Speakers at the Saarclaw conference on Saturday proposed adoption of stringent laws to ensure good corporate governance, safeguard small stakeholders' interest and to make transparent the entire working of a corporate entity.
The conference, which began on Friday, had a galaxy of guests including members of higher judiciary, leading legal experts, academics, corporate lawyers and representatives of civil society from the seven Saarc countries. Chief justices V N Khare of India, Sarath N Silva of Sri Lanka, Govinda Bahadur Shrestha of Nepal, K M Hasan of Bangladesh, Tobgye Lyonpo Sonam of Bhutan and Rasheed Ibrahim of Maldives attended the conference. Chief Justice of Pakistan Mr. Justice Nazim Hussain inaugurated the conference on Friday at an impressive ceremony.
Speaking on the second day at the second session of the 10th Saarc-law conference 'Leap forward--Next Generation Laws', in progress at a local hotel on Saturday, Dr A M Singhvi of India, a corporate law expert, said that Saarc region needed proper explanation of the concept of good corporate governance.
Dr Singhvi seemed to be representing the other three speakers who spoke after him and came out with the same ideas but in different words.
He said that price-sensitive information was frequently being leaked out for insider trading; self-regulatory mechanism had not taken place in effective manner; auditors in many cases were yet to be disciplined; resolution of dispute between the minority and majority shareholders was available through court who normally suggest buying out shares of one party by another party, and absence of mega-policing were some of the areas that needed consideration. .
He said that those offices which are supposed to regulate fair functioning of a corporate entity are not having sufficient powers to enforce rules or impose heavy fine.
He said that the supervisory bodies had little control over banks and public sector.
"This does not send positive message to the private sector."
Dr Singhvi said that the word 'punishment' was missing from the entire system. "It is missing from our statute. It should be introduced with full force. The fear against wrongdoing can only be created through the introduction of stringent laws for punishment for bad governance," he added.
He said that harmonisation of corporate governance, sick industry issue, questionable role of chartered accounts and auditor firms that had led to misleading information were some of the other areas that the members of the Saarc region should deal with.
Andrew Baker, a leading corporate lawyer from the United Kingdom, said that Britain has example of good governance which could serve as model for those who are still trying to find examples.
He said he would suggest enhancement of corporate mechanism in an organisation to achieve the purpose.
He said that duties of the board of a company should be clearly defined and adhered to by each member.
The importance of non-executive director should be utilised, particularly for the improvement in audit. The meetings should be regular, and rigorous procedure to maintain the highest standard of service should be adopted.
Baker said that the role of institutional shareholders was crucial and it should be given proper attention. He suggested that independence of auditors should be maintained. It would be better if the audit could be separated from other departments or services. A peer review of the audit would be a step further toward good governance of corporate affairs.
Baker was of the view that rotation of auditors would also be a tool for corporate governance.
He said, "Whether we like it or not, the corporate governance has come to stay. It would be better to prepare ourselves for this change."
Laleenie Hulangamuwa from Sri Lanka spoke about the role of company secretary in corporate governance and said that the scope of the modern company secretary was of immense responsibility. The governance debate can only add to these responsibilities, and it is real question for boards to determine the level of resources, which should go into investment in staffing and training of company secretaries and support staff.
Failure to adequately invest may result in a shortfall of standard of compliance generally, and governance in particular.
Mahmood J Jaffer from Pakistan, a corporate affairs lawyer, said that code of corporate governance had not been introduced in Pakistan through any kind of legislation but only through regulations framed by the SECP.
These instructions are applicable mostly to listed companies. Many of the instructions regarding good corporate governance had come through the compilation of best practices in the corporate sector.
He said that a standard was to be attained in corporate governance and this sector should look at the non-profit sector.
There are examples of philanthropy which need emulation by others in the corporate sector.
He said that an institute of corporate governance of Pakistan was being set up with the co-operation of the Karachi Stock Exchange.
Andrew Baker at this stage suggested that those who were interested in setting up the proposed institute should see the website of European Corporate Governance Institute. "It has many ideas and lessons for us."
Jaffer said that he would propose that corporate governance institutes should be set up in all Saarc countries.
He said that soon there would be cross-border trade among the Saarc countries and chances of single currencies were also there. To meet the requirement of such a situation good corporate practices would be needed.
Advocate Abrar Hasan of Pakistan said that corporate governance and accountability should go together.
He spelled out the following points required to be done to achieve effective and credible corporate governance.
Change in the format of quarterly accounts and annual report of a company so that, for other than financial data, it should comment on the operational efficiencies of the company ie staff turnover, growth rates, percentage etc.
The internal audit department of the companies can not be independent till the audit committee is comprised of non-executive directors, and preferably the chairman of the board should be the director representing the minority interests.
The internal audit department should functionally and administratively report to the audit committee and for day to day matters; it should have easy access to the chairman of the audit committee.
The appointment, appraisal, increment, promotion for all staff of the internal audit should be sole discretion of the audit committee and no recommendation should be made in this respect by the management of the company.
The supervisors whose main objective is to safeguard the economy, which is beneficial for the society as well as individuals, should keep a close liaison and frequent meeting with the internal auditors of the companies.
Non-executive directors should hold independent meetings with executive management/departmental heads of the company in order to identify any risks or suspicious transactions etc.
Other methods may be devised to ensure effective participation of minority shareholders in the management of the company and/or at least their free access to the chairman of the audit committee of the board.
The co-chair of the session, Mr Justice Sabihuddin Ahmed, said that at this point of time there was no concept of corporate governance. People should be made aware of its concept.
The session chairman, Justice Sarath Silva, Chief Justice of Sri Lanka, summing up the discussion, expressed the hope that members would discuss all issues in detail and come up with concrete proposals.
Earlier, in the first session in the morning, the session chairman, Adviser to the Prime Minister Syed Sharifuddin Pirzada said that international law does not explain 'terrorism' and acts of terror and had not drawn a line of distinction between terrorism and freedom struggle. He was summing up discussion on International Law.
He said that the Dr A M Singhvi had also agreed that the right to use veto power was available to only five countries in the United Nations. "It should either be done away with or made conditional to the majority decision of the General Assembly.
Pirzada referred to a document which Quaid-e-Azam and Mahatma Gandhi had signed on April 15, 1947. The document contained a pledge from the two leaders that no force would be used for the realisation of political objective.
Pirzada was critical of a number of issues related with international law and its application in the solution of disputes and said that the jurisdiction of the International Court of Justice should be enlarged and its judgements should have binding force.
The decisions of the ICJ should not only be binding but a mechanism for the implementation of its decision should also be evolved. "At this time the judgements of the ICJ are not mandatory," he added.
In another session Mr Justice Umesh C. Banerjee of India said that to progress they would have to accept the right to freedom of expression with open mindedness.
He said that there might be many excuses to refuse this right to the people but it would not solve the issue of freedom of expression. "We will have to accept its existence and have to grant it without condition to the civil society."
Co-chair of the session Hafizullah of Bangladesh concurred with the view of the chairman and other speakers and said that refusal to grant freedom of expression would lead to stoppage of the process of development.
Amirul Islam of Bangladesh said that freedom of expression was the birthright of the people and it could not be denied to them.
Manohara de Silva of Sri Lanka said the use of the right to speak freely should be used very cautiously. In many cases, it may lead to complications of grave nature.
He said that this right should be used to educate people, motivate them to participate in productive pursuits and in the greater interest of the mankind.
Zahid Ebrahim of Pakistan said that freedom of expression granted the right to be careful, honest and objective.
Professor Kanak B Thapa of Nepal chaired session on Banking and Recovery Law. Hafizullah of Bangladesh was co-chairman.
Summing up the discussion Thapa said that there was need to make stringent laws for the recovery of dues. Foreclosure laws were also needed to be examined again.
There was general agreement that the Saarc countries should study the laws and come up with proposal to deal with the situation when the cross-border trade begins.
Session on Media Laws was chaired by Justice Lyonop Sonam Tobgay, Chief Justice of Bhutan, 'Combating Organised Crime' chaired by Nihal Jayamanne of Sri Lanka, Women and Children chaired by Amir-ul-Islam of Bangladesh and Cyber Crime was chaired by Chief Justice of Maldives Justice Mohammad Rasheed.
The closing session would be held on Sunday at 11:15 am. The closing ceremony or the valedictory session would be addressed by the Chief Justice of Bangladesh Mr Justice J. R. Mudassir Husain, and closing remarks by Mr. Justice G. H. Malik. President, Saarclaw, Pakistan.
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