Corporate governance matters for the pecuniary progress by growingthe flow of money to the capital market. East Asian fiscal catastrophe magnetizesevere consideration to significance of corporate governance in developingcountries.
The OECD has established a set of corporate governance values in1999 that have turn out to be the core outline for assessing a country’scorporate governance preparations. Corporate governance comprises the privateand public institutions which simultaneously rule the association among thosewho deal with corporations and those who put in capital in corporations. Theseinstitutions on average include a country’s corporate laws, securities set oflaws, stock-market listing necessities, accepted trade practices and existingbusiness principles.
Thus, changes in Pakistani structure of corporategovernance are probable to have vital penalty for the formation and behavior ofstate business. The concernof Corporate Governance of banks has also basic significance for risingEconomies. SBP rationalized the regulatory structure leading the commercialbanking business and issued some guiding principles for corporate governance.The study of Khalid & Haneef (2005) provides an outline of progress in thebanking zone and procedures of corporate governance in Pakistan. Their cramobserves that SBP planned its job as a supervisor and manager and create thecentral bank comparatively more efficiently in recent years. Furthermore, the lawfuland regulatory formation leading the function of commercial banks has been modernized.Nevertheless, as the practice of corporate governance of banks in Pakistan isvery new, not sufficient information is on hand to make an evaluation of theimpact of these policies such as an estimation of the progress in bank effectivenessor decrease in bank defaults. Securities and Exchange Commission of Pakistanissued Code of Corporate Governance in March 2002 in order to reinforce theregulatory system and its enforcement.
The code of corporate governance is the mainstep in corporate governance reforms in Pakistan. The code includes manyrecommendations in sequence with worldwide good practice. The most importantareas of enforcement consist of reforms of board of directors in order to makeit responsible to all shareholders and enhanced disclosure together with enhancedinternal and external audits for listed companies. However, the code’s limited requirementson director’s freedom remain deliberate and offer no supervision on internalcontrols, risk management and board reimbursement policies.Institutional StructureEast Asian monetary disaster andcorporate breakdown like Enron have brought to light the significance of an efficientinstitutional structure. In order to the improve value of the corporategovernance for finance progress of a country concentration must be given to reinforcethe institutional support.
That strong institutional structure would aid in successfulcorporate administration and for developing superior capital markets thatincreases investor value and improve corporate governance. The establishment ofthe Security and Exchange Commission of Pakistan represents an imperativemilestone in the progress of the regulatory framework of the capital market inPakistan. The Securities and Exchange Commission of Pakistan was established inpursuance of the Securities and Exchanges Commission of Pakistan Act, 1997 and startedits operations on 1st January, 1999. It succeeds the Corporate Law Authority(CLA), which was a Government sector attached to the Ministry of finance. Itwas originally concerned with the regulation of corporate sector and capitalmarket.
In harmony with the accepted Corporate Plan, the Commission has been prearrangedinto the following six Divisions: