06&07 - GE05 - FECGBL - Corporate Governance (10%) - Class No.06 & 07 - by MD - Monowar Hossain FCMA, CPA, FCS, ACA

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GE05: Fundamentals of Ethics, Corporate Governance and Business Law
CMA
Business Level
GE 05: Fundamentals of Ethics, Corporate Governance and Business Law
GE 05–C. The role and key objectives of corporate governance.
Class
Corporate The interaction of corporate governance, ethics and the law.
No. 06
governance (10%) The development of corporate governance internationally e.g. in
& 07
the UK, Europe, South Africa and the USA.
Rules and principles based approaches to governance.
The role and key objectives of corporate governance.
Corporate Governance
"The system by which organisations are directed and controlled". _ UK Cadbury Committee.
“A set of relationships between a company’s management, its board, its shareholders, and other
stakeholders. Corporate governance also provides the structure through which the objectives of the company
are set, and the means of attaining those objectives and monitoring performance are determined. Good
corporate governance should provide proper incentives for the board and management to pursue objectives
that are in the interests of the company and its shareholders and should facilitate effective monitoring.”
- The Organization for Economic Cooperation and Development (OECD)
The role and key objectives

of corporate governance.
1. Reducing conflicts of interest,
especially between managers and
stockholders.
2. Verifying that the firm’s assets
are used efficiently and
productively and in the
shareholders’ best interest.
Core attributes of an effective
corporate governance system
include:
3. A clear delineation of
shareholder rights.
4. An outline of manager and
director responsibilities to
shareholders.
5. Clearly defined standards
against which performance of
responsibilities can be measured.
6. Fair and equitable treatment in
relationships between managers,
directors and shareholders.
7. Accuracy and transparency in
disclosures regarding operations,
performance, risk and financial
position.
Page# 42 October 17, 2015

Md.Monowar Hossain CPA,ACA,FCS,FCMA
GM & Head of Internal Control and Compliance (ICC)
AGRANI BANK LIMITED
eMail: md.monowar@gmail.com
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Attributes that Contribute to Governance Effectiveness

There are four attributes that help assess the board’s performance level and put the framework into action. A
board can use these attributes to help identify its strengths and opportunities for improvement within each of
the governance elements:
Skills and knowledge: What are the skills
that are needed for the board to effectively
execute its responsibilities?
Process: What processes are necessary for
the board to both understand and properly
oversee the activities of the organization?
Information: Is the information received
by the board adequate to support effective
oversight and decision-making?
Behavior: Does the board’s behavior
support and reinforce strong oversight?
These very broad questions can help to
start the process of identifying gaps and
opportunities for improvement within the
overall framework.
Once the broad questions have been addressed, the board can get more tactical and drill down to more
analysis of development opportunities within the various elements.
For example, a board may find the quality and timeliness of information provided by management with
respect to performance to be quite adequate, while determining that the information available related to the
strategic planning process needs work. This high-level prioritization helps to take the broad concepts of
board effectiveness and create manageable activities.
Principles of good corporate governance

The principles underlying these rules are:
1. ethical approach - culture, society; organizational paradigm
2. balanced objectives - congruence of goals of all interested parties
3. each party plays his part - roles of key players: owners/directors/staff
4. decision-making process in place - reflecting the first three principles and giving due weight to all
stakeholders
5. equal concern for all stakeholders - albeit some have greater weight than others
6. accountability and transparency - to all stakeholders
Golden Rules of best corporate governance practices are:
1. Ethics: a clearly ethical basis to the business

2. Align Business Goals: appropriate goals, arrived at through the creation of a suitable stakeholder
decision making model
3. Strategic management: an effective strategy process which incorporates stakeholder value
4. Organization: an organization suitably structured to effect good corporate governance
5. Reporting: reporting systems structured to provide transparency and accountability

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Why is Corporate Governance Important?
Corporate governance is the way a corporation polices itself. In short, it is a method of governing the
company like a sovereign state, instating its own customs, policies and laws to its employees from the
highest to the lowest levels. Corporate governance is intended to increase the accountability of your company
and to avoid massive disasters before they occur. Failed energy giant Enron, and its bankrupt employees and
shareholders, is a prime argument for the importance of solid corporate governance. Well-executed corporate
governance should be similar to a police department’s internal affairs unit, weeding out and eliminating
problems with extreme prejudice. A company can also hold meetings with internal members, such as
shareholders and debt-holders – as well as suppliers, customers and community leaders, to address the
request and needs of the affected parties.
Corporate Governance as Risk Mitigation
Corporate governance is of paramount

importance to a company and is almost as
important as its primary business plan. When
executed effectively, it can prevent corporate
scandals, fraud and the civil and criminal
liability of the company. It also enhances a
company’s image in the public eye as a self-
policing company that is responsible and
worthy of shareholder and debt-holder capital.
It dictates the shared philosophy, practices and
culture of an organization and its employees.
A corporation without a system of corporate
governance is often regarded as a body
without a soul or conscience. Corporate
governance keeps a company honest and out
of trouble.
Steps to Improving Corporate Governance
1. Recognizes that good governance is not just about compliance

Boards need to balance conformance (i.e. compliance with legislation, regulation and codes of practice) with
performance aspects of the board’s work (i.e. improving the performance of the organization through
strategy formulation and policy making). As a part of this process, a board needs to elaborate its position and
understanding of the major functions it performs as opposed to those performed by management. These
specifics will vary from board to board. Knowing the role of the board and who does what in relation to
governance goes a long way towards maintaining a good relationship between the board and management.
2. Clarify the board’s role in strategy
It is generally accepted today that the board has a significant role to play in the formulation and adoption of
the organization's strategic direction. The extent of the board’s contribution to strategy will range from
approval at one end to development at the other. Each board must determine what role is appropriate for it to
undertake and clarify this understanding with management.
3. Monitor organizational performance
Monitoring organizational performance is an essential board function and ensuring legal compliance is a
major aspect of the board’s monitoring role. It ensures that corporate decision making is consistent with the
strategy of the organization and with owners’ expectations. This is best done by identifying the organization's
key performance drivers and establishing appropriate measures for determining success. As a board, the

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directors should establish an agreed format for the reports they monitor to ensure that all matters that should
be reported are in fact reported.
4. Understand that the board employs the CEO
In most cases, one of the major functions of the board is to appoint, review, work through, and replace (when
necessary), the CEO. The board/CEO relationship is crucial to effective corporate governance because it is
the link between the board’s role in determining the organization's strategic direction and management’s role
in achieving corporate objectives.
5. Recognize that the governance of risk is a board responsibility
Establishing a sound system of risk oversight and management and internal control is another fundamental
role of the board. Effective risk management supports better decision making because it develops a deeper
insight into the risk-reward trade-offs that all organizations face.
6. Ensure the directors have the information they need
Better information means better decisions. Regular board papers will provide directors with information that
the CEO or management team has decided they need. But directors do not all have the same informational
requirements, since they differ in their knowledge, skills, and experience. Briefings, presentations, site visits,
individual director development programs, and so on can all provide directors with additional information.
Above all, directors need to be able to find answers to the questions they have, so an access to independent
professional advice policy is recommended.
7. Build and maintain an effective governance infrastructure
Since the board is ultimately responsible for all the actions and decisions of an organization, it will need to
have in place specific policies to guide organizational behaviour. To ensure that the line of responsibility
between board and management is clearly delineated, it is particularly important for the board to develop
policies in relation to delegations. Also, under this topic are processes and procedures. Poor internal
processes and procedures can lead to inadequate access to information, poor communication and uninformed
decision making, resulting in a high level of dissatisfaction among directors. Enhancements to board meeting
processes, meeting agendas, board papers and the board’s committee structure can often make the difference
between a mediocre board and a high performing board.
8. Appoint a competent chairperson
Research has shown that board structure and formal governance regulations are less important in preventing
governance breaches and corporate wrongdoing than the culture and trust created by the chairperson. As the
“leader” of the board, the chairperson should demonstrate strong and acknowledged leadership ability, the
ability to establish a sound relationship with the CEO, and have the capacity to conduct meetings and lead
group decision-making processes.
9. Build a skills-based board
What is important for a board is that it has a good understanding of what skills it has and those skills it
requires. Where possible, a board should seek to ensure that its members represent an appropriate balance
between directors with experience and knowledge of the organization and directors with specialist expertise
or fresh perspective. Directors should also be considered on the additional qualities they possess, their
“behavioural competencies”, as these qualities will influence the relationships around the boardroom table,
between the board and management, and between directors and key stakeholders.
10. Evaluate board and director performance and pursue opportunities for improvement
Boards must be aware of their own strengths and weaknesses, if they are to govern effectively. Board
effectiveness can only be gauged if the board regularly assesses its own performance and that of individual
directors. Improvements to come from a board and director evaluation can include areas as diverse as board
processes, director skills, competencies and motivation, or even boardroom relationships. It is critical that
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any agreed actions that come out of an evaluation are implemented and monitored. Boards should consider
addressing weaknesses uncovered in board evaluations through director development programs and
enhancing their governance processes.
The interaction of corporate governance, ethics and the law.
Ethics, law and corporate governance are all interrelated.
Ethics are values and principles that society expects companies and individuals to follow and laws are
rules that the legislators have determined that companies and individuals must follow.
Corporate governance requirements may be viewed as additional rules and guidance for companies
and individuals. They bridge the gap between what the law requires and what society expects.
The law and ethics The law and corporate governance
Ethical and moral behaviour is The law provides the structure for the internal regulation of
very often codified and therefore companies, such as the duty of directors to be open about their
legally binding. This occurs where dealings and it also provides a mechanism of control, for example
the ethical position is so important the ability of shareholders to dismiss the directors and to exercise
that the legislators decide that it control of the company through the articles and meetings.
must be protected by the force of The main legal regulations that affect companies are as follows.
law.
Name Contains rules on:
For example, society believes it is Registering, administering and
ethically wrong for those who Companies Act-1994
operating companies.
commit crimes (such as drug Memorandum of Association Interaction between the
smuggling) to profit from their and Articles of Association shareholders and directors.
illegal actions. Legislation was
Money Laundering Prevention
brought in and now it is now an Criminal activities such as
Act -2012
offence in the Bangladesh to money laundering and insider
Anti Terrorism (Amendment)
launder the proceeds of crime, in dealing.
Act- 2013
other words making illegal gains
appear legitimate. Securities and Exchange
Rules-1987 Listing rules such as admission
The rules on insider dealing, Stock Exchanges and disclosure requirements
where those who possess ‘inside Listing Regulations-2015
information’ about a company and
who gain by the sale or purchase BSEC Notification No. Corporate Governance Guideline
of its shares whilst using this SEC/CMRRCD/2006- for the listed securities issued by
information, is another example. 158/134/Admin/44 the Bangladesh Securities and
Society believes it is unfair for Dated: 07 August, 2012 Exchange Commission.
those ‘lucky’ individuals with Bangladesh Bank issued its latest
BRPD Circular No.11 dated 27 Corporate Governance
inside knowledge to take
October 2013 Guidelines for the Banks.
advantage of their position at the
expense of others.
The relationship between law, governance, social responsibility and ethics

Corporate
Law Social responsibility Ethics
Governance
*Mandatory rules that *Publicly listed * No regulation. Values and principles.
individuals and companies only * Individuals and Individuals and companies
companies must follow. are regulated. companies have a free are expected to follow.
*The minimum level of *Others are choice. Adopting an ethical
behaviour society encouraged to * Some social pressure to position is down to free
allows. follow 'best act in a socially choice.
practice'. responsible manner.
More regulation, less freedom of choice. Less regulation more freedom of choice.
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The development of corporate governance internationally e.g. in the UK, Europe, South Africa
and the USA.
The development of corporate governance in the UK

Three significant government committees (Cadbury, Greenbury and Hampel), were commissioned during the
1990s in response to the increased need for good corporate governance in light of several corporate scandals
including the collapse of Asil Nadir's Polly Peck, the pension scandal of Robert Maxwell's Mirror Group and
Guinness's illegal share support scheme involving Ernest Saunders. Other UK corporate scandals involved
Barings Bank and BA.
Corporate collapses such as those mentioned above not only affect the stakeholders involved – such scandals
reduce overall investor confidence in the markets, as directors are not being seen to be effectively controlled.
For a country such as the UK which has a tradition of investment and respected financial markets, resolving
this issue was massively important economically. The recommendations of the committees were
incorporated into the 1998 Combined Code which companies listing on the London Stock Exchange are
required to comply. Since then, three further committees reported (Turnbull, Higgs and Smith) and their
recommendations were incorporated into the 2003 Combined Code. This Code is regularly revised, the latest
version being published in 2014.

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UK Corporate Governance Code Read your study material : Page -427

The UK Corporate Governance
Code (formerly known as the
Combined Code) sets out
standards of good practice for
listed companies on board
composition and development,
remuneration, shareholder
relations, accountability and
audit. The code is published by
the Financial Reporting Council
(FRC).
On 17 September 2014 the FRC published an updated version of the UK Corporate Governance Code, as
announced in the press release FRC updates UK Corporate Governance Code. The revised Code was applied
to accounting periods beginning on or after 1 October 2014.
The development of corporate governance in the Europe
The European Commission has taken the view that corporate governance matters should be left as a matter
for individual states to deal with and was the subject of an announcement in 2003. The Commission did
recognise that a common approach was necessary for certain fundamental issues (such as directors'
remuneration, disclosure and access to financial information and the management of independent non-
executive directors) so it developed a series of Directives as a basis for all states to follow.
In October 2004 the EU Corporate Governance Forum was established with 15 members representing
various stakeholders from across the EU with the objective of co-ordinating corporate governance between
all member states.
The development of corporate governance in the South Africa
The King III Report

Principles of good governance are not only regulated in terms of legislation and the common law. Important
recommendations are contained in Codes of Best Practice. The King II Report on Corporate Governance of
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2002 (hereafter referred to as 'King II') was applicable to South African enterprises until the end of February
2010.
In view of the anticipated new Companies
Act 2008, it became necessary to draft a
new King Report on Corporate
Governance. The King III Committee
consisted of 11 subcommittees, namely:
1) boards and directors
2) accounting and auditing
3) risk management
4) internal audit
5) integrated sustainability reporting
6) compliance and stakeholder
relationships
7) business rescue
8) fundamental and affected
transactions
9) IT governance
10) alternative dispute resolutions
11) editing.
The King III Report deals with more or less the same issues as dealt with in King II.
Corporate governance is regulated in South Africa. Most of the companies that had corporate governance
failures did subscribe to principles of good corporate governance and had certain measures in place. This
raises the question: does the drafting of codes of good governance really make companies healthier and more
sustainable, and will they reduce the likelihood of corporate collapses? This question is linked to the concept
of 'box-ticking', referring to the practice of ticking off certain areas/boxes to indicate that there was
compliance with specific aspects. To merely tick boxes is clearly not ideal as there must be compliance with
the rule and not just with the form.

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The development of corporate governance in the USA
Corporate governance rules in the USA have developed from relatively little to the complex
Sarbanes-Oxley Act of 2002. Three main drivers for this were:
1) Active management
Increasing shareholder
activism from
institutional investors
and in particular fund
managers brought the
actions and behaviour
of senior corporate
managers to the
public's attention. This
was driven in part by
the increasingly
protective practices of
directors in preventing
takeovers which some
investors thought went
against their best
interests.
2) Enron, Arthur Andersen and Worldcom

The collapses of Enron and Worldcom encouraged the US government to take action to restore
public confidence and trust in large corporations. The Sarbanes-Oxley Act of 2002 introduced
measures to protect investors from further corporate disasters by implementing reporting procedures
aimed at increasing the accuracy of disclosures and the openness of corporations.
While Enron no longer exists, Worldcom did survive and merged with MCI International following
successfully emerging from bankruptcy.
3) Close relationships between auditors and clients

Enron also revealed that far from being independent, auditors often enjoyed very close relationships
with their clients, In Enron's case, its auditor (Arthur Andersen) undertook lucrative consultancy
work. The threat of losing this valuable income compromised the auditor's ability to give a truly
independent report.
Andersen was found guilty of obstructing justice as a result of the investigation into the scandal
(although the decision was subsequently quashed). Andersen still exists today but it is very small and
mainly deals with lawsuits against it.
The Public Company Accounting Oversight Board was created by the Sarbanes-Oxley Act and was
given the role of policing auditors. All auditors of public companies must be registered and comply
with strict rules on ethics and audit procedures. Restrictions are in place to prevent auditors
performing certain audit and non-audit work for clients and they must disclose audit and non-audit
income separately

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The development of corporate governance in the Bangladesh
Bangladesh Securities and Exchange Commission

(BSEC) issued its latest Corporate Governance
Guidelines (No. SEC/ CMRRCD/2006-158/
134/Admin/ 44) on 07 August 2012 in order to
enhance the corporate governance practices of the
companies listed with any stock exchange in
Bangladesh, in the interest of investors and the
capital market.
This notification supersedes its earlier Notification
No. SEC/ CMRRCD/ 2006-158/ Admin/ 02-08
dated 20 February 2006.
NOTIFICATION
07 August 2012
No. SEC/CMRRCD/2006-158/134/Admin/44: Whereas, the Securities and Exchange Commission (herein

after referred to as the “Commission”) deems it fit that the consent already accorded by the Commission, or
deemed to have been accorded by it, or to be accorded by it in future, to the issue of capital by the companies
listed with any stock exchange in Bangladesh, shall be subject to certain further conditions, on 'comply'
basis, in order to enhance corporate governance in the interest of investors and the capital market;
Now, therefore, in exercise of the power conferred by section 2CC of the Securities and Exchange
Ordinance, 1969 (XVII of 1969), the Commission hereby supersedes its earlier Notification No.
SEC/CMRRCD/2006-158/Admin/02-08 dated 20th February, 2006 and imposes the following further
conditions to the consent already accorded by it, or deemed to have been accorded by it, or to be accorded by
it in future, to the issue of capital by the companies listed with any stock exchange in Bangladesh:
Provided, however, that these conditions are imposed on 'comply' basis. The companies listed with any stock
exchange in Bangladesh shall comply with these conditions in accordance with the condition No. 7.
The Conditions:
1. BOARD OF DIRECTORS:
1.1 Board's Size The number of the board members of the company shall not be less than 5 (five) and
more than 20 (twenty): Provided, however, that in case of banks and non-bank financial institutions,
insurance companies and statutory bodies for which separate primary regulators like Bangladesh
Bank, Insurance Development and Regulatory Authority, etc. exist, the Boards of those companies
shall be constituted as may be prescribed by such primary regulators in so far as those prescriptions
are not inconsistent with the aforesaid condition.

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1.2 Independent Directors
All companies shall encourage effective representation of independent directors on their Board of
Directors so that the Board, as a group, includes core competencies considered relevant in the
context of each company. For this purpose, the companies shall comply with the following:-
(i) At least one fifth (1/5) of the total number of directors in the company’s board shall
be independent directors.
(ii) For the purpose of this clause “independent director” means a director
a) who either does not hold any share in the company or holds less than one
percent (1%) shares of the total paid-up shares of the company;
b) who is not a sponsor of the company and is not connected with the company’s
any sponsor or director or shareholder who holds one percent (1%) or more
shares of the total paid-up shares of the company on the basis of family
relationship. His/her family members also should not hold above mentioned
shares in the company:
Provided that spouse, son, daughter, father, mother, brother, sister, son-in-law
and daughter-in-law shall be considered as family members;
c) who does not have any other relationship, whether pecuniary or otherwise, with
the company or its subsidiary/associated companies;
d) who is not a member, director or officer of any stock exchange;
e) who is not a shareholder, director or officer of any member of stock exchange
or an intermediary of the capital market;
f) who is not a partner or an executive or was not a partner or an executive during
the preceding 3 (three) years of the concerned company’s statutory audit firm;
g) who shall not be an independent director in more than 3 (three) listed
companies;
h) who has not been convicted by a court of competent jurisdiction as a defaulter
in payment of any loan to a bank or a Non-Bank Financial Institution (NBFI);
i) who has not been convicted for a criminal offence involving moral turpitude.
(iii) the independent director(s) shall be appointed by the board of directors and
approved by the shareholders in the Annual General Meeting (AGM).
(iv) the post of independent director(s) can not remain vacant for more than 90 (ninety)
days.
(v) the Board shall lay down a code of conduct of all Board members and annual
compliance of the code to be recorded.
(vi) the tenure of office of an independent director shall be for a period of 3 (three) years,
which may be extended for 1 (one) term only.
1.3 Qualification of Independent Director (ID)
(i) Independent Director shall be a knowledgeable individual with integrity who is able to ensure
compliance with financial, regulatory and corporate laws and can make meaningful contribution
to business.
(ii) The person should be a Business Leader/Corporate Leader/Bureaucrat/University Teacher with
Economics or Business Studies or Law background/Professionals like Chartered Accountants,
Cost & Management Accountants, Chartered Secretaries. The independent director must have at
least 12 (twelve) years of corporate management/professional experiences.
(iii) In special cases the above qualifications may be relaxed subject to prior approval of the
Commission.
1.4 Chairman of the Board and Chief Executive Officer
The positions of the Chairman of the Board and the Chief Executive Officer of the companies
shall be filled by different individuals. The Chairman of the company shall be elected from
among the directors of the company. The Board of Directors shall clearly define respective roles
and responsibilities of the Chairman and the Chief Executive Officer.
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1.5 The Directors’ Report to Shareholders

The directors of the companies shall include the following additional statements in the Directors'
Report prepared under section 184 of the Companies Act, 1994 (Act No. XVIII of 1994):-
(i) Industry outlook and possible future developments in the industry.
(ii) Segment-wise or product-wise performance.
(iii) Risks and concerns.
(iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin.
(v) Discussion on continuity of any Extra-Ordinary gain or loss.
(vi) Basis for related party transactions- a statement of all related party transactions should be
disclosed in the annual report.
(vii) Utilization of proceeds from public issues, rights issues and/or through any others
instruments.
(viii) An explanation if the financial results deteriorate after the company goes for Initial Public
Offering (IPO), Repeat Public Offering (RPO), Rights Offer, Direct Listing, etc.
(ix) If significant variance occurs between Quarterly Financial performance and Annual
Financial Statements the management shall explain about the variance on their Annual
Report.
(x) Remuneration to directors including independent directors.
(xi) The financial statements prepared by the management of the issuer company present fairly
its state of affairs, the result of its operations, cash flows and changes in equity.
(xii) Proper books of account of the issuer company have been maintained.
(xiii) Appropriate accounting policies have been consistently applied in preparation of the
financial statements and that the accounting estimates are based on reasonable and prudent
judgment.
(xiv) International Accounting Standards (IAS)/Bangladesh Accounting Standards
(BAS)/International Financial Reporting Standards (IFRS)/Bangladesh Financial Reporting
Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the
financial statements and any departure there-from has been adequately disclosed.
(xv) The system of internal control is sound in design and has been effectively implemented and
monitored.
(xvi) There are no significant doubts upon the issuer company's ability to continue as a going
concern. If the issuer company is not considered to be a going concern, the fact along with
reasons thereof should be disclosed.
(xvii) Significant deviations from the last year’s operating results of the issuer company shall be
highlighted and the reasons thereof should be explained.
(xviii) Key operating and financial data of at least preceding 5 (five) years shall be summarized.
(xix) If the issuer company has not declared dividend (cash or stock) for the year, the reasons
thereof shall be given.
(xx) The number of Board meetings held during the year and attendance by each director shall
be disclosed.
(xxi) The pattern of shareholding shall be reported to disclose the aggregate number of shares
(along with name wise details where stated below) held by:-
a) Parent/Subsidiary/Associated Companies and other related parties (name
wise details);
b) Directors, Chief Executive Officer, Company Secretary, Chief Financial
Officer, Head of Internal Audit and their spouses and minor children (name
wise details);
c) Executives;
d) Shareholders holding ten percent (10%) or more voting interest in the
company (name wise details).

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Explanation: For the purpose of this clause, the expression “executive”
means top 5 (five) salaried employees of the company, other than the
Directors, Chief Executive Officer, Company Secretary, Chief Financial
Officer and Head of Internal Audit.
(xxii) In case of the appointment/re-appointment of a director the company shall disclose the
following information to the shareholders:-
a) brief resume of the director;
b) nature of his/her expertise in specific functional areas;
c) names of companies in which the person also holds the directorship and the
membership of committees of the board.
2. CHIEF FINANCIAL OFFICER (CFO), HEAD OF INTERNAL AUDIT AND COMPANY
SECRETARY (CS):
2.1 Appointment
The company shall appoint a Chief Financial Officer (CFO), a Head of Internal Audit (Internal Control and
Compliance) and a Company Secretary (CS). The Board of Directors should clearly define respective roles,
responsibilities and duties of the CFO, the Head of Internal Audit and the CS.
2.2 Requirement to attend the Board Meetings

The CFO and the Company Secretary of the companies shall attend the meetings of the Board of Directors,
provided that the CFO and/or the Company Secretary shall not attend such part of a meeting of the Board of
Directors which involves consideration of an agenda item relating to their personal matters.
3. AUDIT COMMITTEE:
(i) The company shall have an Audit Committee as a sub-committee of the Board of Directors.
(ii) (ii) The Audit Committee shall assist the Board of Directors in ensuring that the financial statements
reflect true and fair view of the state of affairs of the company and in ensuring a good monitoring
system within the business.
(iii) The Audit Committee shall be responsible to the Board of Directors. The duties of the Audit
Committee shall be clearly set forth in writing.
3.1 Constitution of the Audit Committee
(i) The Audit Committee shall be composed of at least 3 (three) members.
(ii) The Board of Directors shall appoint members of the Audit Committee who shall be
directors of the company and shall include at least 1 (one) independent director. 7
(iii) All members of the audit committee should be “financially literate” and at least 1 (one)
member shall have accounting or related financial management experience.
Explanation: The term “financially literate” means the ability to read and understand the
financial statements like Balance Sheet, Income Statement and Cash Flow Statement and a
person will be considered to have accounting or related financial management expertise if
(s)he possesses professional qualification or Accounting/ Finance graduate with at least 12
(twelve) years of corporate management/professional experiences.
(iv) When the term of service of the Committee members expires or there is any circumstance
causing any Committee member to be unable to hold office until expiration of the term of
service, thus making the number of the Committee members to be lower than the prescribed
number of 3 (three) persons, the Board of Directors shall appoint the new Committee
member(s) to fill up the vacancy(ies) immediately or not later than 1 (one) month from the
date of vacancy(ies) in the Committee to ensure continuity of the performance of work of the
Audit Committee.
(v) The company secretary shall act as the secretary of the Committee.

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(vi) The quorum of the Audit Committee meeting shall not constitute without at least 1 (one)
independent director.
3.2 Chairman of the Audit Committee
(i) The Board of Directors shall select 1 (one) member of the Audit Committee to be Chairman
of the Audit Committee, who shall be an independent director.
(ii) Chairman of the audit committee shall remain present in the Annual General Meeting
(AGM).
3.3 Role of Audit Committee Role of audit committee shall include the following:-
(i) Oversee the financial reporting process.
(ii) Monitor choice of accounting policies and principles.
(iii) Monitor Internal Control Risk management process.
(iv) Oversee hiring and performance of external auditors.
(v) Review along with the management, the annual financial statements before submission to the
board for approval.
(vi) Review along with the management, the quarterly and half yearly financial statements before
submission to the board for approval.
(vii) Review the adequacy of internal audit function.
(viii) Review statement of significant related party transactions submitted by the management.
(ix) Review Management Letters/ Letter of Internal Control weakness issued by statutory
auditors.
(x) When money is raised through Initial Public Offering (IPO)/Repeat Public Offering
(RPO)/Rights Issue the company shall disclose to the Audit Committee about the
uses/applications of funds by major category (capital expenditure, sales and marketing
expenses, working capital, etc), on a quarterly basis, as a part of their quarterly declaration of
financial results. Further, on an annual basis, the company shall prepare a statement of funds
utilized for the purposes other than those stated in the offer document/prospectus.
3.4 Reporting of the Audit Committee
3.4.1 Reporting to the Board of Directors
(i) The Audit Committee shall report on its activities to the Board of Directors.
(ii) The Audit Committee shall immediately report to the Board of Directors on the
following findings, if any:-
a) report on conflicts of interests;
b) suspected or presumed fraud or irregularity or material defect in
the internal control system;
c) suspected infringement of laws, including securities related laws,
rules and regulations;
d) any other matter which shall be disclosed to the Board of Directors
immediately.
3.4.2 Reporting to the Authorities
If the Audit Committee has reported to the Board of Directors about anything which has material
impact on the financial condition and results of operation and has discussed with the Board of
Directors and the management that any rectification is necessary and if the Audit Committee
finds that such rectification has been unreasonably ignored, the Audit Committee shall report
such finding to the Commission, upon reporting of such matters to the Board of Directors for
three times or completion of a period of 6 (six) months from the date of first reporting to the
Board of Directors, whichever is earlier.
3.5 Reporting to the Shareholders and General Investors
Report on activities carried out by the Audit Committee, including any report made to the Board of
Directors under condition 3.4.1 (ii) above during the year, shall be signed by the Chairman of the Audit
Committee and disclosed in the annual report of the issuer company.
AGRANI BANK LIMITED
CMA Class Note on
4. EXTERNAL/STATUTORY AUDITORS: The issuer company should not engage its
external/statutory auditors to perform the following services of the company; namely:-
(i) Appraisal or valuation services or fairness opinions.
(ii) Financial information systems design and implementation.
(iii) Book-keeping or other services related to the accounting records or financial statements.
(iv) Broker-dealer services.
(v) Actuarial services.
(vi) Internal audit services.
(vii) Any other service that the Audit Committee determines.
(viii) No partner or employees of the external audit firms shall possess any share of the company
they audit at least during the tenure of their audit assignment of that company.
5. SUBSIDIARY COMPANY:
(i) Provisions relating to the composition of the Board of Directors of the holding company
shall be made applicable to the composition of the Board of Directors of the subsidiary
company.
(ii) At least 1 (one) independent director on the Board of Directors of the holding company shall
be a director on the Board of Directors of the subsidiary company.
(iii) The minutes of the Board meeting of the subsidiary company shall be placed for review at
the following Board meeting of the holding company.
(iv) The minutes of the respective Board meeting of the holding company shall state that they
have reviewed the affairs of the subsidiary company also.
(v) The Audit Committee of the holding company shall also review the financial statements, in
particular the investments made by the subsidiary company.
6. DUTIES OF CHIEF EXECUTIVE OFFICER (CEO) AND CHIEF FINANCIAL OFFICER
(CFO):
The CEO and CFO shall certify to the Board that:-
(i) They have reviewed financial statements for the year and that to the best of their knowledge
and belief:
a) these statements do not contain any materially untrue statement or omit any
material fact or contain statements that might be misleading;
b) these statements together present a true and fair view of the company’s
affairs and are in compliance with existing accounting standards and
applicable laws.
(ii) There are, to the best of knowledge and belief, no transactions entered into by the company
during the year which are fraudulent, illegal or violation of the company’s code of conduct.
7. REPORTING AND COMPLIANCE OF CORPORATE GOVERNANCE:

(i) The company shall obtain a certificate from a practicing Professional Accountant/Secretary
(Chartered Accountant/Cost and Management Accountant/Chartered Secretary) regarding
compliance of conditions of Corporate Governance Guidelines of the Commission and shall
send the same to the shareholders along with the Annual Report on a yearly basis.
Explanation: Chartered Accountant means Chartered Accountant as defined in the
Chartered Accountants Act, 1949 (Act No. XXXVIII of 1949); Cost and Management
Accountant means Cost and Management Accountant as defined in the Cost and
Management Accountants Ordinance, 1977 (Ordinance No. LIII of 1977); Chartered
Secretary means Chartered Secretary as defined in the Chartered Securities Act, 2010.
(ii) The directors of the company shall state, in accordance with the Annexure attached, in the
directors' report whether the company has complied with these conditions.

AGRANI BANK LIMITED
CMA Class Note on
Annexure
Status of compliance with the conditions imposed by the Commission’s Notification No. SEC/CMRRCD
/2006-158/134/Admin/44 dated 07 August 2012 issued under section 2CC of the Securities and Exchange
Ordinance, 1969:
(Report under Condition No. 7.00)
This Notification shall be complied within 31 December 2012.
By order of the Securities and Exchange Commission
Prof. Dr. M. Khairul Hossain
Chairman.

AGRANI BANK LIMITED
CMA Class Note on
Rules and principles based approaches to governance.
There is continuing debate over the form corporate governance guidance should take. Some believe in
fundamental principles, others that detailed rules are required.
We have already seen that the United Kingdom has adopted a principles-based approach with the
Combined Code. This was the preferred option recommended by the Hampel committee when it reported.
The United States has firmly come down on the side of a prescriptive rules-based approach. This is most
evident from the Sarbanes-Oxley Act that requires a large amount of compliance work by companies to
ensure they meet very detailed rules.
There are many arguments for and against both approaches.

Arguments in favour of a principles-based approach:
• Companies are highly regulated already - further regulation would stifle their development.
• There is a high cost involved when complying with detailed rules.
• It is not practical to apply an identical set of rules to individual companies.
• Companies may have valid reasons for non-compliance with rules.
Arguments in favour with a rules-based approach:
• General guidance is of little use to ensure companies have robust procedures in place.
• Disasters are less likely to strike companies who are 100% compliant as they are unlikely to be
satisfied with mere token compliance.
• The cost of compliance may be high, but it is likely to be less than the cost of a major fraud
occurring.
• The ‘comply or explain’ requirement of a principles-based approach requires a high
degree of shareholder activism to be a deterrent.

AGRANI BANK LIMITED

06&07 - GE05 - FECGBL - Corporate Governance (10%) - Class No.06 & 07 - by MD - Monowar Hossain FCMA, CPA, FCS, ACA

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CMA Class Note on

GE05: Fundamentals of Ethics, Corporate Governance and Business Law

The role and key objectives

Page# 42 October 17, 2015

Attributes that Contribute to Governance Effectiveness

Principles of good corporate governance

Golden Rules of best corporate governance practices are:

1. Ethics: a clearly ethical basis to the business

Page# 43 October 17, 2015

Corporate Governance as Risk Mitigation

Corporate governance is of paramount

Steps to Improving Corporate Governance

1. Recognizes that good governance is not just about compliance

Page# 44 October 17, 2015

The relationship between law, governance, social responsibility and ethics

The development of corporate governance in the UK

Page# 47 October 17, 2015

UK Corporate Governance Code Read your study material : Page -427

The development of corporate governance in the Europe

The development of corporate governance in the South Africa

The King III Report

Page# 49 October 17, 2015

2) Enron, Arthur Andersen and Worldcom

3) Close relationships between auditors and clients

Page# 50 October 17, 2015

Bangladesh Securities and Exchange Commission

No. SEC/CMRRCD/2006-158/134/Admin/44: Whereas, the Securities and Exchange Commission (herein

Page# 51 October 17, 2015

1.5 The Directors’ Report to Shareholders

Page# 53 October 17, 2015

2.2 Requirement to attend the Board Meetings

Page# 54 October 17, 2015

7. REPORTING AND COMPLIANCE OF CORPORATE GOVERNANCE:

Page# 56 October 17, 2015

(Report under Condition No. 7.00)

This Notification shall be complied within 31 December 2012.

By order of the Securities and Exchange Commission

Prof. Dr. M. Khairul Hossain

Page# 57 October 17, 2015

There are many arguments for and against both approaches.

Page# 58 October 17, 2015

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