Code of Corporate Governance 2012 launched: jobs creation, poverty reduction top priorities in next budget, says Hafeez

Finance Minister Dr Abdul Hafeez Shaikh on Tuesday said that new job creation and poverty reduction would be two top priorities of the government in the upcoming budget for next fiscal year. Talking to reporters at the launching ceremony of Code of Corporate Governance 2012 here, the minister said that the economic meltdown and rising petroleum prices have affected almost all economies around the globe.
However, he said despite difficult situation, Pakistan's GDP growth would be at 4 percent in the current fiscal year, highest in last three years. He said the government would increase its revenues with enhancing tax base. All the taxable incomes would be brought under tax net so that the country could move towards self-reliance, he added.
The minister said the government had launched a huge social safety programme. The government had allocated Rs 50 billion for this programme to provide financial support to poor people of the country in the form of cash, health insurance, small loans and technical training, he added.
Earlier, speaking at the launching ceremony of Code of Corporate Governance 2012, the minister said the revised code would help promote transparency and protect minority shareholders' rights. He said the government would be fully supportive in the development of institutions in the country.
The minister noted that a big change is taking place in the country. He said the parliament is the most important institution that is going to complete its five-year term successfully. The country now has strong institutions such as SBP, FBR, SECP and CCP and these are fully independent and autonomous. According to Hafeez, the government does not interfere in their affairs.
He said the parliament has restored constitution and passed the NFC Award. The provinces were given more powers and resources and the federal government had devolved 18 ministries to the provinces. He pointed out that the provinces were given Rs 600-700 billion to improve their basic health, education and other services. Now the provinces have more authority and more resources and it is a historic step in the country, he added.
"It is a new Pakistan," he said and added that the country is moving toward prosperity with the strong institutions. SECP chairman Muhammad Ali, Country Director CIPE Moin M Fudda, Chairman PICG Task Force Ebrahim Sidat and CEO of Pakistan Institute of Corporate Governance Faud Azim Hashmi also spoke on the occasion.
Meanwhile, the Finance Minister launched the Code of Corporate Governance, 2012 in a formal ceremony organised by the Securities and Exchange Commission of Pakistan (SECP). The launching ceremony was held in collaboration with the Center for International Private Enterprise (CIPE), who has been supportive of SECP's initiative throughout the process of revising the code.
The code sets a minimum benchmark in terms of governance standards, brings consistency in the corporate practices and promotes transparency through enhanced disclosure requirements. The code will result in availability of enhanced information to market participants and hence will provide better protection of the rights of all investors, particularly minority shareholders.
Governance standards are dynamic and changing with the development of constantly evolving corporate sector and financial markets. This calls for a constant review of governance framework to keep pace with globally set benchmarks. In an endeavour to align our governance regime with enhanced requirements of present times and global best practices, the SECP mandated the Institute of Corporate Governance to initiate work on review of the code.
The SECP, while finalising the code, conducted a thorough consultative process which included holding of three roundtables, a number of bilateral meetings with stakeholders, written and verbal comments and suggestions received from a wide range of stakeholders.
While finalising the code, due consideration was given to all the suggestions received, keeping in view the global developments in corporate governance and the overall objective of raising the standards of corporate governance in the country.
A comparison of new and previous code is given below:
1. The Code, 2012 requires at least one independent director while preference is for 1/3rd of the total members of the board to be independent directors.
2. Criteria for assessment of independence have been substantially expanded.
3. Maximum number of Executive Directors has been decreased from 75% to 1/3rd of elected directors including CEO.
4. Number of directorships has been decreased from 10 to 7 that a director can hold at the same time.
5. Requirement of board evaluation has been introduced.
6. Office of the Chairman and CEO has been separated. The chairman shall now be elected from amongst the non-executive directors of a listed company.
7. It will now be mandatory for directors of listed companies to attain certification under any director training program offered by any institution (local or foreign), which meets the criteria specified by the SECP. The criteria are available at the websites of the stock exchanges and the SECP.
8. The appointment, remuneration and terms and conditions of employment of the Chief Financial Officers (CFO), Company Secretary (CS) and the Head of Internal Audit (IA) of listed companies shall be determined by the Board rather than CEO. The removal will also be by the Board for CS and CFO.
9. Qualification introduced for Head of IA. The removal of Head of IA is with the approval of the Board only upon recommendation of the Chairman of the Audit Committee.
10. A formal and transparent procedure to be followed regarding remuneration of Directors and disclosure of aggregate remuneration in the annual report.
11. It is now mandatory for the Chairman of the audit committee to be an independent director, who shall not be the chairman of the board. Audit Committee shall comprise of non-executive directors.
12. The secretary of Audit Committee shall either be the Company Secretary or Head of Internal Audit. However, the CFO shall not be appointed as the secretary to the Audit Committee.
13. Human Resources and Remuneration Committees have been introduced.
14. The internal audit function may be outsourced by a listed company to a professional services firm or be performed by the internal audit staff of the holding company.
The Code has been revised taking into account the lessons learnt from the practical issues and considerations relevant to the listed companies and to ensure that it reflects changing governance concerns, practices and economic circumstances and international best practices.