A survey of 371 financial institutions/companies showed that lack of qualified professionals/ staff, information/ know-how about corporate governance principles and practices are major barriers to put in place good corporate governance in Pakistan.
The survey was conducted by the Pakistan Institute of Corporate Governance (PICG) in collaboration with the Securities and Exchange Commission of Pakistan (SECP) under the International Finance Corporation's (IFC) the Pakistan Corporate Governance Project (PCGP).
From the perspective of a country, the corporate governance is important as it facilitates the development of stronger capital markets, reduces risks and enhances a country's ability to mobilise, allocate and monitor investments, which ultimately foster economic growth.
In Pakistan, since the establishment, the SECP is working on creating transparency and accountability in the corporate and financial sectors. It has initiated a number of reforms aimed at improving corporate governance policies, structures and frameworks in the country.
The most important reform was the implementation of the code of corporate governance in Pakistan in 2002. This code has been made a part of listing regulations of the Karachi, Lahore and Islamabad stock exchanges, and all listed companies are required to give a statement of compliance with the code of corporate governance in their annual reports.
The key findings of the survey of 111 financial institutions and 260 listed/non-listed companies showed some interesting results. The survey does not cover audit of corporate governance practices of the financial sector institutions and companies in Pakistan. The survey is unable to look beyond the number of companies contacted for obtaining feedback on different issues. Key findings revealed that none of the respondents (companies) have developed their own code of corporate governance.
It states that 31 percent of the respondents did not identify any barrier to improving governance in the company as they believed that they have to comply with the code of corporate governance, every barrier has to be overcome and resistance is futile.
Of the 69 percent of the respondents, who identified barriers, 42 percent mentioned unavailability of qualified staff to help with implementation of corporate governance practices and lack of information/know-how relating to corporate governance principles and practices as the barrier to improving corporate governance practices in the company.
The other main obstacle identified (mentioned by 21 percent of respondents) was that corporate governance produces commercially sensitive information that cannot be shared with competitors.
Even though none of the respondents considered corporate governance to be unimportant or irrelevant, 14 percent asserted that the main obstacle to improvement in corporate governance practices was that they did not see any benefit in adopting such practices.
In general, the corporate governance practices are being implemented because of the code of corporate governance; for 82 percent of the respondents the main benefit of implementing corporate governance practices was with the legal and regulatory requirements.
Almost all respondents (98 percent) stated that they complied with the corporate governance. The majority (81 percent) of the respondents published a statement of compliance with the code of corporate governance in the annual reports, as required by the code.
Corporate governance improvements required by the code of corporate governance have generally been implemented. On the other hand, there is little evidence of corporate governance improvements not required by the code of corporate governance, such as introduction of independent non-executive directors on the board of directors and establishment of any board committees other than audit committees.
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