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INTRODUCTION:
In March 2002, the Securities and Exchange Commission of Pakistan issued the Code of
Corporate Governance to establish a framework for good governance of companies listed on
Pakistan's stock exchanges. In exercise of its powers under Section 34(4) of the Securities and
Exchange Ordinance, 1969, the SEC issued directions to the Karachi, Lahore and Islamabad
stock exchanges to incorporate the provisions of the Code in their respective listing regulations.
As a result, the listing regulations were suitably modified by the stock exchanges.
WHAT IS CORPORATE GOVERNANCE?
The set of rules and procedures that ensure that managers do indeed employ the principles of
value based management where VBM is, a managerial approach where the whole aim,
strategies and actions are linked to shareholder value creation Essence of Corporate
Governance, to make sure that the key shareholder objective wealth maximization is
implemented. A basic definition of corporate governance signifies the manner in which business
and affairs of the corporations are directed and managed by their board of directors and senior
management.
The Benefits of Corporate Governance:
The popularity and development of corporate governance frameworks in both the developed and
developing worlds is primarily a response and an institutional means to meet the increasing
demand of investment capital. It is also the realization and acknowledgement that weak corporate
governance systems ultimately hinder investment and economic development.
The Pakistani Corporation:
Corporate entities in Pakistan are primarily regulated by the SEC under the Corporate entities in
Pakistan are primarily regulated by the SEC under the Companies Ordinance, the Securities and
Exchange Ordinance, 1969, the Securities and Exchange Commission of Pakistan Act, 1997, and
the various rules and regulations made there under. In addition, special companies may also be
regulated under special laws and by other regulators, in addition to the SEC. In this way, listed
companies are also regulated by the stock exchange at which they are listed; banking companies
are also regulated by the State Bank of Pakistan; companies engaged in the generation,
transmission or distribution of electric power are also regulated by the National Electric Power
Regulatory Authority; companies engaged in providing telecommunication services are also
regulated by the Pakistan Telecommunication Authority; and oil and gas companies are also
regulated by the Oil and Gas Regulatory Authority.
The Origins of Corporate Governance in Pakistan:
Since 1948, when Pakistan came into being, Indian Companies Act, 1913 is used by corporations
until the promulgation of Companies Ordinance, 1984 corporate entities in Pakistan primarily
regulated under Securities and Exchange Ordinance, 1969 and SECP Act, 1997 With the changes
in the International Business Environment SEC took responsibilities and powers of the Corporate
Law Authority in, 1999The SEC has focused on encouraging businesses to adopt good corporate
governance practices to manage business challenges internationally.
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The CFO:
The senior manager responsible for overseeing the financial activities of an entire company. The
CFO's duties include financial planning and monitoring cash flow. He or she analyzes the
company's financial strengths and weaknesses and suggests plans for improvement. The CFO is
similar to a treasurer or controller in that he or she is responsible for overseeing the accounting
and finance departments and for ensuring that the company's financial reports are accurate and
completed on time.
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The amount, if any, which they recommend should be paid by way of dividend
In the case of a public company or a private company which subsidiary of a public company, the
directors report shall in additional to above matters:
Give reasons for incurring loss and a reasonable indication of future prospects of profit, if
any.
SCRUTINIZING FINANCIAL STATEMENTS - WHAT EVERY DIRECTOR SHOULD
KNOW
1. First auditors:
The first auditors of a company shall be appointed by the directors within sixty days of the
date of incorporation.
2. Commission power to appoint auditors:
3.
4.
5.
6.
CONCLUSION
Corporate governance is the mechanism by which the agency problems of corporation
stakeholders, including the shareholders, creditors, management, employees, consumers and the
public at large are framed and sought to be resolved.