
o
The overall universe of Co’s requires a fair bit more
to be done.
o
GCG can not be achieved through prescription alone.
o
All stakeholders must want it. Capital Markets and
Society must be more demanding & discerning.
A PARTING THOUGHT
o
“Good Corporate Governance is about maximising
wealth in a legitimate way and distributing it in an
equitable way”.
o
An Effective Board is essential to meet the twin
objectives stated above.