Challenges of corporate governance in Bangladesh
Published : Thursday, 13 December 2012
Dipok Kumar Roy
Sir Adrian Cadbury was chairman of Cadbury Ltd from 1965 and of Cadbury Schweppes during 1975-1989. A pioneer in raising awareness and stimulating the debate on corporate governance, he produced the Cadbury Report, a code of best practice, which has served as a basis for reform of corporate governance around the world. On the challenges to implementing corporate governance, Sir Adrian Cadbury said, "The rich and complex governance system (of policy, laws, regulations, public institutions, self-regulated professional bodies, and managerial ethos) has evolved over centuries in developed market economies. In emerging markets, however, many elements of this mosaic are absent or countries are ill-equipped to address the corporate governance challenges they face." In the context of Bangladesh, the "ill-equipped" structure has been unable to address the corporate governance challenges to make it effective and efficient. We should first identify the challenges before pointing out the ill-equipped structure. Adoption of a standard framework: The first challenge is to adopt corporate governance in line with standard framework making the management accountable and responsible to the Board and the Board to the shareholders/stakeholders. The Board's general approach is to act as a self-declared leader-with the 'my company' or 'my governance' attitude. As such the Board likes to stay beyond accountability and perform its duty in whatever way it likes. But under corporate governance, the Board is a corporate leader being accountable to the shareholders having fiduciary responsibilities to them. Sometimes, the Board emphasises keeping the management under their control with policy and procedures instead of making the Board members accountable with any written policy and reporting framework. Thus the tiers of corporate responsibility and accountability do not work well, that is not a good sign for the corporate governance and sustainable development of the company. Function of independent wings: In corporate governance framework, there are some independent internal and external wings for ensuring accountability in managing resources and reporting thereof. How far the independent director(s) works independently in the Board? The selection and appointment of independent directors stems from the requirement of Securities and Exchange Corporate Governance Guidelines, where the Board appoints such director(s), subject to approval at the Annual General Meeting (AGM). Basically, they hardly have any guts to play the role independently in the Board. Internal control and compliance team, other teams for other purposes and internal audit department may have just only advices of regulators. The effectiveness and efficiency for working independently on the part of these teams and departments are subject to questions as the senior management or even the Board may interfere in these teams prompted by their 'dishonest interest'. The regulator has very little strategy to strengthen these internal teams and departments except dealing with them on reporting. The functions of the audit committee have really been, in most cases, on papers and to present them in the report. The picture of independence of independent director(s), internal team and department and the audit committee of the Board as stated above is a general practice in our corporations or companies. Some companies may have sound and remarkable independence in practice, but the number of such companies is really negligible. The role of external audit is also under a question mark of independence. If the client is large for the auditor with a large amount of professional fee, the auditor may lose its independence because of fear of losing audit engagement. In cases of small clients, the auditor may overlook their professional responsibilities to review and give views on financials. In case of...
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