Global and local perspectives

"Boards and shareholders must embrace the fact that good business is not just about achieving the desired financial bottom line by being competitive. It is equally about creating shareholder value, which can only be sustained by well-informed strategic direction and engaged oversight, which stretch beyond short-term financial performance. Good corporate governance cannot be achieved merely on the strength of regulations. Directors have a duty not just in setting strategic direction and overseeing the conduct of business in compliance with laws, they should also be effective stewards and guardians of the company in respect of ethical values, and ensuring an effective governance structure for the appropriate management of risks and level of internal controls"- Telekom Malaysia Berhad ™ stated in their corporate governance report in 2012.
Corporate governance is the rules, regulations and measures that achieve the best protection and balance among the interests of the company's managers, shareholders, and other stakeholders. As per Wikipedia, "Corporate governance refers to the system by which corporations are directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate affairs. Governance provides the structure through which corporations set and pursue their objectives, while reflecting the context of the social, regulatory and market environment. Governance is a mechanism for monitoring the actions, policies and decisions of corporations. Governance involves the alignment of interests among the stakeholders".
In every organisation context, there are different gatekeeper roles to protect the interest of the stakeholders. Corporations with good corporate governance practices have the prevailing environment for the gatekeepers to play their pivotal role. Today, organization entered into knowledge economy plus global perspective of working, networking, and connections. So shareholders and other stakeholders also have no boundaries in country perspective. Multinational and transnational companies are growing tremendously. There is no way to control the organization by shareholders directly. So, the role of good corporate governance practice is obvious. Good corporate governance helps to bridge the gap between the interest of those that run a company, including a major shareholder, and the stakeholders more generally, increasing investor confidence and lowering the cost of capital for the company. Good corporate governance also helps ensure that a company honors its legal commitments, and forms value-creating relations with stakeholders including employees and creditors.
The needs of corporate governance in the organization especially public company are enormously raised after the issues like Enron and others. But in global perspective, the formation of guideline for good corporate governance started by the Organisation for Economic Co-Operation & Development (OECD).
The OECD Principles of Corporate Governance were revised in 2004 to respond to corporate governance developments including corporate scandals that further focused the minds of governments on improving corporate governance practices. Since they were first issued in 1999, the OECD Principles of Corporate Governance have gained worldwide recognition as an international benchmark for sound corporate governance. They are actively used by governments, regulators, investors, corporations and stakeholders in both OECD and non-OECD countries. The 2004 revision of the OECD Principles reflects not only the experience of OECD countries but also that of emerging and developing economies.
The origins of OECD date back to 1960, when 18 European countries plus the United States and Canada joined forces to create an organization dedicated for global development. Total 34 member countries span the globe, from north & South to Europe and the Asia-Pacific region. They include many of the world's most advanced countries but also emerging countries like Mexico, Chile and Turkey. OECD also works closely with emerging giants like China, India and Brazil and developing economies in Africa, Asia, Latin America and the Caribbean. The main goal of OECD is described as "Together, our goal continues to be to build a stronger, cleaner, fairer world".
The OECD Principles of Corporate Governance, originally adopted by the 30 member countries of the OECD in 1999, have become a reference tool for countries all over the world. Following an extensive review process that led to adoption of revised OECD Principles of Corporate Governance in the spring of 2004, they now reflect a global consensus regarding the critical importance of good corporate governance in contributing to the economic vitality and stability of our economies. Good corporate governance - the rules and practices that govern the relationship between the managers and shareholders of corporations, as well as stakeholders like employees and creditors - contributes to growth and financial stability by underpinning market confidence, financial market integrity and economic efficiency.. The OECD Principles of Corporate Governance provides specific guidance for policymakers, regulators and market participants in improving the legal, institutional and regulatory framework that underpins corporate governance, with a focus on publicly traded companies. They also provide practical guidance and suggestions for stock exchanges, investors, corporations and other parties that have a role in the process of developing good corporate governance. The OECD Principles have become the international benchmark for corporate governance, forming the basis for a number of reform initiatives, both by governments and the private sector. The OECD began a review of the Principles in 2003 to take into account recent developments through a process of extensive and open consultations. OECD governments in April 2004 agreed the new Principles.
The six areas of the OECD principles are:
Ensuring the basis for an effective corporate governance framework: The corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities.
The rights of shareholders and key ownership functions: The corporate governance framework should protect and facilitate the exercise of shareholders' rights.
The equitable treatment of shareholders: The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.
The role of stakeholders in corporate governance: The corporate governance framework should recognize the rights of stakeholders established by law or through mutual agreements and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.
Disclosure and transparency: The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company.
The responsibilities of the board: The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board's accountability to the company and the shareholders.
These basic principles are well complied and implemented by OECD member's countries and also encouraged enough to voluntarily implemented by be others countries around the globe.
In line with global perspective, Bangladesh Securities and Exchange Commission in their notification of August 07, 2012 imposes the some conditions for the companies listed with any stock exchange in Bangladesh which includes formation of Board of Directors, appointment of Independent Directors, qualification of independent directors, responsibilities of Chairman of the Board, the Chief Executive Officer, Directors of Board, formation & role of Audit Committee, duties of Chief Executive Officer, Chief Financial Officer, Head of Internal audit and company secretary. As per notification, the board of directors of the company shall consist of independent directors at least one fifth of their total numbers in the board. Also prescribed Independent Director shall be a knowledgeable individual with integrity who is able to ensure compliance with financial, regulatory and corporate laws and can make meaningful contribution to business. The SEC corporate governance guideline further stated that Independent director should be a Business Leader/Corporate Leader/Bureaucrat/University Teacher with Economics or Business Studies or Law background/Professionals like Chartered Accountants, Cost & Management Accountants, and Chartered Secretaries. The independent director must have at least 12 (twelve) years of corporate management/professional experiences. Regarding the chairmanship in the company the SEC guideline strictly noticed in section 1.4 "The positions of the Chairman of the Board and the Chief Executive Officer of the companies shall be filled by different individuals. The Chairman of the company shall be elected from among the directors of the company. The Board of Directors shall clearly define respective roles and responsibilities of the Chairman and the Chief Executive Officer." Regarding reporting and compliance of Corporate Governance, Bangladesh Securities and Exchange Commission stated in their notification that "the company shall obtain a certificate from a practicing Professional Accountant/ Secretary (Chartered Accountant/Cost and Management Accountant/ Chartered Secretary) regarding compliance of conditions of Corporate Governance Guidelines of the Commission and shall send the same to the shareholders along with the Annual Report on a yearly basis".
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Md. Touhidul Alam Khan is the SEVP and Head of Corporate Banking, Bank Asia Limited. Email- [email protected].
Saifur Rahman Shipon is working for a multinational joint venture company as head of finance.
E-mail- [email protected]