Securities and Exchange Commission of Pakistan (SECP) Chairman Mohammad Ali has said federal ministers and politicians cannot be appointed on boards of public sector enterprises under proposed draft regulations.
Addressing a press conference here on Friday, Ali expressed the hope that the rules, aimed at improving governance in bleeding public sector enterprises and regulating their day-to-day affairs, would be finalised in a few months.
He also highlighted the progress the country made in the Global Competitiveness Index, where on the pillar of regulation of securities exchanges the country was upgraded 15 notches to 55th position. However, overall, Pakistan was placed among bottom 20 countries of the world.
The process to finalise the rules is painfully slow, particularly at a time when state units like Pakistan International Airlines (PIA), Pakistan Steel Mills and Pakistan Railways are suffering billions of rupees worth of losses.
Ali said at present a task force is working on the draft rules and after that the SECP will finalise the rules by the end of December. The rules will be issued after taking input from the finance ministry and evaluation by the law ministry.
Under the rules, contrary to the existing practice, the performance of boards of companies will be monitored on an annual basis. The regulations will be applied to both listed and non-listed public sector companies.
Ali pointed out that there would be fit and proper criteria for appointment of board members, which would include their financial integrity, industry experience and no criminal record. There will also be a maximum limit on bureaucrats sitting on various boards.
If this proposal is passed by the law ministry, it will close the door on bureaucrats, who have been found unnecessarily calling board meetings to mint money.
The SECP has formulated draft regulations that have been principally based on the code of corporate governance. These regulations have been designed in
view of the distinct governance challenges faced by public sector corporations in the country. The inefficiency of such companies
is choking the economy and draining fiscal resources, necessitating the need for restructuring of their operations, according to the SECP.
Measures to improve governance in state corporations include reforms in board composition by including a certain number of independent non-executive directors in the boards and ensuring continuity in the tenure of board members.
They also include separating roles of chairman and chief executive, forming specialised board committees, training and capacity-building of board members, strengthening internal control mechanism and augmenting disclosure and transparency requirements.
Demutualisation of stock exchanges
Ali disclosed that after becoming limited companies, a significant chunk of shares of stock markets would be listed in the equity markets. Rest of the shares will be sold to strategic investors. Stock market brokers have already obtained 40% shares.
He said the SECP had suggested to the three stock markets to consider the possibility of merger before going to strategic investors. At least, Islamabad and Lahore stock markets could merge, which would strengthen their balance sheets and reduce costs, he said.
However, Ali made it clear that the SECP would have no role in the merger decision and it would be up to the management of bourses to decide.
Published in The Express Tribune, September 8th, 2012.
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Yes;very good move.