Code of Corporate Governance as issued by Bangladesh

Securities Exchange Commission in 2006 and subsequent

modifications to highlight measures aimed at better financial
management

Introduction
The recent waves of stock market crashes, unethical practices by the
corporations, investors growing interest on the stock market has created the
demand of more transparency and practices that could lead to better
financial management. Keeping that in mind Bangladesh Securities and
Exchange Commission (BSEC) issued Code of Corporate Governance
2006.Successful corporate governance largely depends on trade-off between
the various conflicting interest groups like government, society, investors,
creditors and employees of the organization.

Code of Corporate governance

Under the guidelines, all the companies listed in the Bangladesh stock
exchange must take comply or explain approach i.e companies need to
comply with the code and if not they have to explain why not.
Board of directors
First category in the guidelines relate to the board of directors. The board of
directors is considered as an active monitor of a companys corporate
governance system.
The number of Board of Directors should not be less than 5 (five) and more
than twenty. The Banks, non-bank financial institutions, insurance companies
and statutory bodies shall follow the prescription of their respective primary
regulators in this regard.
Independent Directors
Independent directors are those who do not hold any executive position in
company or have any direct and indirect interest in the company. According
to Agency theory independent directors enhance a boards monitoring
capabilities.
Appointment of at least one-fifth of the total number of the company's board
of directors should be 'independent non-shareholders directors' in the Board.

Separate role of chairperson and CEO

The two most important posts are the Chair of the Board and the Chief
Executive officer. The posts should be filled by different individuals since
their functions are necessarily separate. The positions of chair significantly
influences the outcome of the board decisions as the person controls board
meeting, sets its agenda, makes committee assignments and influences the
selection of directors.
The position of CEO is also important as he is responsible for any operating
and financial decision making.
Appointment of the Chief Financial Officer, Head of Internal Audit
and Company Secretary
The Company is required to appoint a Chief Financial Officer (CFO), a Head of
Internal Audit and a Company Secretary. The CFO and Company Secretary
are required to attend the Board meeting.
The CEO with the board provides overall leadership and vision regarding the
companys strategic direction, tactics and business plans necessary to
realize revenue and earnings growth and increase shareholder value.
The Directors' Report
Prepared as per Companies Act may include additional statements on:The financial statement presents fairly company's state of affairs, the results
of its operation, cash flows and change is equity. While preparing the
financial statement The accounting estimates are based on reasonable and prudent
judgement.
Appropriate accounting policies have been consistently applied
IAS is followed in preparation of the financial statements
Proper books of accounts have been maintained
Disclosure on company's ability as a going concern and if not so then
the fact along with the reasons thereof,
Explanation on the significant deviation from last year in operating
results, if so happened,
Summarize of at least last three years key operating and financial data,
Reasons for non declaration of dividend (if not declared) for the year,
Significant plans and decisions along with future prospects and risks
Number of Board Meetings held during the year and attendance by
directors,

Aggregate number of shares held by: Parent/Subsidiary/Associate

companies,
Directors, CEO, Company Secretary, CFO, Head of Internal Audit and
their spouse and minor children,
Top five salaried employs other than the above mentioned persons
Shareholders holding ten percent or more voting interest in the
company.
Audit Committee
The companies will form an Audit Committee comprising of at least three
members including at least one independent non - shareholder director. The
Audit Committee shall assist the Board in handling the issues, which might
be overlooked and ensures a good monitoring system within the business.
The Committee is required to make report on its activities to the Board. An
immediate report have to made to the Board on the following findings:
conflict of interest;
suspected or presumed fraud or irregularity or material defect in the
internal control system
suspected infringement of laws.

Limitations
There is no specific requirement for directors educational and service
background. Whereas it is assumed that directors who are financially
educated are likely to manage the business more efficiently.

Conclusion
Good corporate governance can ensure effective financial practices in
corporations as a result market is likely to be more efficient. On the other
hand efficient market will definitely attract more investors which is very
crucial for an emerging economy such as Bangladesh. The guideline is
expected to increase level of efficiency, quality and competitiveness
throughout the national economy. Therefore an up to date code of corporate
governance carry innumerable importance.

References www.bdresearchpublications.com

www.csc.com
www.sec.gov.bd