Corporate Management and Good Governance

What Corporate Governance is

Coprate Governace is the system by which companies are directed and controlled. It is about leadership, sustainability and corporate citizenship. It is also about establishing a framework of company processes and attitudes that add value to the business, help build its reputation and ensure its long term continuity and success.

Board of Directors is responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors & auditors and to satisfy themselves that an appropriate structure is in place to ensure RAFT (Responsibility, Accountability, Fairness, and Transparency) in the company.

What Corporate Goverance is not …

Corporate goverance is not-

Ø  an academic subject

Ø  a box-ticking exercise

Ø  an additional layer of bureaucracy

Ø  something that company secretaries, directors and shareholders can ignore.

Five Key Elements to Governace

Ø  Good board practices

Ø  Transparent disclosure

Ø  Shareholder rights

Ø  Effective control processes

Ø  Board commitment

The Company Secretary is at the heart of all 5 elements.

A Company’s Corporate Governace System:

  

 Significance of Corporate Governance

1. -          Better compliance of the law
2. -          Real time status of legal/statutory compliances
3. -          Safety valve against unintended non-compliances/prosecutions, etc.
4. -          Cost savings by avoiding penalties/fines and minizing litigation
5. -          Better brand image and positioning of the company in the market
6. -          Enhanced credibility/creditworthiness that only a law abiding company can command
7. -          Goodwill amongst the shareholders, investors and stakeholders
8. -          Recognition as Good corporate citizen

Banks are also benefitted through compliance of corporate governance by way of-

 (i)   enhancement of bank viability,

(ii)   increase of bank’s valuation,

(iii) managing the bank’s risk-taking behavior, and

(iv) improving bank’s performance.

Key players in the Corporate Governance process of Bank and their roles

The most influential parties involved in corporate governance include:

·   Government agencies and authorities/Bank regulators and supervisors (e.g. Ministry of Finance, Bangladesh Bank, Bangladesh Securities & Exchange Commission-BSEC, National Board of Revenue, Stock Exchanges, etc.)

·          Shareholders

·          Policy makers, i.e. Board of Directors.

·   Management, the Chief Executive Officer or the equivalent, other executives and line management

·          Auditors (Audit Committee, External & Internal Auditors)

Other influential stakeholders may include lenders, suppliers, employees, creditors, customers and the community at large.

Corporate Governance and Regulatory Issues in Bangladesh for Regulation/Supervision of Banks

A.     Bangladesh Bank’s Circular: Corporate Governance in Bank Management

Bangladesh Bank vide BRPD Circular No. 11 dated July 27.10.2013 has laid down following specific demarcation of responsibilities and authorities among the board of directors, its chairman and other committees of Board of Directors in respect of its overall financial, operational and administrative policymaking and overall business activities, internal control, internal audit & compliance along with lending and risk management issues

B.     BSEC Notification regarding Corporate Governance to be practised by Listed Companies

Bangladesh Securities & Exchange Commission (BSEC) vide their Notification No. SEC/CMRRCD/2006-158/134/Admin/44 dated 07.08.2012 (issued under Section 2CC of the Securities & Exchange Ordinance, 1969) imposed following conditions, on ‘comply’ basis, for the companies listed with any stock exchange in Bangladesh in order to enhance coroporate governance in the interest of investors and the capital market.

The code of corporate governance for Bangladesh is (i) the related provisions of the Companies Act, 1994 together with regulations thereof, (ii) BSEC guidelines for corporate governance, and (iii) other operating laws for any specific types of companies like banks, financial institutions, any other company having separate law of operation along with separate regulations or rules of operations (like Insurance Development & Regulatory Authority – IDRA, Bank Companies Act, 1991 (amended upto 2013) SEC Ordinance, 1969, Insurance Act, 2010, etc). The Companies Act, 1994 is the basic code of corporate governance and applicable for all types of companies.

References:

·         Bangladesh Bank’s BRPD Circular No. 11 dated 27.10.2013

·         BSEC’s Notification No. SEC/CMRRCD/2006-158/134/Admin/44 dated 07.08.2012

·         Companies Act, 1994

·         Bank Companies Act, 1991 (Amemded upto 2013)                             

·         SEC Ordinance, 1969

·         Euromoney Learning Solutions-2015