Curb on brokers as directors of firms: IP asks SECP to amend Companies Ordinance

Transparency International Pakistan has suggested to the Securities and Exchange Commission of Pakistan (SECP) to amend the Companies Ordinance 1984 to bar the brokers and directors of brokerage firms etc from serving as directors on the Boards of different groups of companies' structures to eliminate chances of the 'Conflict of Interests' and inside trading.
It is learnt that Adil Gilani, Adviser, TI Pakistan, has submitted viable suggestions to amend the Companies Ordinance 1984 in the larger interest of the corporate sector. The Transparency International Pakistan, in its communication dated November 18, 2011 to the SECP has suggested that brokers, directors of brokerage firms, or directors/owner companies of brokerage firm, are serving as directors on the Boards of different companies under the umbrella of group companies structures and they are basically 'shadow-directors' even in other companies. Transparency International Pakistan has suggested that such kind of practices should not be allowed at all, to eliminate chances of the Conflict of Interests and inside trading.
The Transparency International Pakistan said that now, under leadership of Muhammad Ali, Chairman of SECP, the commission is maintaining a continuous dialogue with the different spheres of society and it has been told that SECP is in the process of revamping the whole set of laws, especially the Company Ordinance 1984, and in this regard a Company Law Review Commission has also been restored and overhauled. Transparency International Pakistan considers that there are issues that need immediate attention of the regulator and it is the prime time that if legal changes are required then those can also be incorporated.
The Transparency International Pakistan suggested that the shareholders and stakeholders demand transparency and disclosure of a company's compensation policies as part of their right to question pay and /or compensation structures. A majority of companies are not only paying to the Chairperson a higher amount for attending Board meetings, companies are paying to their Directors on Board Committees and Chairpersons of the Committee.
The hefty director's fee for attending the Board meetings and practice of paying an extra fee for serving on Board Committees is an added expense paid at the cost of shareholders' earnings. It is proposed that SECP may consider imposing a maximum ceiling on the fee.
The Transparency International Pakistan has further suggested that the Directors' fee and remuneration has to be approved by the shareholders in the general meeting, and the approval of the same under existing provisions of the Companies Ordinance 1984 clearly points that it is an apparent conflict of interests. Moreover, all government nominated Directors are being paid salaries from the exchequer, as public servants, and shall not be allowed any fee for attending meeting or committee meetings.
The Transparency International Pakistan further suggested that the Board extends contracts especially for Audit, consultancy and legal assignments, to its fellow directors or companies nominated by shareholders in AGM. This is opaque practice, and may be tantamount to be corruption to benefit for personal gain, and amounts to corruption and corrupt practice under NAO 1999 Article 9. Therefore, such practices be done away urgently and changes in the relevant laws be suggested and brought in, Adil Gilani added.