Transition from the command to market economy of Bangladesh needs a series of reforms in the financial and capital markets, public and private sectors following the prescription of the International Monetary Fund (IMF) and the World Bank. Significant development has taken place in the corporate financial reporting. Bank-led financial system needs fulfilment of the requirements of BASEL I, II, and III.
The Bangladesh Exchange Commission (BSEC) has asked ICAB-licensed public accounting firms to prepare financial statements of listed entities in compliance with the requirements of the International Financial Reporting System and prescribed principles of corporate governance and defined principles of conflict of interest for different stakeholders.
Since the last couple of years, the Institute of Chartered Accountants of Bangladesh (ICAB) initiated awards to the corporate entities for Best Published Annual Reports. Following ICAB's example, the Institute of Cost and Management Accountants (ICMAB) has also initiated award for Best Corporate Performance on annual basis.
Invariably, the Finance Minister or the Commerce Minister attends such award-giving functions as the chief guest and the chairman of the BSEC attends as special guest. The programme is held by both the institutions annually. Next day, we see much colourful advertisements in the daily newspapers showing the pictures of award recipients with the chief guest and special guests although these guests act in the capacity of the regulators for these corporate entities.
Critics argue that these pictures confuse the general investors who lack adequate financial literacy. There are instances that some of the award-receiving corporate entities and their sponsors were found guilty of default with banks, tax department, and utility entities and with many other institutions. It is argued that the methodology for selection of award entity suffers problems emerging from the basic principles of conflict of interest rule.
In the ICAB, most of the members are from the public accounting (audit) firms who award their client corporate entities to keep them happy. The chairman of such an entity is reported to be an influential council member, who is selected before the presidential election. Even in the absence of balloting, he gets the prized position for making most of foreign visits during his tenure. There is a keen competition among the council members for this position. Moreover, award-seekers also liaise with the chairman for getting higher marks in the evaluation.
Another interesting conflict of interest rule violation is that all the award-receiving corporate entities contribute to the expenditures of the award-giving ceremonies. This reveals that there is a lobbying syndrome between the chairman and the members of evaluation committee with the corporate entities.
However, it is reported that the ICAB has a written procedure for evaluation. Similarly, the ICMAB has an evaluation for the best performing corporate entity, headed by a council member for a long time. He is the managing director of a credit rating company. He tries to reward his exiting clients to keep them longer time and hunts for future corporate clients for rating purposes. If someone looks at the list of award recipients of the ICMAB, he will see 100 per cent of them are his rating clients for the last couple of years. In this case also, award recipients and sponsors funding the programme are the identical corporate entities.
Aware of all these violations of the principle of conflict of interest, how do the Finance Minister and the Chairman of the BSEC attend the programme as chief and special guest? Critiques argue, when a corporate entity is a bank, tax and utility bill defaulter, share market scamster, and involved in other corporate scandals, it should not be eligible for evaluation. Others suggest that no license of credit rating companies should be given to the relatives of top brass of the Treasury Department (Finance Minister). Once they get, it naturally proceeds to next step of creating pressure on the corporate entities owned by the public and private sectors for their rating assignment.
When general investors see that scamsters and godfathers of stock market scandals are rewarded by the Finance Minister and the Chairman of the BSEC, this may create a public perception that the high-ups are the part of the problem. There is a possibility of losing confidence on the integrity of the quasi-judicial body. The Bangladesh Bank, the BSEC, the IDRA, the DSE and the CSE should examine the methodology, evaluation criteria, and the existing structure of the evaluation committee. Academics from accounting and economic and financial journalism and members from regulatory institutions should be included to supervise and monitor the process. Conflict of interest should be avoided. The Finance Minister and the head of regulatory organisation should not attend these award-giving ceremonies. Those who have conflict of interest should be removed from the evaluation committee.
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