manual Corporate Govrnance Pakistan

manual Corporate Govrnance Pakistan

Manual of Corporate
Governance

SEC

Securities and Exchange
Commission of Pakistan

This manual is for reference only and does not constitute any legal requirement on
companies, their officers, directors or auditors. This manual may be used for
guidance and compliance must be ensured with the provisions of applicable laws
and regulations.

CONTENTS
I.

INTRODUCTION

1

II.

WHAT IS CORPORATE GOVERNANCE?
(i)
The Background
(ii)
Definition of Corporate Governance
(iii)
The Benefits of Corporate Governance
(iv)
The Pakistani Corporation
(v)
The Origins of Corporate Governance in Pakistan

3
3
4
7
8
10

III.

THE NEED FOR CORPORATE GOVERNANCE

12

IV.

THE STAKEHOLDERS
(i)
General
(ii)
Shareholders
(iii)
Directors
(iv)
Employees
(v)
Creditors

17
17
19
20
20
21

V.

PROMOTING REFORM AND SHAREHOLDER ACTIVISM

22

VI.

ROLE AND RESPONSIBILITIES OF DIRECTORS AND
MANAGERS
(i)
Directors and Managers Distinguished
(ii)
Appointment and Proceedings of Directors
(iii)
Fiduciary Duties
(iv)
Powers and Responsibilities of Directors
(v)
Liability of Directors
(vi)
Executive and the Non-executive Directors
(vii)
The CEO

26
26
26
32
38
42
42
45

(viii)
(ix)
(x)
(xi)

VII.

VIII.

The Company Secretary
The CFO
Internal Control System
Reporting Requirements

47
49
49
50

SCRUTINIZING FINANCIAL STATEMENTS - WHAT EVERY
DIRECTOR SHOULD KNOW
(i)
General
(ii)
Liability of Directors
(iii)
Preparation of Financial Statements
(iv)
Tools for Directors' Review
(v)
How to Prevent Misleading and Fraudulent Financial
Statements
(vi)
External Auditors
(vii)
Role of the Audit Committee
(viii)
Role of Internal Audit

54

CONCLUSION

81

APPENDIX A

54
54
55
60
61
65
75
79

DIFFERENCES BETWEEN DIRECTORS AND MANAGERS 82

MANUAL OF CORPORATE GOVERNANCE

CORPORATE GOVERNANCE IN PAKISTAN
I.

INTRODUCTION

1.1

In March 2002, the...

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