SECP launches consultation process

SECP launches a consultation process to reform the 2002 code of corporate governance.

The Securities and Exchange Commission of Pakistan (SECP) has launched a consultation process to reform the 2002 code of corporate governance. The code is being revised taking into account lessons learnt from practical issues and considerations relevant to listed companies and to ensure that it reflects changing governance concerns, practices and economic circumstances.

The main proposals include ensuring that the board is well balanced and challenging, that new principles are put forward and that the roles, skills and independence of non-executive directors and their levels of time commitment are clearly defined.

The revised code proposes the separation of the offices of chairman and CEO with the chairman being a non-executive director of the listed company. It also proposes increased representation of independent directors on the board and to limit the number of directorships that an individual can hold in listed companies to five.

Board evaluation reviews have also been proposed to improve accountability and a number of changes to board committees and their composition have been suggested. Furthermore, it has been proposed that the audit committee ought to have a majority of independent directors and that its chairman should be from amongst the independent directors.

While launching the consultation process, Salman Shaikh, the SECP Chairman, said that the principal lesson of the evolving governance regime in Pakistan is that those on boards must think deeply about their individual and collective roles and responsibilities. “The code is made up of strong principles that require careful thought and application to the circumstances of each company. The code demands that boards critically assess their performance and openly explain themselves to shareholders. The proposed changes to the code are based on international best practices and the experience of last few years in implementation of the code. The changes proposed would indeed benefit governance in all major businesses,” said Shaikh.

Published in The Express Tribune, October 7^th, 2010.