The revision of the code of corporate governance issued by Bangladesh Securities and Exchange Commission (BSEC) is a demand of the hour for (a) standardisation, (b) effective implementation, and (c) aligning the law and introducing a separate code for unlisted companies. We may review the focal points to be addressed for updating the code, law and practice. 

The code may be standardised considering some issues under five elements of corporate governance. These are:

BOARD PRACTICE: (i) To introduce nomination committee for appointment of directors of the Board, (ii) to introduce remuneration committee for payment of remuneration, if applicable, especially for the companies paying remuneration to directors, (iii) to obtain documents of self-evaluation and training of the members of the boards of companies by the Bangladesh Securities and Exchange Commission, (iv) to focus on transparency about appointment of independent directors like scrutinising the CVs of the candidates,  (v) to ensure signing of Code of Conduct by each director.

INTERNAL CONTROL: (i)To focus the framework of internal control and ensuring thereof with a view to protecting the banking scandals that happened in the recent past, and ensuring sustainability of any business and protecting the banks' borrowed money and investors' investment in those companies, (ii) to focus on strengthening the functions of  Internal Audit and Audit Committee by setting the work plan and effective implementation of plan,  (iii) to make compulsory the setting up of a compliance department for the Company other than banks (since banks have their compliance department). 

TRANSPARENT DISCLOSURES:  The accountability of external auditor should be brought under this code of corporate governance for ensuring transparent disclosures.

SHAREHOLDERS' RIGHT: Although the Companies Act 1994 provides guidelines on voting rights, buying and selling right, dividend right of shareholders, the BSEC guidelines/code should include: (i) review right of records, right for legal action under any act affecting their right and should introduce shareholder's right in the company, and (ii) policy on related party, extraordinary transactions, dividend etc to be stated clearly.

BOARD COMMITMENT AND PLAN: (i) To introduce a commitment form that the Board is aware of its duties and responsibilities and is committed to adhere to related policies to operate the company, (ii) to make mandatory corporate governance principles of each company and the Board has to inform BSEC with a copy of it in line with BSEC guidelines, and (iii) to obtain CG implementation plan by BSEC from the Board every year.

EFFECTIVE IMPLEMENTATION OF THE CODE: In order to ensure effective implementation of corporate governance (CG), two issues on the audit and review of CG may be focused. These are: (i) to ensure effective audit of Corporate Governance conducted by a Chartered Secretary or Cost and Management Accountant or Chartered Accountant by incorporating a punishment clause in the code in case of  negligence in audit, (ii) to introduce Corporate Governance Audit by Bangladesh Securities and Exchange Commission once or twice a year to ensure compliance and review of previous year's compliance report.

ALIGNING THE LAW AND INTRODUCTION OF A SEPARATE CODE FOR UNLISTED COMPANIES: In order to align the law and practice, the two more issues may be addressed. These are: (i) to introduce Corporate Governance for unlisted companies as well in order to make them structured in compliance for availing banking facility and making them eligible for entering into capital market. The unlisted companies avail bank loans from banks and may enter into capital market, but unless they are made to comply with good corporate governance, they may tend to behave in an unbecoming manner. (ii)The Companies Act should include the issue of internal control with its framework and the contents of accounting affairs in line with Bangladesh Financial Reporting Standards (BFRSs) as adopted by the Institute of Chartered Accountants of Bangladesh for ensuring transparent disclosures.

The above considerations may hopefully ensure good corporate governance in Bangladesh. There is no alternative to a standard set of code of corporate governance and effective implementation thereof for success and sustainability of business.

The Writer is an Associate Member of ICAB.  roy_dipok@yahoo.com

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Source: The Financial Express