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Ensuring Enterprise Governance: The Role of Gatekeepers
Muhammad Abdul Hannan Zoarder
Executive President
Bangladesh Institute of Capital Maret !BICM"
1.0 Introduction
Enterprise includes entities such as businesses, companies, organizations, institutions and
alliances. These enterprises have significant bearing on our lives. Performance of these entities,
its successes and failures equally sway our survival and welfare as a member of the society.
Therefore, we, the beneficiary of these entities, invest our time, money and energy to run it so
that it could deliver for which these are set up.
Enterprises are organized complexities. Technology and intricacies unique to a particular
organization make that even more difficult to operate. ost of parties are involved with it having
varying ob!ectives and agenda to maximize their benefits. "ne party wants to profit in expense of
another or other parties. That creates tension and conflict among themselves. #unning an entity
to maximize every stakeholders benefit requires cohesion, coordination, commitment and
dedication within the institution and respecting rights of the parties that are affected by the
results of the operation of these entities. These differing ob!ectives, schemes, and efforts cannot
be synchronized unless there are control and risk management system within the organization as
well as overseer of their activities who comply with certain norms, ethics, rules and regulations.
$ll these, together, constitute good enterprise governance.
%n the advent of large corporate failures at the beginning of this century, corporate governance
comes to the forefront. The contribution of corporate governance has been much more vivid
towards achieving accountability and assurance, but moving the business forward with desired
performance metrics has failed in many cases. Then Enterprise &overnance emerges as a new
integrated concept combining both the corporate governance aspect 'sometimes referred to as
conformance aspect( and the performance dimension 'value creation and resource utilization(. %f
the corporate entities want to do more towards driving their sustainable success through focusing
more on strategic goals, they have to depend more on the gatekeepers)the reputational agents)
for the conformance aspect with a view to giving further concentration on performance aspect.
Therefore, the enterprise governance concerns the totality of measures irrespective of internal or
external for safeguarding the financial and economic interest of the shareholders in general and
all stakeholders in particular. "rganization for Economic *ooperation and +evelopment '"E*+(
rears that view.
&ood enterprise governance rests on wide array of parties, viz., board of directors, independent
directors of the board, audit committee, management, auditor, credit rating companies, merchant
bankers, securities exchanges, securities commission, courts, and the financial press. Excepting
the issuer, these parties could be categorized as financial gatekeepers.
,tephen *utler, ,E* +irector of Enforcement, during a speech at -*.$ .aw ,chool in
,eptember /001, defined corporate gatekeepers as2
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The sentries of the marketplace: the auditors who sign off on companies' financial
data; the lawyers who advise companies on disclosure standards and other securities
law requirements; the research analysts who warn investors away from unsound
companies; and the boards of directors responsible for oversight of company
management. They're paramount in ensuring that our markets are clean. And ongress
recogni!ed that when it enacted "arbanes#$%ley& '*asey and ,teiner, /033(.
Therefore, if the gatekeepers play their respective roles, that could be a win)win situation for all
the stakeholders.
2.0 Gatekeepers
Effective enterprise governance helps elevate confidence of the investors and parties associated
with the enterprise. *redibility of the enterprise and entrepreneurs significantly rest on the
financial gatekeepers. 4inancial gatekeepers facilitate, grant, or condition access to the public
capital markets by issuers of publicly traded securities by providing oversight and analysis of
firms and transactions.
&atekeepers5 roles are important for they could prevent misconduct of issuers by withholding
cooperation to issuers and not providing information and certification for directors and investors.
6ecause of their mandate and expertise they have ability to detect and deter misconduct and
could further effective corporate governance. &atekeepers enhance trust of investors and
stakeholders on the enterprise and entrepreneurs which acts as glue and holds businesses
together. There are two types of gatekeepers5 viz. private gatekeepers and public gatekeepers.
Private gate keepers include ) board of directors, audit committee, independent director, external
auditor, credit rating companies, investment banker and analyst. "n the other hand public
gatekeeper includes ) auditing regulators, company registry, securities exchanges, banking and
insurance regulators, court and financial media.
#oles of some of the gatekeepers require elaboration.
(1) Board of Directors
"ne of the first lines of defense against management wrongdoing is the company5s board of
directors. 6oards are not supposed to run a corporation5s day7to7day operations ) that is the !ob
of the full7time management ) and they are not supposed to work full7time in their capacity as
board members. 8evertheless, as the elected representatives of the shareholders, directors are
charged with protecting their interests by setting the direction for the company and by watching
over management. The board should provide leadership and oversight with an eye toward
maximizing shareholder value. -nfortunately, this is a difficult !ob for the board on a part7time
basis, as companies, their businesses and the transactions they enter into become ever larger and
increasingly complex. 9ithin the board, audit committee and independent directors have greater
responsibility as to ensuring ob!ective recording and reporting of information.
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(2) External Auditor
$mong the gatekeepers5 cited above the most important roles are played by the external auditors.
:4inancial information is used to plan, control, and evaluate the performance activities of
companies and their managers. 6ut to be useful for in decision making and contracting, the
information need to be relevant and trustworthy. $ttestation by external auditors with expertise
in accounting, auditing, systems, and client businesses helps give a company5s financial
information the requisite reliability and credibility even though company5s management provide
the information. Essentially, company5s managers5 use audited financial statements inform
themselves, to inform others, and to comply with laws and regulations.;
$s mentioned by <ames +. *ox '/00=( about the gatekeeping role of the external auditor2
'ecause the auditor(s attest function is the heart of their engagement) the auditor(s
role is first and foremost that of a gatekeeper. $ther gatekeepers) such as
underwriters and lawyers are also sociali!ed into a gatekeeper function) but their
role in this endeavor does not involve a formal attestation. *ence) only indirectly
do they come to their role of being gatekeepers. +t is a masterpiece of
understatement) but no doubt diplomatic) to observe that the accounting profession
has not earned rave reviews for its performance as gatekeepers in the aftermath of
the recent financial and accounting scandals in which accountants either recklessly
failed to detect their clients( false reporting or were their accomplices in their
clients( fraud '*ox, /00=2 >017>0?(.
%n 6angladesh, numbers as well as size of audit firm is at the lower end. %n most developed and
emerging !urisdiction there are more than 30 audit firms to a single listed company excepting
<apan where the ratio is 32>.=1 firms. @ost firms do not send qualified people for audit and audit
fee is too low.
(3) Mercant Banker
There are ?/ institutions registered by ,ecurities and Exchange *ommission to carry out
investment banking functions. These institutions act as a bridge between the issuer companies
and ,E* as to raising of capital by the issuer companies. @erchant bankers are usually carrying
out traditional investment banking roles viz. issue management, underwriting and portfolio
functions. $s issue manager merchant bankers determine issue price in association with the
issuer company that want to raise capital. -nderwriters give comfort to the issuer to the effect
that in the event of non7subscription of offered shares they would take up the security.
%nvestment bankers, as per the securities laws, have to carry out proper due diligence to ensure
that contents of the prospectus are factual and price reflects the underlying assets and potential
revenue generated by the entity in future.
6ut in most cases, investment bankers do not discharge responsibilities reposed on them and
sponsors of issuer companies benefit in expense of the minority shareholders.
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(!) "redit #atin$ "o%panies
$t present, there are 0A credit rating companies operating in 6angladesh. *redit rating
companies opine on the issuers5 ability to repay principal and service interest of the debt
instruments. Two credit rating companies that are registered a few years back carried out most of
the ratings. "ne of the rating company5s website shows that it has 3?00 clients and have >?
officers. @ost of these officers are fresh graduates. ow they service these huge number of
clients raise the questions of quality.
,E* has got authority to examine and questions how these clients are served and ratings are
assigned. %f these rating companies fail to ensure quality, their reputation would be similar to the
external auditors in 6angladesh.
(&) Anal'st
$nalyst plays a significant role as a gatekeeper. owever, in 6angladesh there exists no analyst
firm apart from the credit rating companies which opines on the ability of issuers at repayment of
principal and servicing of interest. ,ecurities and Exchange *ommission is considering a rules
that would allow certain entity to perform as investment analyst.
(() Media
@edia provides means of communicating with large number of people in short period of time. %t
includes print 7 newspapers, magazines, books and electronic 7 TB, radio, movies, music,
internet. @edia has been called the :?th 6ranch of &overnment;. The role of the media is to
collect, select, certify, and repackage information. %n doing so they dramatically reduce the cost
economic agents face to become informed. %t acts as an advocate of the public. The media acts as
public gatekeeper when it gives signal alerting the public to important developments as soon as
possible. 9hen a financial press publishes quarterly performance of a company, for instance, an
investor does not have to spend time collecting all the pieces of information herself, but she can
glance at them in a second, for the price of a few taka plus the opportunity cost of the time spent
reading.
@edia has significant roles on the behavior of an enterprise towards pursuing good corporate
governance. @edia pressure leads a regulator or government to intervene in the one hand and
fear of losing reputation by the issuer on the other. ,ince media ) both press and electronic is
growing every day passes by media impact on the enterprise and regulators have been increasing.
%n most !urisdiction media cannot be restrained prior to publication of reporting. owever, after
publication, media could be sued if contents are wrong and considered as slander and libel.
<ournalist should work independently and report ob!ectively and impartially.
%n 6angladesh most of the print and electronic media are owned by the big business houses or
persons who yield significant influence. Even in developed !urisdiction public confidence on the
press report has been on the wane. $ Press ,urvey of Pew #esearch %nstitute carried out in 3CCC
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shows that public does not trust media to a significant extent and as the time progresses
confidence has been sliding Except in a single case less than ?0D reader consider the news or
information factual.
owever, despite aforesaid limitation as to ownership media is playing a laudable role in
elevating corporate governance in 6angladesh.
()) *tock Excan$es
,tock exchanges, as self7regulatory institution, discipline its members and help smooth operation
of securities trading. .isting #egulations of stock exchanges has provisions concerning corporate
governance standards for listing companies to promote high standards and monitor the operation
of securities markets.
$t present two stock exchanges viz. +haka ,tock Exchange and *hittagong ,tock Exchange are
providing trading floors for securities transactions. These exchanges are not for profit
organizations and run by its members. 4or acting as broker or dealer membership is primary
requirement. There is about >E? brokingFdealing firms hold registration from ,E*. These firms
do not have adequate capital and trained human resources. @oreover, they do not have economy
of scale. $s a result, there is allegation that many members have unholy alliance with
unscrupulous sponsors of listed companies. Bery often, it is alleged, they resort to malpractices
in the securities market.
&iven these allegation and also considering the recommendations of the ,hare @arket Enquiry
*ommittee led by @r. Ghondker %brahim Ghaled measures has been taken to demutualize +,E
and *,E. %f exchanges could be demutualized more professionals could act as broker in the
securities market and encourage good corporate houses to list their security on the stock
exchanges.
(+) #e$istrar of ,oint *tock "o%panies and -ir%s
"ffice of the #egistrar of <oint ,tock *ompanies and 4irms administers *ompanies $ct, 3CC1.
*ompanies $ct has specified about the standards of conduct for companies registered under it
and defined fiduciary duties, authorities, and responsibilities of shareholders, directors, and
officers. There are numerous provisions in the said $ct that relate to good governance. owever,
punitive measures, particularly, penalties for various non7compliances are too low and the
authority rarely applies negative reinforcement measures. The "ffice is inadequately staffed and
professionalism is almost absent.
%nternational @onetary 4und in its 4inancial ,ystem ,tability $ssessment, /030 commented that
:The #egistrar should undergo more substantial reform than its current computerization
program. %t should be capable of fulfilling its role under the *$ as well as carrying out its other
functions in a timely and efficient manner. This may require extensive change, including the
#egistrarHs place in the current administration. "n enforcement, the #egistrar is still not an
effective means of redress. 9hile supplemented by ,E* regulations and enforcement, the *$
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provides the foundation for corporate governance, and its enforcement depends on the #egistrar
and the courts.;
4or updating *ompanies $ct, 3CC1 two committees were formed headed by former +eputy
Prime @inister @r. <amal -ddin $hmed 4*$ and ,upreme *ourt .awyer +r. @. Iahir.
,ecurities and Exchange *ommission has also requested certain changes concerning holding
$&@ and authority of the *ommission concerning direction to the companies.
%f the capacity of the "ffice of the #egistrar of <oint ,tock *ompanies and 4irms could be
increased and if discharges the roles reposed on it by aforesaid $ct enterprise governance
scenario would improve significantly.
(.) Insurance De/elop%ent and #e$ulator' Autorit' Ban$lades 0ID#A1
,ixty insurance companies)1> general and 3E life) are now operating in 6angladesh. The
mission of %+#$ includes protection of policy holders and other stakeholders under insurance
policy, supervision and regulation of insurance industry effectively, ensuring orderly and
systematic growth of the insurance industry and matters connected thereto. %n the insurance
sector there exists undue competition. Private insurance companies allow to much discount that
compromises the quality of their service. %+#$ has !ust been set up and members are appointed.
Effectiveness of the $uthority would depend on it hiring of right professionally capable people
with commensurate compensation. $uthority has to instill sound management practice in the
insurance industry and could contribute enterprise governance.
(10) *ecurities and Excan$e "o%%ission
,ecurities laws are intended to protect investors and improve investor confidence in the integrity
and efficiency of the capital markets. These laws and rules have provisions that help improve
corporate governance, financial reports, and audit activities. The laws that guide the securities
markets are2
,ecurities and Exchange "rdinance, 3C=CJ
,ecurities and Exchange *ommission $ct, 3CC>J and
+epository $ct, 3CCC.
$s per the said laws responsibility of the *ommission is to ensure proper issuance of security,
protection of investor, regulation and development of securities markets. -nder the said $cts the
*ommission has been consistently been trying to put in place regulatory framework keeping
parity with the emerging, developing and developed !urisdictions.
These have been echoed by %@4 in 4inancial ,ector $ssessment, /030. $ssessment says :$part
from the regulatory framework, physical infrastructures have been installed for issuance of
securities and trading of the same on the stock exchanges. Transparency in trading of securities
on both the exchanges has been ensured through automation. Elimination of bad delivery of
securities has been done through establishment of electronic registry system 'through *entral
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+epository of 6angladesh .imited(. 6oth the exchanges have been very keen to establish a
securities clearing corporation for enabling real time gross settlement of securities transactions.;
,ecurities and Exchange "rdinance, 3C=C and conditions imposed on the issuers under one of its
section 7 /**, time to time, the *ommission imposes various conditions for good enterprise
governance. $part from that ,ecurities and Exchange *ommission %nsider Trading #ules, 3CC?,
%ssue of *apital #ules, /003, ,ubstantial $cquisition #ules, /00/, Public %ssue #ules, /00=,
#ights %ssue #ules, /00= and *orporate &overnance &uidelines, /00= help the *ommission in
exercising oversight on the listed companies.
"ver time perennial practices of non7holding or delayed holding of annual general meeting, non7
payment or delayed payment of dividend, delayed refund of %P" could almost be remedied.
.isted companies now submit audited financial statement within 3>1 days from the close of the
financial year and submit audited half7yearly and unaudited quarterly financial statements on
time. Partnership firms of chartered accountants having at least two partners who have seven
years practicing experience are required to audit the affairs of a listed company. @oreover, in
every three years external auditor is rotated. The listed companies must hold $&@ within six
months from the end of the financial year and once in every calendar year. Practice of giving
gifts to the shareholders in the $&@ has also been stopped.
8ow price sensitive information required to be disclosed within >0 minutes of taking decision by
the company board to the *ommission and stock exchanges. .isted companies need to have
website and financial statements needs to be posted on their websites. Exchanges have been
assigned to monitor it.
The *ompanies $ct 3CC1 prohibits public companies and private companies that are subsidiaries
of public companies to provide loans, or give guarantees in connection with loans, to their
directors. These restrictions equally apply to loans or guarantee to relatives of directors and
private companies or firms in which such directors have substantial interest. ,imilar provisions
have been incorporated in ,ecurities and Exchange #ules, 3CAE. This provision has helped ,E*
to arrest the trend of giving loan without interest or interest lower than market rate.
.isted companies are categorized for trading purposes based on governance and performance
into $, 6, &, 8 and I.
4or restoring confidence of investor in the securities market all the intermediaries associated
with capital market have been brought within the regulatory regime of the *ommission. They are
licensed and license renewal is mandatory. The *ommission has strengthened its oversight on
the issuers, exchanges and other market intermediaries through supervision and online
surveillance of trading on the stock exchanges and employment of special auditor to examines
the state of affairs of the listed companies.
The *ommission has imposed various punitive measures on various players that include2 penalty
on individual directors of listed securities and other intermediaries, suspension of trade on the
stock exchanges and cancellation of registration to act as market intermediaries. The
*ommission has also filed criminal cases against issuers and market intermediaries that are on
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various stages of trial with the *ourt of ,ession and ,uperior *ourts. The *ommission has a
specific complaint desk to attend to the complaints of the investor and prompt resolution of the
same. "n ongoing basis the *ommission has also been educating the investors through its
H%nvestor Education Program5 so that informed investment decision could be taken.
,E* has put maximum emphasis on good governance of listed securities. @easures taken by
,E* could be compared with the provisions of ,arbanes7"xley to assess the scenario.
How does Bangladesh Measure up with Sarbanes-!le"
Sarbanes- !le" Bangladesh situation #hat $ight be needed
Certification of annual
accounts b* CE+, C-+
At least t.o directors must sign, of .hom
one must be the Managing /irector
0eed to change to have
M/1CE+ plus -inance
/irector1C-+ to sign
-ull* independent audit
committees
Audit committee shall have at least one
independent director
0eed to consider full*
independent and tighter
definition of independence
/isgorgement of CE+1C-+
compensation in event of
restatement
Accounts and profits once published
cannot be restated. E2+P pa*ments are
rare.
/isincentive to CE+1C-+
misdeeds should be .ored
out b* the regulators.
Prohibition of insider trading Prohibits insider trading -urther rigor should be in
place as to insider trading.
3eal time disclosure
concerning changes in
financials and operations
2ecurities and Exchange 3ules, #45)
re6uires *earl*, half7*earl* audited
financial statements and 6uarterl*
unaudited financial statements. Price
sensitive information re6uires to be
disclosed .ithin %8 minutes from the
taing of decision.
Information disclosure
re6uires to be s*nchroni9ed b*
the exchanges.
Mandator* periodic revie. of
compan*:s filing once ever*
three *ears.
0o such provision. But in case of
issuance debt instruments, surveillance
rating is re6uired for consecutive three
*ears.
Periodic revie. mechanism
could be introduced.
Auditors prohibited from nine
t*pes of non7audit services to
clients
Corporate ;overnance ;uidelines, $88(
prohibit these non audit services
0eeds to chec .hether the
companies are compl*ing .ith
the $88( ;uidelines.
Auditors to report to Audit
Committee on critical
accounting policies
Auditor should report to audit committee
as .ell as include a compliance checlist
along .ith the audit report.
Authenticit* and accurac*
should be checed.
3otation of audit partners
ever* five *ears.
Auditors of listed securit* re6uire to be
rotated in ever* three *ears.
0o further change is needed.
<p to $8 *ears in prison for
fraud and destruction of
records
0o such provision. Ho.ever, auditors
could be barred to audit listed companies
up to five *ears.
=ougher provisions should
included for pla*ing due roles
of auditors.
(11) Ban$lades Bank
6angladesh 6ank is responsible for the licensing, supervision and regulation of the bank and
non7bank financial institutions in 6angladesh. The banking sector in 6angladesh has a meteoric
rise since independence. *redits and investment assets of scheduled banks increased from a
meager Tk. E.0E billion in 3CE/ to Tk. 1=/?.A? billion as of +ecember /033 registering a =?1
fold increase. "ver the years banking sector has experienced structural change and reforms
transforming it to be vibrant private sector led banking market. 6angladesh bank as a public
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gatekeeper has put in place prudential parameters viz. minimum capital adequacy, liquidity, risk
management mechanism, disclosure and governance mechanism. 6ecause of 66s proactive
measure percentage of non7performing loans has been reduced drastically. +espite 66s efforts
governance weakness still persists, control shareholders still control credit access and forces
management to act in favor of the dominant shareholders in expense of the minority. 6anking
sector still lacks professionally capable *E"s due to excessive interference of the control
shareholders turned directors of the 6oard.
+ue to poor asset liability management banking sector, very often, experiences liquidity
problem. #isk management products and tools are not in vogue. %n the money market
commercial paper has not yet been introduced. 6ecause of the weakness of oversight,
management could venture into the business that could harm the depositors5 interest.
,eparate debt office is still a distant reality and fiscal responsibility act has not yet been passed.
$s a result, government borrows heavily from the banking system and has crowding7out effect.
,tronger strategic vision seems lacking and instead of vertical expansion, new banks are being
licensed. There could be undue competition among the banks to have their customers. .oans may
be extended without rigorous scrutiny and merit. That could have negative effect on the clientele
base and harm enterprise good governance.
(12) Institute of "artered Accountant of Ban$lades

%nstitute of *hartered $ccountants of 6angladesh K%*$6L was established under the
6angladesh *hartered $ccountant "rder, 3CE> as a self7regulatory organization for regulating
accounting and auditing professions in 6angladesh. *ompanies $ct, 3CC1 requires that a firm
of chartered accountant under the aforesaid "rder shall be appointed as an auditor of a
company. %*$6 is responsible for exercising oversight on the auditor registered by it. %*$6
has now 33A> members out which >/C members are practicing in A? proprietary and A=
partnership firms. $ significant number of members K311L are residing abroad. $ study titled
:#eview on "bservance of ,tandard and *odes; by 9orld 6ank in /001 painted very dismal
scenario of our audit profession. %t stated that :The out7of7date legal requirements, widespread
noncompliance with accounting and auditing standards, ineffective enforcement mechanism,
poor quality accounting education and training, and inadequate adherence to professional
ethics have contributed to the weakness of the financial reporting regime.; The report further
observed that :%ts %nvestigation and +isciplinary *ommittee is not proactive with respect to
disciplining errant public practitioners. @oreover, %*$6 has no effective measures to ensure
that its members maintain current professional standards through continuous professional
development.; 4inally the report recommended that :an independent oversight bodyM
4inancial #eporting *ouncilMshould be established. The 4inancial #eporting *ouncil will be
responsible for adoption, monitoring, and enforcement of %$, and %,$ N.;
$ppreciating the #",* #eport measures were taken by the &overnment of 6angladesh to
establish a 4inancial #eporting *ouncil. 4inancial #eporting "rdinance was promulgated
during the *aretaker government in /00E. $lthough, the "rdinance was not ratified by the
current democratic government, it is being reviewed by a *ommittee headed by $dviser to the
onorable Prime @inister for 4inance and may be passed after being reviewed thoroughly.
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owever, under a 9orld 6ank Pro!ect %*$6 members have been trained on %nternational
4inancial #eporting ,tandards K%4#,L and %nternational ,tandard on $uditing K%,$L. $part from
that %*$6 has changed its curricula and has a twining program with %nstitute of *hartered
$ccountants in England and 9ales.
&iven the plight of the corporate accounting, reporting and disclosure scenario quality of the
persons engaged in the accounting and auditing profession need to be elevated and oversight
mechanism should be put in place and strengthened.
3.0 "onflict of Interest of Gatekeeper
*onflict of interest consists of a set of conditions by which professional !udgment concerning a
primary interest e.g. investors5 interest tends to be unduly influenced by a secondary interest e.g.
financial gain.
&atekeepers are expected of delivering their duties ob!ectively. owever, they may not discharge
their roles if they have conflict of interest. *onflict of interest arises in a situation in which an
individual or entity, either private or governmental, is in a position to exploit a professional or
official capacity in some way for their personal or corporate benefit. *onflict of interest is
synonymous to conflict of roles.
aving a conflict of interest is not, in and of itself, evidence of wrongdoing. 4or many
professionals, it is virtually impossible to avoid conflicts of interest from time to time. %t can,
however, become a legal matter if an individual tries influencing the outcome of the decision for
personal benefit. Then it becomes a breach of the H+uty of .oyalty5.
$ conflict of interest may exist even if there are no improper acts as a result of :*onflict of
#oles; and *onflict of %nterest. $ person with two roles e.g. a stockholder and government
official, may experience situations where those two roles conflict. aving two roles even if may
not be illegal, could provide an incentive for improper acts in some circumstances.
The courts of a developed !urisdiction have interpreted :honest services; to include honest and
impartial government, and a general duty on the government official to act out of loyalty,
honesty, independence, impartiality, and integrity. $ccordingly, the public has a right to have its
public officials perform their duties free from improper influences, corruption, fraud, deceit, self7
enrichment, self7dealing, and conflicts of interest.
!.0 "o%pensation of Gatekeeper
&atekeepers either to lower their cost of due diligence or further their interest may resort to
malpractices. %n such situation, the regulator must ensure that gatekeepers extend honest
services. %f they fail to do so public gatekeepers particularly, ,E* and government must ensure
that perpetrators of fraud are rightly punished. #egulators should also ensure that victims of
fraud are fairly compensated. owever, the best remedy to have an appropriate deterrence
mechanism that would ensure potential perpetrators are deterred from committing fraud
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&.0 "onclusion
The gatekeepers5 should always ask themselvesJ would stakeholders trust my !udgment if they
knew of my conflict of rolesFconflict of interestO %f the answer is in the negative, they should
exercise maximum restraints. 6ut if the private gatekeepers do not carry out proper due diligence
and act as a cohort public gatekeepers should come to remedy their follies. $ccording to ,chilit,
:%f there is a feeling of the private that :%t pays to do it, it5s easy to do, and it5s unlikely that
you5ll get caught; the private gatekeeper will continue.;
3Therefore gatekeepers should help create an environment that sets an appropriate tone at the
top, promoting ethical behavior, reinforcing antifraud conduct, and demanding :doing the right
thing always.; *orporate culture should also provide incentives for everyone in the company to
act ethically. *ontrol structure should eliminate opportunities for individuals to engage in
fraudulent activities. 4or ensuring above, oversight on the management, compliance with the
ethics, rules and regulation, internal audit, external audit, and monitoring should be strengthened.
"nly then corporate governance participants fulfill their responsibility when their role in
corporate governance will be considered as a value7added function.
#eferences
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and .odernising "ecurities /egulation in ,urope and the 0". Portland, "regon, -,$2
art Publishing.
6ainbridge, ,tephen @. /00A. The 1ew orporate 2overnance in Theory and 3ractice. 8ew
Pork2 "xford -niversity Press, %nc.
*asey, <ohn, and +eborah ,teiner. /033. %n7ouse *ounsel as *orporate :&atekeepers.;
$vailable at http2FFwww.lw.comFuploadFpub*ontentFQpdfFpub1/E1Q3.pdfJ accessed
/0.01./03/.
*offee, <ohn *.. <r. /00=. 2atekeepers: The 3rofessions and orporate 2overnance. "xford,
-G2 "xford -niversity Press.
*ox, <ames +. /00=. The "ligopolistic &atekeeper2 The -, $ccounting Profession. %n <.
$rmour, and <oseph $. @c*ahery 'eds.(, After ,nron: +mproving orporate -aw and
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the 0" 'Portland, "regon, -,$2 art Publishing(2 3?C7/31.
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