Free market economy demands less or zero government interference. From this concept emanates the theory of self-regulation. It is presumed that the business organisations will regulate themselves by following the rules of games. That is why they are also known as self-regulatory organisations (SROs).
First of all, let us discuss the case for the developed countries, virtually the protagonists of free market economy. In spite of the freedom enjoyed by the business houses, there are a number of various strong regulatory authorities which oversee the activities of the business organisations. Apart from these, the government issues instruction from time to time.
Today the publicly traded companies are to include independent directors in the Board of the Directors of a company. Earlier, all of them were elected by the shareholders at the annual general meeting (AGM). As common practice, the minority shareholders hardly had any say in the formal election of the directors. It was because the controlling shareholders would have already selected directors outside the AGM. After the mega corporate scam in 2001 in the USA, the then President George W Bush issued the instruction for inclusion of independent directors. This has now become a global order. The independent director is one who will not have any kind of financial stake in the company.
In the USA, the issue of monopoly is directly handled by the government. Comcast, America`s largest cable company, announced that it would buy Time Warner Cable, the largest provider of TV and broadband after Comcast, for about US$ 45 billion. Market observers apprehend that it would create a Goliath because it would have more than 30 million TV subscribers and 33 per cent of broadband customers. So, American regulators should block Comcast's proposed deal with Time Warner Cable. The matter will be settled at President Obama's level.
Now let us come back to our own country. There are various trade bodies and associations known as self-regulatory organizations (SROs). What is their performance? In the insurance sector, a chaotic situation is prevailing. Removal of two ills can improve the situation. These are the stoppage of the credit business, and the heavy undercut of premiums. A decade back, Bangladesh Insurance Association (BIA) framed some rules for smooth running of business in the sector. In presence of the then Commerce Minister, the rules were put into operation and the members of the BIA were loud in their promise. But subsequently, it was more honoured in breach than observance. The government set up Insurance Development and Regulatory Authority (IDRA) to bring back the insurance sector on right track. A section of insurance mandarins left no stone unturned to make it a failed organisation.
The Finance Minister openly expressed his indignation at their activities. Decades back, Dhaka Vegetable Oil Company, an edible oil company, was sold to a high-profile businessman for implementing the policy of privatisation. When the company was under a government corporation, it was making huge profits. It was traded at the stock exchange as a blue chip issue. The company was shut down under the private ownership. Is it believable that a company, which was earning huge profits under the government management, would collapse after it was taken up by a well established businessman? It is reported that the industry possessed huge landed property and priority was given to that sector.
Before the introduction of the Securities and Exchange Commission Act, the affairs of the capital market were conducted under the Capital Issues Act 1947. Usually, a joint secretary of the Ministry of Finance performed as the chief controller of the Capital Issues Act. It was a highly regressive Act. A listed company could not issue any right/bonus shares or enhance the salary of the chief executive, let alone raising of capital without the prior permission of the chief Controller of Capital Issues (CCI). When Mamunur Rashid, the erstwhile CSP, was the CCI, he removed all these obstructions and every thing was left at the hand of the company. Taking the advantage, a company issued rights shares at the rate of 125 against one. Probably, this might be a world record in the corporate sector. The SEC was compelled to step in and restricted the issue probably at 10.
In 2001 in the USA, the world famous energy company Enron and a few other companies collapsed and the audit giant Anderson was the villain. So, in spite of improved and acceptable audit system, President Bush had to set up an accounting authority known as Public Company Accounting Oversight Board.
In Bangladesh, the Finance Minister while presenting the budget for financial year 2011-2012, informed parliament that the Financial Reporting Act would be passed with a view to ensuring transparency and maximum disclosure of the accounts of the publicly traded companies. This would safeguard the interest of the general investors. The Act is yet to be passed. A few days back the Finance Minister said that it would be placed in the next session of parliament.
Earlier, representatives from the Asian Bank Development (ADB) visited Bangladesh. They expressed satisfaction over the performance of the economy but categorically stated that they would not release any further fund unless the proposed Financial Reporting Act was passed and implemented . We do not know when the odyssey of the Act would be over. It is natural that the Institute of Chartered Accountants of Bangladesh (ICAB) would be antagonised but the government should do what is necessary to do.
Bureaucracy and delay are synonymous in Bangladesh. This kind of delay has given birth to a wonderful term in the budget expenditure known as June final. June 30 is the valedictory day of an ongoing financial year. Unspent amount is shown as spent one in a dubious manner and these irregular expenditures are carried out up to August/September.
We have respect for trade bodies, associations and other related organisations. They will continue their status as SROs. But they have limitations also. They can hardly control and restrain any member from the activities which may be violation of rules and laws. The government machineries are to act in accordance with laws and the trade organisations should fully cooperate. The garments sector may be discussed in this connection. This scribe acted as a director, marketing in a garment house at the early stage of the sector. The employees were not given any appointment letter. They were provided with identity cards which were to be deposited at the time of entering the factory. A worker might have worked for years but if the authorities wanted he or she would simply be asked not to come to the factory from the next day. The victim had nothing to show that he or she worked for long and would be deprived of any benefits provided in the laws. Government authorities did not look into the matters and supervise safety measures likely to be taken by the company. Negligence by the government machineries is one of the majors reasons for the chaotic situation in the sector. The result has been withdrawal of GSP (Generalised System of Preferences) facilities and constant monitoring, supervision and even reprimand by the foreigners. We, as an independent nation, could not discharge our responsibilities. We could not ensure good governance. Good governance does not mean undue interference or creation of hindrance. Its only function is to see that the existing laws, rules and regulations are followed.
rezaulparvaz@live.com
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