Compliance with the guidelines on corporate governance (CG) for listed companies is not mandatory, but failure to cope with that must be explained, observed the Securities and Exchange Commission (SEC) Chairman Mirza Azizul Islam.
"We are imposing the conditions of CG guidelines on comply or explain basis. The companies listed with any stock exchange in Bangladesh should comply with conditions mentioned in the guideline or shall explain the reasons for non-compliance," he also said.
He was addressing as the chief guest at a roundtable discussion on "SEC guidelines on corporate governance", organised by the Bangladesh Enterprise Institute (BEI) in the city yesterday (Thursday) with its president Faruq Sobhan in the chair.
Former Bangladesh Bank (BB) governor Fakhruddin Ahmed, former SEC chairman Habibur Rashid and Bangladesh Supreme Court advocates Nihad Kabir and Sheela R Rahman also addressed the roundtable.
The conditions in the CG guideline stated that the number of the board members of the company should not be less than five and more than twenty. And at least one-fifth of the total number of the company's board of directors should be independent non-shareholder directors, who will be appointed by the elected directors.
The company should appoint a chief financial officer, a head of internal audit and a company secretary and the board of directors should clearly define respective roles, responsibilities and duties of the above personalities, the guideline added.
The audit committee should be composed of at least three members, responsible for reporting to board of directors, on conflicts on interests, suspected infringement of laws and presumed fraud or irregularity or material defect in the internal control system, the guideline also suggested.
"Corporate governance system imposes unnecessary restrictions, making the application system of the prescribed set of rules more complex for most organisations," said Fakhruddin Ahmed.
He suggested the market regulators of financial sector to extend their support and cooperation to financial institutions for better market capitalisation by the implementation of the basic CG guidelines.
"The buy-back option of shares should be allowed for the better financial conditions of the company," said Anis A Khan, chairman of the Industrial Development Leasing Company (IDLC).
Terming CG as a set of code related to morality and ethics, normally designed to protect the interest of all the stakeholders, Nihad Kabir said, shareholders should be made aware of their rights for the effective CG implementation.