Bringing Better Corporate Governance on Board

Absence of adequate professional capacity is a persistent bane for efforts aimed at developing a strong corporate sector anywhere and Pakistan is no exception. Along with cross-representation of family members on Boards which tends to lead to conflicts of interest and to a hazy corporate culture, the fact that members on Boards of Directors are not always up to speed on the cutting edge of knowledge, international best practice and even the country's own laws and regulations, weakens corporate governance. The promulgation and enforcement by the SECP of the Code of Corporate Governance in 2002 has helped raise standards but has a supply-side bias and does not stress capacity building of Board members enough. Now it seems the regulators may finally be taking steps to correct this.

According to a report in the daily News, the Karachi Stock Exchange has been directed by the Securities and Exchange Commission of Pakistan to amend its listing regulations to include a provision that members of the Board must possess a certification under a Board Development Series, an internationally accredited Director Education Program developed by the Pakistan Institute of Corporate Governance. This regulation would be implemented in phases, with at least one member of the Board to have this certification before 30 June 2011 and thereafter, every following year minimum one director on the board "shall acquire the said certification under this programme".

The Pakistan Institute of Corporate Governance was established a few years back as a not-for-profit company and hopes that this Business Development Series, which is accredited by RiskMetrics Group of USA, and allows for due recognition by rating companies when evaluating the participant’s organization, will strengthen corporate governance in Pakistan.

Time will be the judge of whether this aim is met.