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...