Corporate Governance Compliance Corporate Governance Compliance Corporate Governance Compliance Corporate Governance Compliance

The main determinants of a company’s corporate governance
Corporate Governance Compliance: A study of the listed
companies based on CSE-30 Index
Professor K. M. Golam Muhiuddin, FCMA*, Mohammad Nayeem Abdullah**& Sabrina Hossain***
Abstract: Corporate Governance is new in Bangladesh. This study makes an attempt to investigate the current practices of Corporate
Governance in Bangladesh in the listed companies in the stock market. The analysis was done in terms of the five major criteria as set by
the SEC for the Corporate Governance compliance. The results thus realized are satisfactory but to improve the general quality of
corporate governance practices in Bangladesh this study can be helpful. From the findings many firms do comply or implement the code
in their own way, but it should be maintained strictly in the practices, policies, regulation and procedures of the companies in
Bangladesh.
Keywords: CSE- 30, SEC, Corporate Governance, Board of Directors, Compliance.
1.0 Introduction:
Corporate governance has become one of the most commonly
used phrases in the business vocabulary. Conflict of interest is
the main problem in the auditor’s firm. Independent
appointment of the company’s auditors by the company’s
shareholders is replaced by subjective appointment by company
bosses, where the auditor is all too often beholden to the
company’s senior management. (Solomon & Solomon, 2004)
The fall of Enron was the biggest corporate collapse ever, and
the suffering caused by Enron’s collapse was extensive and
showed us that strong corporate governance needs to play to
prevent them.
A number of theoretical frameworks have evolved to explain
and analyze corporate governance. For example,
- Agency theory arises from the field of finance and economics.
- Transaction cost theory; arise from economics and
organizational theory.
- Stakeholder theory, arise from a more social oriented
perspective on corporate governance.
Agency theory: The ‘divorce’ of ownership and control led to
the notorious agency problem. First detailed theoretical
exposition of agency problem was presented in Jensen and
Meckling (1976). They defined the mangers of the company as
the agents and the shareholders as the principal. Problem arises,
when the agents make decisions that are not necessarily in the
best interests of principal.
Transaction cost theory: transaction cost theory is based on the
fact that firms have become so large that they, in effect,
* Professor K. M Golam Muhiuddin, FCMA , Department of Accounting & Information
Systems, University of Chittagong, Bangladesh
** Mohammad Nayeem Abdullah, Lecturer, School of Business, Independent
University, Bangladesh, Email: nayeem30@yahoo.com
*** Sabrina Hossain, Lecturer, School of Business Independent University,
Bangladesh Email: sabrinahossain@gmail.com
In Bangladesh we have recent survey conducted by Imam
substitute for the market in determining the allocation of
resources. Transactional cost economics attempts to incorporate
human behavior in a more realistic way. In this paradigm,
managers and other economic agent practice bounded
rationality and are opportunistic by nature, these results in
managers organizing transactions in their best interest.
(Williamson 1979)
Stakeholder theory: a basis for stakeholder theory is that
companies are so large, and their impact o society so pervasive,
that they should discharge accountability to many more
sectors of the society than solely their shareholder.
First, corporate governance has become important because the
role of capital markets has grown so dramatically during the
past decade. Second, a flood of recent academic research has
clearly documented the importance of effective governance in
maximizing the value and productivity of a nation’s publicly
traded firms. Third, the spread of privatization programs around
the world has forced governments to improve (or create)
effective governance systems in order for the programs to be
perceived as economic and political successes. (Megginson,
2000)
The system of corporate governance presiding in any country is
determined by a wide array of internal factors including
corporate ownership structure, the state of the economy, the
legal system, government policies, culture and history. There is
also a host of external influences such as the extent of capital
inflows from abroad, the global economic climate and cross
border institutional investment.
Political forces account for the difference in choice of corporate
governance models among various countries. Political forces---
party systems, political institutions, political orientations of
governments and coalitions, ideologies, and interest groups---
are the primary determinants of the degree of shareholder
diffusion and the relationships among managers, owners,
workers, and other stakeholders of the firm. (Roe, 2003)
that are listed by the Chittagong Stock Exchange for the term this no difficulty emerged in the study as all the information was 8.0 Findings and Analysis Table 2
system are ownership structure and legal framework. In this (2000) focused on some form of disclosure related to human from 29th March 2007 onwards. The principal objective of the straight forward regarding the compliance of the rules and in Total Appointment Board meeting
All companies included in this study made significant reports on
study we will try to focus that the practice corporate governance resource, community, and consumer disclosure. But it’s not research is to investigate into the various aspects of corporate non-compliance cases with reasons specified. attendance
governance of Bangladesh and to provide an analytical Corporate Governance. In this section, Corporate Governance
system among some selected top companies in Bangladesh.
There is one study concerning CSR reporting practice of some
about pure corporate governance practice. In their article
corporate social responsibility reporting practice (Abid and description. The followings are the specific objectives of this
The reports were analyzed by classifying them into five major
areas as specified by the Securities and Exchange Commission:
practices in Bangladesh have been analyzed under five
Textiles & Clothing
Pharmaceuticals & Chemicals
2
3
2
3
2
3
categories as set by the Securities and Exchange Commission
selected companies in Bangladesh (Abid & Taneem, 2007) and
another brief study on Bangladeshi CSR by Belal (1999). In this
Taneem, 2007) conclude that although number of companies
are making social disclosures, the quantity of information
study:
1. To analyze the nature of corporate governance being
1. Board of Directors mentioned above.
Cement
Engineering & Electrical
1
1
1
-
1
1
study rather than reporting practice, we focus on how strictly disclosed is very low. Sound corporate governance practice is complied by the listed companies of Bangladesh. 2. Chief Financial Officer, Head of Internal Audit and
8.1 Board of Directors Leather & Footwear 1 1 -
the selected companies are abiding by the SEC rules and part of the corporate social responsibility. Here in this article we Company Secretary
2. To determine the quality of the compliance by the The results of this study in the area of board of directors were Paper, Printing & Packaging 1 1 1
will try to focus on regulation that is followed by listed 3. Audit Committee
regulations. listed companies. Energy 1 1 1
companies. satisfactory. All 30 companies included in the survey did
3. To compare the different sectors of the listed 4. External/ Statutory Auditors comply with an extent. Bank 16 13 9
2.0 Corporate Governance reporting Defined 4.0 Statement of the problem
companies in this regard. 5. Reporting the Compliance in the Director’s Report Information Communication &
Many writers defined corporate governance in different way. Historical experience suggests that it is very difficult for All 30 companies reported that the board’s size is as required. Technology 1 1 1
businesses to operate effectively in a nation wracked by 6.0 Limitations of the study Board of Directors includes the board’s size, independent But only 14 companies out of 30 have an independent director.
Existing definitions of corporate governance fall on to a Leasing & Finance 2 1 2
political or macro-economic instability. These are especially This study is on the listed 30 companies of the Chittagong Stock directors, Chairman of the Board and Chief Executive, and The 11 companies mentioned that the directors are being recruited
spectrum, with narrow views at one end and more inclusive, Miscellaneous 1 - -
damaging for capital spending, since entrepreneurs are typically Exchange that has at least 11 different sectors. This report may Director’s Report to shareholders. The Board’s size should not and will be reported in the annual report the following year.
broad views placed at other. The narrow view, of corporate
unwilling to make long-term, potentially appropriable not give a true indication of the analysis, as the annual reports be less than 5 and more than 20. And the companies should This information was mentioned in the first few pages of the
Total- 30 24 21
governance is restricted to the relationship between company
investments in a country where legal rules are prone to sudden collected are of the year 2005-2006, which is the latest that have at least one tenth of the total number of the company’s Location of Information
and its shareholder. The finance paradigm, expressed in agency report where the list of directors and management was
could be gathered in all the different sectors concerned for the board of directors, subject to a minimum of one, who should be List of Board of Director’s,
theory is indicative of a narrow view. At the broad end of change or where taxes, inflation, or high interest rates can introduced. In three cases the independent director was
study. Hence a lot of the information may not be valid any an independent director. The Chairman and the CEO must be Management & Auditors 24
spectrum, corporate governance may be seen as a web of quickly eviscerate an investment’s value. (Roe, 2003). introduced as independent director, but in the other 8 cases the
longer at the present date. separate persons, and the director’s report to shareholders must Director’s Report 12
relationship, not only between a company and its shareholder Bangladesh has severe political crisis that affects overall rules independent director was not mentioned in the introduction but
include fairly prepared financial statements, proper books of General Information 4
and regulation growth and business environment. rather in either the annexure of the compliance where the
but also between a company and a broad range of stakeholder. 7.0 Research Methodology account, appropriate accounting policies, International Others 5
The best definition of corporate governance: The way in which companies finance themselves and the Accounting standards in the statements prepared, sound system companies claim to have an independent director or in the
7.1 Sample
Source: Annual reports (2005-2006)
structure of corporate ownership within an economy are Company activities where the directors’ roles are specified and
of internal control, issuing company’s ability to continue as a
“Corporate governance is the system of checks and balances, considered to be principal determinants of country’s corporate As the study is confined to the listed companies only, 29 companies reported that the Chairman and the Chief
going concern, highlights and reasons specified in significant defined.
both internal and external to companies, which ensures that governance system. An insider dominated system of corporate companies which are included in the latest Chittagong Stock Executive Officer are filled by different persons. Only
deviations from last year, and last three years key operating and
companies discharge their accountability to all their HEIDELBERGCEMENT BANGLADESH LTD. has the Chairman
governance is one in which a country’s publicly listed Exchange (CSE) Selective Index (CSE -30), dated 29 March 2007 financial data.
stakeholders and act in a socially responsible way in all areas of Table 1 and the Managing Director/ CEO the same person. (Annual
companies are owned and controlled by small number of major being effective for only six months onward have been chosen as
their business activity.”(Solomon & Solomon, 2004) CFO, Head of Internal Audit and Company Secretary includes Report-2005, Pg. 03). Although it is mandatory for a company if
shareholders .Insider systems are basically relationship based the sample of the study. CSE-30 comprises thirty companies Total Board’s Independent Chairman of Director’s
mainly two issues: first that the CFO, Head of Internal Audit and listed in the CSE-30 to have the Chairman and Chief Executive
3.0 Literature review system .on the other hand the term outsider refers to the system selected by the CSE based on important criteria used as Size Directors the Board Report to
Company secretary should be appointed, and their roles, Officer as two separate individuals, this cement company, being
of finance and corporate governance where most large firms are benchmark of performance. These companies are quoted on and Chief Sharehol-
One of the first influential paper on Corporate Governance was responsibilities and duties should be defined clearly. Secondly Executive ders the only cement company to be listed in the CSE-30, does not
controlled by their managers but owned by outside Dhaka Stock Exchange (DSE) as well. The study accepts CSE-30
Shleifer and Vishny (1997), since it synthesized the existing the CFO and the Company Secretary of the companies should Textiles & Clothing 2 2 1 2 2 comply with the rules.
shareholders, such as financial institutions or individual as sample because the thirty ideal companies are expected to
strands of research to that time—and was in fact named “a attend meetings of the BOD. Pharmaceuticals & 3 3 3 3 3
shareholder. reveal improved findings on Corporate Governance. A list of The Director’s Report to Shareholders has been included in the
Chemicals
survey of corporate governance.” the sample companies from various eleven sectors has been The company should have an audit committee as a sub- Cement 1 1 1 - 1 annual reports of 28 companies, only 6.7% companies failed to
Bangladeshi system is still bank based system, where as share
Maher and Andersson (1999) analyze the point on the basis of shown in Appendix 1. committee of the BOD. This also includes sectors like Engineering & comply with this clause, in that they did not have a separate
market is growing. Due to political influence on the banks, it’s
shareholder versus stockholder’s models. In their opinion constitution, chairman also reporting of the audit committee to Electrical 1 1 - 1 1 report in the annual reports but rather did sign in the financial
difficult to have sound corporate governance practice. Even The most important aspect of this study is the use of secondary
the BOD, authorities and also the shareholders and general Leather & Footwear 1 1 1 1 1 statements provided by the auditors. However they did report
neither model has competitive advantage. though researcher like (Charkam, 1994) has concluded in favor data. Annual reports are considered as the only means of Paper, Printing &
investors. but the format was different.
The works of LaPorta, Lopez-de-Silanes, Shleifer, and Vishny of insider model the tide is flowing in opposite direction. For information communication in the context of Bangladesh. Packaging 1 1 - 1 1
the sound corporate governance practice (Megginson, 2000) Secondary data have been collected from the latest published Functions like valuation services, financial information systems Energy 1 1 - 1 1 As shown in the table below (Table 1) information relating to
(LLSV, 1997) have had unprecedented impact. They use sample
suggested some guidelines follows below: 1) legal reforms 2) annual reports of sample organizations. The collected data have design and implementation, book-keeping, broker-dealer Bank 16 16 7 16 14 the board of director was provided in the list of Board of
of 49 countries and show that countries with poorer investor Information
Mandate international accounting standards. 3) Promote high been classified and tabulated manually. services, actuarial services, internal audit services should not be Directors and Management list. Only the Director’s Report to
protection—measured both by the character of legal rules and Communication &
standards for listing on the national stock market.4) Encourage conducted by its external auditors. Shareholders was provided in the Directors Report to the
the quality of law enforcement—have smaller and less liquid 7.2 Extent of Corporate Governance Appliance Technology 1 1 - 1 1
institutional investors to become major players in the national Shareholders and fulfilled all the set criteria. Two listed banks
capital markets. Last but not the least, reporting of the compliance of these Leasing & Finance 2 2 1 2 2
stock market.5) Establish workable, efficient bankruptcy systems The research method involved rigorous examination and only did not include the report. The independent director’s
activities of the firm in the director’s report must be attached, Miscellaneous 1 1 - 1 1
LLSV (1998) document (and provide a rationale for) the fact that 6) Clarify—but limit—government’s role in corporate analysis of the annual reports under analysis to observe the recruitment was also not mentioned in many reports and these
with reasons in non-compliance. Total- 30 30 14 29 28
ownership concentration is highest in countries offering poor governance. Sometimes it’s difficult for third world country like regularity of Corporate Governance keeping in mind the Location of were gathered by personal enquiry.
The issues mentioned above are all mandatory for compliance.
investor protection, which is consistent with the idea that small, Bangladesh to have a sound practice in such macro economic objectives of the research. All the sections of all the 30 Information
Hence in summary of the clause 1 of the Corporate Governance
diversified shareholders are unlikely to be important in companies’ annual reports were carefully examined to ease the The selected companies of the CSE-30 index should comply List of Board of
instability. Director’s, & compliance it can be stated that the Pharmaceuticals and
analysis. with the stated clauses and in cases of non-compliance, reasons
countries that fail to protect outside investors. After that in the Management 30 9 29 Chemicals & Leather and Footwear complies to the fullest
5.0 Objectives of the Study should be mentioned.
year 1999 -2000 they have published another two articles The reports were analyzed and where the information was not Directors’ Report 28 extent, whereas the others including the banking sector
concerning about ownership concentration and dividend This study on Corporate Governance Compliance of the listed available an interview with the concerned authority was taken This report is a study of corporate governance compliance of Others 5 complies also but the exceptions were in the employment of
companies of Bangladesh is based on a sample of 30 companies
policy. so as to get the right information for the research. Apart from the CSE-30 companies, and the findings are stated below. Source: Annual reports (2005-2006) independent directors in all the cases.

The Cost and Management, September-October, 2008 13 14 The Cost and Management, September-October, 2008 The Cost and Management, September-October, 2008 15 16 The Cost and Management, September-October, 2008

Corporate Governance Compliance Corporate Governance Compliance Corporate Governance Compliance Corporate Governance Compliance
8.2 Chief Financial Officer, Head of Internal Audit and Table 3 Table 4 Information about the constitution of the Audit Committee and 9.0 Conclusion Enterprises in China.) Co-sponsored by the: Organization for Economic
Company Secretary the Chairman of the Audit Committee was found in the List of Cooperation & Development Research Center of the State Council of the PRC
Total Constitution Chairman Reporting of the Report to Total Non- Non- Non- Non- Non- Non- Non- In conclusion it can be stated that although many companies of
of Audit of Audit Audit Committee Shareholders engage- engage- engage- engage- engage- engage- engage- Board of Directors, Management and Auditors or as stated in Asian Development Bank Beijing, China January 18-19, 2000.(page: 1-2)
In this area there is also satisfactory extent of compliance. 80% ment in ment in ment in ment in ment in ment in ment in
the listed ones are making satisfactory compliance with the
Committee Committee Reporting Reporting and General some annual reports in the employees’ directory. However the 15) William L. Megginson(2000) ,[Corporate governance in publicly quoted company]
of the companies reported that they have appointed a CFO, to the BOD to the Investors appraisal designing in Book- Book Actuarial Internal other code of Corporate Governance, but there are still many
or of Financial keeping dealer Services Audit services rest information regarding the reporting of the Audit Committee For presentation at the conference on:(Corporate Governance of State-Owned
Head of Internal Audit and Company Secretary. The rest 20% Authorities companies that fail to comply with the main aspects of this
Textiles & Clothing 2 1 1 2 2 2 valuation Information service was as stated in the Auditor’s Report and the various the Enterprises in China.) Co-sponsored by the: Organization for Economic
companies although have a CFO but they have not yet System governance. The reasons for this non-compliance could be
Pharmaceuticals & financial statements attached. Cooperation & Development Research Center of the State Council of the PRC
appointed an internal audit and have reported either in personal Chemicals 3 3 2 3 3 3 Textiles & attributed to the lack of statutory requirement, less awareness,
Asian Development Bank Beijing, China January 18-19, 2000.(page: 9-12)
enquiries or in notes that the internal audit recruitment is in Cement 1 1 - 1 1 1 Clothing 2 2 2 2 2 2 2 2 8.4 External/ Statutory Auditors an under developed corporate culture, and might also be the
Engineering & Pharmac- 16) William L. Megginson(2000) ,[Corporate governance in publicly quoted company]
process. All the listed 30 companies analyzed in this criterion gave very sample size. Since the study is based on only 30 listed
Electrical 1 - - 1 1 1 euticals & For presentation at the conference on:(Corporate Governance of State-Owned
Information regarding requirement to attend board meeting or Leather & Footwear 1 1 1 1 1 1 Chemicals 3 3 3 3 3 3 3 3 common results. 21 companies out of the 30 listed did mention companies in the Chittagong Stock Exchange, it actually does
Enterprises in China.) Co-sponsored by the: Organization for Economic
board meeting attendance was not disclosed in the annual
Paper, Printing & Cement 1 1 1 1 1 1 1 1 in the report about the compliance of this criterion. And the rest not portray all the companies of Bangladesh. In such
Packaging 1 - - 1 1 1 Cooperation & Development Research Center of the State Council of the PRC
reports or even in personal enquiries. 70% of the companies Engineering 9 listed companies had nothing mentioned in the report and circumstances it is advisable that not only the listed but also the
Energy 1 - 1 1 1 1 Asian Development Bank Beijing, China January 18-19, 2000.(page: 21-22)
& Electrical 1 1 1 1 1 1 1 1 non-listed companies should take up Corporate Governance as
reported in the annual report the board meetings held and Bank 16 7 13 16 16 16 hence through personal queries it was found that they also do
Leather & 17) William L. Megginson(2000) ,[Corporate governance in publicly quoted company]
attendance of the officials, but the rest 30% did not mention Information comply with this criterion it boosts economic growth, reduces corruption and also eases
Footwear 1 1 1 1 1 1 1 1 For presentation at the conference on:(Corporate Governance of State-Owned
Communication & the flow of funds.
anything related to the board meeting and when personally Paper, This information was found in the Compliance summary sheet
Technology 1 - - 1 1 1 Enterprises in China.) Co-sponsored by the: Organization for Economic
enquired gave no pertinent information. Leasing & Finance 2 1 1 2 2 2
Printing &
attached in the annual report either as a section or within the Cooperation & Development Research Center of the State Council of the PRC
Packaging 1 1 1 1 1 1 1 1
The required information of the criteria of Appointment of the Miscellaneous 1 - 1 1 1 1 director’s report to the shareholders. And in 30% of the cases it References Asian Development Bank Beijing, China January 18-19, 2000.(page: 23-24)
Total- 30 14 20 30 30 30 Energy 1 1 1 1 1 1 1 1
CFO, Head of Internal Audit and Company Secretary was Bank 16 16 16 16 16 16 16 16 was required to meet the officials of the companies to gather the 18) Williamson, O. (1979), "Transaction cost economics: the governance of
Location of 1) Belal , A.R (1999) “ corporate social reporting in Bangladesh “, social and
enclosed in the report in 80% of the cases. It was shown in the Information Information information. contractual relations", Journal of Law and Economics, Vol. 22 pp.233-62.
environmental accounting , vol 19 no.1 pp 8-12.
List of Board of Director’s, List of Management & List of Auditor’s Report 15 30 30 30 Communi-
List of Board of cation & 8.5 Compliance details in the Director’s Report 2) Charkam, J., 1994, “Keeping Good Company: a Study of Corporate Governance in
Auditors. The rest 6 companies in the Engineering & Electrical
sector that is eastern cables, and the others in the Banking
Director’s, Manage- Technology 1 1 1 1 1 1 1 1
The last and the fifth condition of the SEC regarding Corporate
Five. Countries”, Clarendon Press, Oxford. Appendix 1: List of companies surveyed
ment & Auditors 13 2 Leasing &
sector did not enclose this information in the report and Others 1 3 Compliance in which the directors of the company should 3) Jill Solomon & Aris Solomon. (2004). Corporate Governance and Accountability, Name of Companies Sector
Finance 2 2 2 2 2 2 2 2
Chi Chester: John Wiley & Sons.
reported in the personal enquiry that they are on the verge of Source: Annual reports (2005-2006) Miscella- report whether the company has complied with the conditions 1. Beximco textile limited Textiles & clothing
recruiting one. neous 1 1 1 1 1 1 1 1 and if not, with reasons, although being mandatory was not 4) Khan, Abid Hossain and Muzaffar, Taneem Ahmed (2007) corporate social 2. Square Textiles limited Textiles & clothing
Total- 30 30 30 30 30 30 30 30 complied by 9 companies, that is by 30% companies. Amongst responsibility reporting practices: A study on selected listed companies of 3. Square Pharmaceuticals Limited Pharmaceuticals and Chemical
Details of the Board of Meeting and the attendance were not personal enquiries they did report that they are enclosing the Location of Bangladesh. [Unpublished]
the non-compliance firms were 3 banks, namely National Bank, 4. Advanced Chemicals Industries Pharmaceuticals and Chemical
mentioned in the annual reports in 30% of the cases. Bata Shoe details in the annual report of the following year. Information 5. Beximco Pharmaceuticals Limited Pharmaceuticals and Chemical
Pubali Bank & One Bank Ltd; along with Miracle industries Ltd, 5) Khan, Abid Hossain and Muzaffar, Taneem Ahmed (2007) corporate social
Company (Bangladesh) and Usmania Glass Sheet Factory are Corporate
responsibility reporting practices: A study on selected listed companies of 6. Heidelberg Cement Bangladesh Limited Cement
8.3 Audit Committee Governance Bangladesh Online Limited, BOC Bangladesh, etc.
amongst the others with the banking sector in which such Bangladesh. [Unpublished] pp: 12-13. 7. Eastern Cables Limited Engineering and Electrical
Compliance
pertinent information was missing. This area was the most crucial study. Of the 30 listed In some cases it was mentioned under the compliance summary 8. Bata Shoe Company Leather and Footwear
Report in the 6) La Porta, Rafael, Florencio López-de-Silanes, Andrei Shleifer, and Robert W.Vishny,
companies focused for the analysis of Corporate Governance, it sheet attached in the report that this section is “not applicable”. 9. Miracle Industries Limited Paper, Printing & Packaging
The required information of this criterion was available in 70% annual report 21 21 21 21 21 21 21 1997, Legal determinants of external finance, Journal of Finance 52, 1131-1150.
was found that only 67% of the companies did have an Audit Others 9 9 9 9 9 9 9 10. BOC Bangladesh Limited Energy
of the cases. 40% listed firms has this information in the Table 5 7) La Porta, Rafael, Florencio López-de-Silanes, Andrei Shleifer, and Robert W. Vishny,
Committee as a sub-committee of the Board of Directors. The 11. Arab Bangladesh Bank Bank
Director’s Report, 13% in the General information pages and experience in accounting or finance. All the companies that did 1998, Law and finance, Journal of Political Economy 106, 1113-1150.
rest listed companies did not comply with this section because Total In the annexure of the report it 12. National Bank Limited Bank
the rest 17% in other areas including personal enquiries. comply with this section do have a Chairman for the 8) La Porta, Rafael, Florencio López-de-Silanes, Andrei Shleifer, and Robert W. 13. The City Bank Limited Bank
of the reasons stated below. has been mentioned
Surprisingly Usmania Glass Sheet factory being the only glass Committee. However the cement sector, engineering and Textiles & Clothing 2 2 Vishny, 1999a, The quality of government, Journal of Law, Economics, and 14. Pubali Bank Limited Bank
sheet to be listed in the CSE-30 had no information in the In order to comply with the Audit Committee Constitution the electrical sector, paper, printing and packaging sector, IC&T Organization 15, 222-279. 15. Islami Bank Bangladesh Limited Bank
Pharmaceuticals & 3 1
annual report regarding either the appointment of the CFO, committee must have at least three members, and one of sectors are the ones that did not comply, and out of 16 banks 9) La Porta, Rafael, Florencio López-de-Silanes, Andrei Shleifer, and Robert W. 16. Prime Bank Limited Bank
Chemicals Cement 1 1
Head on Internal Audit and Company Secretary or the board mandatory members at least has to be an independent director. listed in the CSE-30, 13 reportedly has a Chairman fulfilling this Vishny, 1999b, Investor protection: Origins, consequences, reform, working 17. Dhaka Bank Bank
Engineering & Electrical 1 -
As only 14 companies out of 30 that are listed have an criterion. paper (MIT, Cambridge, MA). 18. Southeast Bank Limited Bank
meetings held and the attendance record. However in the Leather & Footwear 1 1
independent director, this clause was not fully complied with. 19. Mutual Trust Bank Limited Bank
Having an Audit Committee must also report to the Board of Paper, Printing & Packaging 1 - 10) La Porta, Rafael, Florencio López-de-Silanes, and Andrei Shleifer, 1999a,
20. One Bank LImited Bank
Although many of the listed company did have the other two Directors and the Authorities and also to the Shareholders and corporate ownership around the world, Journal of Finance 54, 471-517.
Energy 1 - 21. Bank Asia Limited Bank
CFO, Head of Internal Audit and Company Secretary members right in many cases, but still having no independent the General Investors. Fortunately in the survey it was found 11) Mark J. Roe. (2003). Political Determinants of Corporate Governance: Political
Bank 16 13 22. Mercantile Bank Limited Bank
director does not fully satisfy this clause. And in such that although 20 listed companies do have an Audit Committee Context, Corporate Impact, and New York: Oxford University Press. 9 (Page2-3).
includes mainly two issues: first that the CFO, Head of Information Communication 23. Uttara Bank Limited Bank
circumstances it was found that the banks were amongst the as a sub-committee of the Board of Directors, the rest 10
& Technology 1 - 12) Michael C. Jensen and William H. Meckling (1976)” Theory of the Firm: 24. Eastern Bank Limited Bank
Internal Audit and Company secretary should be main ones that failed to comply. Only 7 banks out of the 16 companies listed also has an audit committee but not in terms
Leasing & Finance 2 2 Managerial Behavior, Agency Costs and Ownership Structure”, Journal of 25. Export Import Bank of Bangladesh Limited Bank
appointed, and their roles, responsibilities and duties listed banks did comply, (rest failed in the term of having an of the Corporate Governance SEC regulations. Hence all 30 Financial Economics, October, 1976, V. 3, No. 4, pp. 305-360.
Miscellaneous 1 1 26. Jamuna Bank Limited Bank
listed companies did have information to be passed to the
should be defined clearly. Secondly the CFO and the independent director). Total- 30 21 13) Imam, S. (2000) Corporate Social Performance reporting in Bangladesh, 27. Bangladesh Online Limited ICT
shareholders and board of directors in the form of Auditors
Location of Information managerial auditing journal, vol .15 no.3, pp133-41. 28. Uttara Finance and Investment Limited Leasing and Finance
Company Secretary of the companies should attend Fortunately for the country it was found that 20 listed Report. Hence all the annual reports studied of the 30 listed
Annexure 21 29. First Lease International Limited Leasing and Finance
meetings of the BOD. companies do have a Chairman of the Audit Committee that has companies did have the Auditor’s Report attached to give 14) William L. Megginson(2000) ,[Corporate governance in publicly quoted company]
30. Usmania Glass Sheet Factory Limited Miscellaneous
a professional qualification or knowledge, understanding and information to the concerned stakeholders. Source: Annual reports (2005-2006) For presentation at the conference on:(Corporate Governance of State-Owned

18 The Cost and Management, September-October, 2008 The Cost and Management, September-October, 2008 19 20 The Cost and Management, September-October, 2008
Th e C o s t a n d M a n a g e m e n t, S e p te m b e r -O cto b e r , 2 0 0 8 17