The government would introduce a new code of corporate governance for public listed companies under which the removal of the chief financial officer, company secretary and head of internal audit of a public listed company shall be made with the approval of its board of directors. The Securities and Exchange Commission of Pakistan (SECP) has issued draft of the Listed Companies (Code of Corporate Governance) Regulations, 2019 to be applicable on public listed companies (listed company) with effect from July 1, 2019.
Under the regulations, the chairman and the chief executive officer of a company, by whatever name called, shall not be the same person. The chairman shall be elected subject to such terms and conditions and responsibilities as provided under these Regulations. The board of directors shall appoint, determine remuneration and renew contracts and terms and conditions of employment of chief financial officer, company secretary and head of internal audit of companies.
The board of directors shall have in place a formal policy and transparent procedure for fixing the remuneration packages of individual directors for attending meetings of the board and its committees. It is mandatory that no person shall be elected or nominated or hold office as a director of a listed company including as an alternate director of more than seven listed companies simultaneously. Provided that the said limit on directorship shall be effective when the board shall be reconstituted not later than expiry of its current term.
Under the regulations, it is mandatory that each listed company shall have at least two or one third members of the board, whichever is higher, as independent directors:
It is mandatory that the independent director shall submit his consent to act as director, along with declaration to the company that he qualifies the criteria of independence notified. The independent director shall give such declaration to chairman of board at first meeting which is held after election of directors as well as on an event of any change affecting his independence.
It is mandatory that the board of directors shall have at least one female director when it is next reconstituted after the effective date of these regulations. It is also mandatory that the executive directors, including the chief executive officer, shall not be more than one third of its board of directors.
The board of directors is responsible for the governance of risk and for determining the company's level of risk tolerance by establishing risk management policies and for this purposes the board are encouraged to undertake at least annually, an overall review of business risks to ensure that the management maintains a sound system of risk identification, risk management and related systemic and internal controls to safeguard assets, resources, reputation and interest of the Company and shareholders, SECP said.
The SECP has said that the chief executive officer of the company shall place significant issues for the information, consideration and decision, as the case may be, of the board of directors or its committees.
The details of all related party transactions shall be placed periodically before the Audit Committee of the company and upon recommendations of the audit committee the same shall be placed before the board for review and approval, SECP added.
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