The Bangladesh Securities and Exchange Commission (BSEC) is apparently unhappy with the low level of compliance of the listed companies with the revised guideline on corporate governance. Following a review of the extent of compliance with the guideline, which was issued in August last year fixing compliance deadline by December 31, 2012, the securities regulator has recently found that only 128 out of a total of 320 listed companies have so far fully complied with the guideline and 91, partially. A total of 101 companies have failed to go by the guideline completely.
The regulator through its corporate governance-related guideline had asked the listed companies to appoint, at least, one-third of their respective directors as independent ones fulfilling certain conditions, give the responsibilities of the chairman and chief executive officer (CEO) to two different individuals, include extensive information about financial health of the companies in the directors' reports to the shareholders, recruit chief financial officers (CFOs), head of internal audit and company secretary and form audit committees with a view to ensuring transparency and accountability in their activities. Reportedly, the BSEC has now decided to punish the companies that have failed to comply with the corporate governance guideline. The errant companies will not be allowed to offer right shares. Such companies have also been asked to explain the reasons for their failure to comply with the guideline.
The securities regulator's move to ensure introduction of standard corporate governance practices in the listed companies, most of which have for long been operating as corporate entities only in name, is a laudable one. A good number of sponsor-directors of some of the listed companies have particularly been reluctant to follow the standards and norms of corporate culture in order to run the affairs of their respective companies as some forms of their own fiefdoms. They have been more prone to running the companies as family-owned ones even after their corporatisation. The BSEC was aware of such an attitude. Yet it did not, or could not, take necessary corrective measures to help ensure transparency and accountability on the part of the listed companies. Though belated, the latest move of the BSEC, if pursued with due earnestness, is expected to yield some positive results.
However, the alertness of the securities regulator on the issue would come under question because of the long delay it has made in reviewing the state of compliance with the guideline. Moreover, barring a few companies that have otherwise a clean image, the regulator will have to scrutinise and verify minutely the compliance reports on corporate governance that are submitted by the listed companies. Given the capacity of the BSEC, in terms of manpower and logistics, the task might prove a difficult one. It, however, needs to carry out the responsibilities faithfully to this effect and with utmost integrity, for ensuring positive results out of the move.
Moreover, punishment that would bar a company from floating right shares for its failure to comply with the corporate governance guideline seems to be too soft to get the results. The floatation of right shares by the listed companies is not a regular or compulsory event. So, the regulator should impose some other tough penalty and implement those in a transparent manner, without being influenced by any other consideration for making any personal gains. This will then have some positive impact on the operation of the companies concerned and prompt all others to comply with the guideline and avoid punishment. The regulator does need to take appropriate actions that would cure the ills and help create a favourable environment in the country's capital market.
