Directorship of Companies & Corporate Governance

awaisaftab · 03-11-2009, 10:23 PM

According to Code of Corporate Governance a person can become director of maximum 10 companies. In my opinion it is not fair; the number of companies of which a person can become director at a time should be reduced.

Because if an individual is allowed to become the director of as many as 10 companies then the door of exploiting of minority shareholders opens and a condition of monopoly of some people in corporate sector begins to exist.

Today, there are some persons who have directorship of many big companies some of them are ex civil and military beaurucrates. Some companies have strong desire the re-election or re-appointment of these influencing persons as directors again and again.
After electing as director these persons use their influences to provide unreasonable benefits to these companies. These benefits included from tax evasion to not compliance from certain provisions of Companies Ordinance, 1984, one side. On the other hand these few persons exploit the rights of minority shareholders and in some cases majority shareholders. There are many techniques which are used by these persons a bird eye view of these techniques is as follows

1. Reluctance, avoidance and delay in declaring dividend.
2. Appointment of favorite persons on key positions to secure benefits of senior mangers.
3. Tax evasion.
4. Escape from stick, true and fair internal as well as external audit.
5. Allotment of shares to desired ones.
6. Creation of monopolies of some families or persons in the company.

Although there are certain rule lays down by the code of corporate governance and companies ordinance for the protection of minority shareholders but I think one clause of Code of Corporate Governance, the reference of which I have given in beginning , make all other rules regulation useless.

Regards

Awais

malikzshan · 03-18-2009, 05:59 PM

I believe, a person having requisite voting power, has the right to be on the BOD of a company, its simple. However, I would say that there isn't much done with regard to safeguarding the interests of minority shareholders. Much need to be done in this regard.

wasim akram · 03-18-2009, 06:50 PM

There is matter of Votes and nothing else. Is it just or not. We can't comment. In my opinion accountants are specislized in accournting treatments of events occured and followers of law. We are not "BAGHI" and parlimentarian. please feel free......and.....be happy.

malikzshan · 03-19-2009, 02:22 PM

Where does BAGHI come into it? Or may be its me who's been unable to comprehend your view point.
I think restricting a person from being director of more than ten listed companies is not the ultimate solution. It needs a much moer comprehensive framework of laws, aimed at introducing proper check and balance in intercorporate dealings, so as to avoid transfer of undue benefits to associated concern. It can be achieved by intdocuing mandatory disclosure requirements for intercorporate dealings between assocaited concerns. Restrictions alone can not be effective, and transparency must be ensured through mandatory disclosures.

awaisaftab · 03-19-2009, 03:46 PM

Dear Wasim and Malik,

I know about some persons who hold directorship in many companies, I don't know what is law in other countries in this regard. But in my opinion the number of companies whose a person can become director should must be reduced.
Accountants are followers of law but as a group of persons, which follow and respect law, we have to also point out the shortcoming and deficiencies of law to protect the rights of ignored,helpless and innocent sections of society i.e. minority shareholders.

It is cruel reality the rights of minority shareholders and investors are badly exploited by the BIG CROCODILES of capital market and corporate sector.
In the beginning of 2005 some big investors of Karachi, Islamabad and Lahore stock exchanges created an artificial boom in the capital market with the help of some director of companies, who had directorship in many companies. On making huge investment by the small investors and shareholders they withdrawn their funds and small investors suffer a lot many. The SECP was unable to protect the rights of investors in the whole story.

Regards,

Awais

danishayub_76 · 03-19-2009, 09:34 PM

Yes.... i totally agree with Mr.Awais. There must be some restriction/limitation for becoming directors of more than one comapny at any time.

wasim akram · 03-20-2009, 02:01 AM

Yes, i agree too but read relevant sections ( I think of 174 to onward) of CO and understand in all respects the appointment/Election of a director. A director In the general meeting represent mojority shareholders with genuin voting power. I think if you all critically study and understand from all aspects the application of CO, then you would be in a position to suggest "CHANGE" in certain sections of CO. More important would be to keep in mind that mojority interest will not suffer. In my opinion the attempt would be gracefull & appreciable. Think of a tricky action of a director of one company only to exploit the minority shareholders.

wasim akram · 03-20-2009, 02:09 AM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 Dear Wasim and Malik,

I know about some persons who hold directorship in many companies, I don't know what is law in other countries in this regard. But in my opinion the number of companies whose a person can become director should must be reduced.
Accountants are followers of law but as a group of persons, which follow and respect law, we have to also point out the shortcoming and deficiencies of law to protect the rights of ignored,helpless and innocent sections of society i.e. minority shareholders.

It is cruel reality the rights of minority shareholders and investors are badly exploited by the BIG CROCODILES of capital market and corporate sector.
In the beginning of 2005 some big investors of Karachi, Islamabad and Lahore stock exchanges created an artificial boom in the capital market with the help of some director of companies, who had directorship in many companies. On making huge investment by the small investors and shareholders they withdrawn their funds and small investors suffer a lot many. The SECP was unable to protect the rights of investors in the whole story.

Regards,

Awais

<hr height="1" noshade id="quote"></blockquote id="quote">
Interesting, undermentioned quote is also yours which indicate that speculation business is prohibited in islam. [)]

Hence, Islam prohibits Muslim from investing in usurious business. As per injunction of Holy Quran and Sunnah (SAW) you cannot purchase the shares of any bank involved in non Islamic banking.

Some reliable sources have quoted that a well known Beverages national company (Listed Public Ltd Company) is also involved in the production of wines. When the matter is brought in the knowledge of a Mufti of Rawalpindi (Maulan Mufti Ismail Tooro, Raees Darul Iftaa Jamia Islamia Kashmir Road Rawalpind,who also have wide knowledge of economics ) he gave the FATWA that no one can involve in the sale and purchase of shares of the said company. So in the light of above Fatwa you cannot purchase shares of any non Islamic bank.
For detailed fatwa please contact

Maulana Mufti Ismail Tooro

awaisaftab · 03-20-2009, 11:49 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by wasim akram
 <blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 Dear Wasim and Malik,

I know about some persons who hold directorship in many companies, I don't know what is law in other countries in this regard. But in my opinion the number of companies whose a person can become director should must be reduced.
Accountants are followers of law but as a group of persons, which follow and respect law, we have to also point out the shortcoming and deficiencies of law to protect the rights of ignored,helpless and innocent sections of society i.e. minority shareholders.

It is cruel reality the rights of minority shareholders and investors are badly exploited by the BIG CROCODILES of capital market and corporate sector.
In the beginning of 2005 some big investors of Karachi, Islamabad and Lahore stock exchanges created an artificial boom in the capital market with the help of some director of companies, who had directorship in many companies. On making huge investment by the small investors and shareholders they withdrawn their funds and small investors suffer a lot many. The SECP was unable to protect the rights of investors in the whole story.

Regards,

Awais

<hr height="1" noshade id="quote"></blockquote id="quote">
Interesting, undermentioned quote is also yours which indicate that speculation business is prohibited in islam. [)]

Hence, Islam prohibits Muslim from investing in usurious business. As per injunction of Holy Quran and Sunnah (SAW) you cannot purchase the shares of any bank involved in non Islamic banking.

Some reliable sources have quoted that a well known Beverages national company (Listed Public Ltd Company) is also involved in the production of wines. When the matter is brought in the knowledge of a Mufti of Rawalpindi (Maulan Mufti Ismail Tooro, Raees Darul Iftaa Jamia Islamia Kashmir Road Rawalpind,who also have wide knowledge of economics ) he gave the FATWA that no one can involve in the sale and purchase of shares of the said company. So in the light of above Fatwa you cannot purchase shares of any non Islamic bank.
For detailed fatwa please contact

Maulana Mufti Ismail Tooro

<hr height="1" noshade id="quote"></blockquote id="quote">

Dear Wasim,

I am not a religious scholars or Mujtahid Do you know the meaning of Mujtahid. You pasted one of my view regarding the investment in shares of banking company. The material contained in this post is on the basis of fatwa of one religious leader who has also knowledge of shares and economics, it was not my personal view.

I have never said that the speculation business is totally Haram or prohibited in Islam speculation factor involves in many business. Islam does not invalidate all these businesses rather only gambling is haram.
This is Unanimous fatwa of Religious Leaders of all sects that the trading of share is HALAL.

Mr. Wasim you inserted the sign of Smiling with your post. If these under discussion topics relate to any other issue then I have no objection on your smilling and laughing but we are discussing very serious issues of HALAL and HARAM

Regards,

Awais

wasim akram · 03-21-2009, 08:28 PM

O meri Jaan, Islam says THINK POSITIVELY. My aim was not to criticise any but to sugguest happily the interection of all views and discussion so that reader can reach a positive conclusion. "GHUSA" haram and TAKING POSITIVELY is HALAL. Keep team spirit.

VO GHUSAY SAY DEKHTAY HAN,DEKHTAY TO HAN
MAN SHAD HOON KEH KISE KE NAZAR MEN TO HOON

Its my habbit to smile and suggest you to smile and make little jokes. You will see life.
" ek bar muskara do ". .........sirf maray lea.

awaisaftab · 03-24-2009, 03:44 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by wasim akram
 O meri Jaan, Islam says THINK POSITIVELY. My aim was not to criticise any but to sugguest happily the interection of all views and discussion so that reader can reach a positive conclusion. "GHUSA" haram and TAKING POSITIVELY is HALAL. Keep team spirit.

VO GHUSAY SAY DEKHTAY HAN,DEKHTAY TO HAN
MAN SHAD HOON KEH KISE KE NAZAR MEN TO HOON

Its my habbit to smile and suggest you to smile and make little jokes. You will see life.
" ek bar muskara do ". .........sirf maray lea.

<hr height="1" noshade id="quote"></blockquote id="quote">

Dear Wasim,

Sorry for delay in repplying. Infact I dont use net during holidays.

I appologize for my harsh words. Although there was little contradiction in my two posts but there was no big ambiguity.

kamranACA · 10-12-2010, 09:10 PM

<blockquote id="quote">quote<hr height="1" noshade id="quote">Originally posted by awaisaftab
 Before one and half year ago I wrote this topic and a healthy debate made here as every one can see.

Now SECP has issued Draft of Revised Code of Corporate Governance for listed companies. Under revised code no person shall be appointed as a director of more than five listed companies simultaneously.

Draft of Revised Code of Corporate Governance can be viewed at following link

http//www.secp.gov.pk/corporatelaws/pdf/Amended_Code_Corporate_Governance_6Oct2010.pdf

Regards,

Awais Aftab

<hr height="1" noshade id="quote"></blockquote id="quote">

Dear All Readers,

In the year 2003 a study was undertaken by SECP to find the post implementation effects of Code of Corporate Governance. Pursuant to such study a report was issued (publicly available at the website of SECP) having title âIMPACT ASSESSMENT OF THE CODE OF CORPORATE GOVERNANCE 2002â. This report can be obtained from following URL

http//www.secp.gov.pk/Reports/ImpactStudyCCG.pdf

This study based upon real life scenario of 40 companies (out of 95 selected for this purpose) and was completed after getting detailed feedback and having many debates.

In its chapter 7 âPolicy Recommendationsâ this report proposed various âShort Term Measuresâ and âMedium Term Measuresâ. The said report categorically included reducing the limit of 10 companies for a listed companyâs director to 5 companies in the proposed âshort-term Measuresâ (Paragraph 7.1 and Page 36).

Anyone can download the report from above URL and check paragraph 7.1, page 36 of the said report.

Apart from the above, the survey undertaken by IFC on CCG implementation in Pak has also criticized the limit of 10 companies for the directors of listed companies.

I am adding no comments, rather simply presenting a self-speaking situation. I think we should avoid the habit to click the ideas of others and tag them with our names. I already warned that such practices are not good.

We should have the courage and should learn to speak truth. This will enhance our own respect. In any manner, knowledge sharing is not bad; provided we don't hide the facts.

Regards,

kamranACA · 10-13-2010, 05:48 PM

The report I discussed in my last post is not something hidden or among the un-ending e-documents available on the net. When those 90 companies were selected the whole program was taken as a hot topic; I don't know about ICMAP surely, but ICAP deliberated that whole discussion in its newsletters and communications with the members (perhaps with students as well) in fullest details. Possibility is there that ICMAP might have done so.

Despite this, whoever would take interest in the topic of CCG will definitely find this report.

Issue of tagging something; people know what I am saying. Still, I know a debate to this effect will bring no positive change.

Regards,