BANGLADESH RESEARCH PUBLICATIONS JOURNAL

ISSN: 1998-2003, Volume: 3, Issue: 2, Page: 971-981, November-December, 2009

Review Paper

CURRENT STATUS OF THE CORPORATE GOVERNANCE

GUIDELINES IN BANGLADESH: A CRITICAL EVALUATION
WITH LEGAL ASPECT
Md. Gulam Sharoar Hossain Kha1, A. K. M. Zahirul Islam 2, Harun Ar Rashid3 and Md. Asraful Arafat
Sufian4

Md. Gulam Sharoar Hossain Kha, A. K. M. Zahirul Islam, Harun Ar Rashid, and Md. Asraful Arafat
Sufian (2009). Current status of the Corporate Governance Guidelines in Bangladesh: A
Critical Evaluation with legal aspect. Bangladesh Res. Pub. J. 3(2): 971-981. Retrieve from
http://www.bdresearchpublications.com/admin/journal/upload/09103/09103.pdf

Abstract

There is a growing sentiment that poor corporate governance is

one of the forces to blame for the collapse of the financial market
since it failed to ensure the transparency, accountability and
integrity of companies, particularly on matters of corporation.
Bangladesh is one of the third world countries having many opportunities
in corporate sector and also one of the least developed countries in
the South-East Asia that has issued corporate governance
guidelines in 2006. This was a timely attempt by the regulatory
market of the country to keep up with the worldwide concern for
reforming corporate monitoring structures. The guidelines are
mandatory for all companies listed in their stock exchange. In the
wake of the free-market economy, many investors are interested to
invest in Bangladesh because of its competitive labour costs and
abundance of workers. The government of Bangladesh also offers
significant incentives to encourage foreign investment. In this
scenario, attempts to enhance corporate monitoring by
implementing new corporate governance guidelines and
respected provisions of company law will enable the country to be
a better place for investment. This paper discusses critically the
implementation practice of the new corporate governance
guidelines.

Key words: Corporate Governance Guidelines, Board of directors, CEO and chair,
Auditors.

Introduction
The recent wave of business scandals and ethical lapses have heightened
people, press, and investor scrutiny of companies, creating demand for a
corporate culture of integrity-driven performance and a new corporate
transparency. Management and Boards now feel compelled to ensure that
proper governance processes are in place to protect corporate reputation,
brand image and shareholder value. According to Pricewaterhouse Coopers 8th
Annual Global CEO Survey ( Dec 2004), 50% of retail industry CEOs believe that
there is a strong relationship among all elements of GRC (governance, risk and
*Corresponding Author
1.
2.
3.
4.

Lecturer, Department of Business Administration, Stamford University Bangladesh

Senior Lecturer, Department of Business Administration, Prime University, Dhaka, Bangladesh.
Lecturer, Department of Law & Justice, Bangladesh University of Business & Technology (BUBT).
Assistant Professor, Department of Law & Justice, Bangladesh University of Business & Technology (BUBT).

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compliance) and that effective governance can be a value driver and a benefit
versus a cost, to their companies.
Effective corporate governance requires management and Board
involvement and accountability, embracing the processes, compliance and
structure required to direct and manage the affairs of a corporation. Its overall
goal is to ensure the financial viability of the enterprise and enhance shareholder
value. For the retail and consumer industry, globalization, which entails
multinational operations, various financial reporting systems, complex supply
chains with wholesalers, distributors and multiple types of retailers, not to mention
multiple brand portfolios and various types of outlets, provides significant rationale
for management and Boards to develop an effective GRC program.
Successful corporate governance depends largely on trade- off among
the various conflicting interest groups like government, society, inventors, creditors
and employees of the organization. This study critically discusses the
implementation practice of the corporate governance guidelines issued
by Securities and Exchange Commission (SEC) in Bangladesh. Following
the much-reported collapses of companies such as Enron, World Com, HIH
and One. Tel, corporate governance reforms have been started in
developed countries such as in the United States, United Kingdom and
Australia. As a continuation of this reform, newly industrialized countries
(NIC) such as China, Malaysia and India have also introduced corporate
governance guideline in their countries.
Although the guidelines are new for Bangladesh, for last few years
market regulators are seriously considering to implement some guidelines
to reform the corporate governance structure of companies. As a first time
implementer, provisions have been made for audit committees and
independent directors on corporate boards (SEC, 2006). One reason for
the late introduction in Bangladesh may be attributed to the relatively
poor development of its capital market (Roundtable discussion, 2006).
One of the constraining factors for effective implementation of such
guidelines is how effective and efficient it is in addressing the needs of the
capital market. This paper critically examines the new corporate
governance guidelines in addressing these issues with the implication of
company law.
Objectives of the studies
The objectives of the study are manifolds which are as follows:
To identify the current status of the capital market in Bangladesh.
To discuss about the corporate governance guidelines provided by
Securities and Exchange Commission.
Compliance with the Second year.
Limitation of the guidelines and Company Law.

Materials and Methods

This paper is mostly based on secondary sources of information and
literature review. Current national and international dailies are also
extensively searched and collected for writing this paper. Web sites of
different companies of multiple countries from home and abroad were
also browsed. Extensive views with prominent personalities of corporate
and academia were exchanged too.
Literature review
Different authors view the meaning of corporate governance differently.
For example, one school of thought describe corporate governance as a

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system by which companies are directed and controlled (Cadbury and

Greenburg Report, CFACG 1992); another school views corporate governance as
structures and processes for decision making, accountability, control and
behavior at the governing body (Public accounts and Estimates Committee,
2002); to others corporate governance is about finding ways to ensure effective
decision making (Pound 1995). But it must be kept in our mind that the
fundamental concern of corporate governance is to ensure the conditions
whereby a 3 firms directors and mangers are held accountable, ensure better
and effective protection to all stakeholders. The World Bank argues that the
framework of corporate governance should be based on four pillars of
Responsibility, Accountability, Fairness and Transparency (RAFT).
However, Kocourek (2003) believes that to counter the accounting,
leadership, and governance scandals, organizations are rushing to institutionalize
corporate governance, which may be even be counterproductive. The drive to
more tightly regulate the membership and functions of corporate boards is
already encouraging companies to view governance as a legal challenge rather
than a way to improve performance. By reducing the critically important issue of
corporate governance to what amounts to box-checking exercise, corporate
directors and senior executives are addressing the symptoms, not the root cause,
of the governance crisis. Kocourek states that governance begins at home
inside the boardroom, among the directors. It is embedded in how, when, and
why they gather, interact, and work with one another and with management in
other words, the soft stuff. But qualitative reforms to the behaviors, relationships,
and objectives of the directors and CEO are meaningless unless they are subject
to the hard mechanisms of performance criteria, processes, and measurement.
According to Kocourek, this combination of soft and hard solutions can turn
corporate governance from vague concept into a means to deliver
organizational resilience, robustness, and continuously improved performance.
Corporate governance practices in Bangladesh are quite absent in most
companies and organizations. In fact, Bangladesh has lagged behind its
neighbors and the global economy in corporate governance (Gillibrand, 2004).
One reason for this absence of Corporate Governance is that most companies
are family oriented. Moreover, motivation to disclose information and improve
governance practices by companies is felt negatively. There is neither any value
judgment nor any consequences for corporate governance practices. The
current system in Bangladesh does not provide sufficient legal, institutional and
economic motivation for stakeholders to encourage and enforce corporate
governance practices; hence failure in most of the constituents of corporate
governance is witness in Bangladesh. Poor bankruptcy laws, no push from the
international investor community, limited or no disclosure regarding related party
transactions, weak regulatory system, general meeting scenario, lack of
shareholder active participations are some of the individual constituents that
have been identified by Mamtaz Uddin Ahmed and Mohammad Abu Yusuf in
their research study Corporate Governance : Bangladesh Perspective (Mamtaz
and Yusuf, 2005).In 2006 government issued new corporate governance rules. In
this paper we have tried to show the current status and implementation of these
rules and the major limitation of this rules which should be rectified.
Capital Market in Bangladesh
Bangladesh is one of the least developed countries (UN, 2007) in
South East Asia. The capital market is relatively underdeveloped with a
market capitalization of only 6% of gross domestic product (GDP)
(Roundtable discussion, 2008). There are two stock exchanges in

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Bangladesh: Dhaka Stock Exchange (DSE) established in 1954 and

Chittagong Stock Exchange (CSE) established in 1995. Both exchanges
are private sector entities, self-regulated and have their own SECapproved operating rules.
To reduce conflict between shareholders (principal) and
management (agent), it is necessary to have strong corporate
governance practices which can be monitored by capital market
regulators. As the regulatory authority of the capital market of
Bangladesh, the SEC was established on June 8, 1993 under the Securities
and Exchange Commission Act, 1993 (Act XV of 1993).
There are a number of factors which hinder the development of
capital market of Bangladesh. Solaiman (2006, p. 195) found that the
existence of weak legal and regulatory frameworks, the absence of active
market professionals, the predominance of individual investors, and a
serious dearth of foreign and institutional investors are all factors. There
have been some attempts at reform but most initiatives are far from
ready. Nothing significant has been done to protect investors; however,
the introduction of the Guidelines in February 2006 is expected to provide
effective monitoring and legal protection to investors (Roundtable
discussion, 2006). It will also increase the confidence of investors.
Corporate Governance Guidelines
Under the Guidelines, all companies enlisted on the stock
exchanges Bangladesh need to follow a comply or explain approach. This
means companies need to comply with the Guidelines, if not; they need
to provide appropriate explanations why not. These Guidelines contain
four major groups: the board of directors; chief financial officer, head of
internal audit and company secretary; audit committee and external
auditors; and, the directors report that discloses conditions met by the
company and explains any conditions not met.
Board of directors
First category in the Guidelines relates to the board of directors. The
board of directors is considered an active monitor of a companys
corporate governance system (Kiel and Nicholson, 2003). They are
responsible for ensuring management behavior and actions are consistent
with the interests of the shareholders, have the power to hire and
compensate executive managers, and rectify and monitor important
management decisions (Fama and Jensen 1983a, 1983b; Jensen, 1993). A
boards monitoring reduces agency costs and safeguards the interests of
shareholders (Jensen and Meckling, 1976). A few considerations emerge
from Anglo-Saxon governance practices that are effective in board
monitoring including: board size, independence of the directors, and
separation of CEO and chair.
Board size
Board size refers to the number of directors sitting on the board.
Section 90 of the Companies Act, 1994 provides that every public
company must have at least three directors but it does not fix the
maximum number of the board. Subject to this minimum number of
directors, the article of a company may and usually do, fix the minimum
and maximum number for the Board. From an agency- risk perspective, it
can be argued that larger boards are more likely to be vigilant for agency
problems, simply because a greater number of people are reviewing

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management actions (Kiel and Nicholson, 2003). However, agency theory

recognizes that there is an upper limit to board size: If the size of the board
becomes too large (beyond the standard threshold), effectiveness of
monitoring diminishes (Ryan and Wiggins, 2004). A large board increases
problems of free-riding and it becomes difficult for directors to express their
ideas and opinions in the limited time available during meetings (Golden
and Zajac, 2001). It is also suggested that large boards are relatively
ineffective and difficult for the chief executive officer to control (Lipton
and Lorsch, 1992; Jensen, 1993). Kiel and Nicholson (2003) found an
inverted U relationship between board size and performance, adding
directors can bring the board to an optimal skills/experience mix level,
however, beyond that point the difficult dynamics of a large board prevail
over the skills/expertise advantage that additional directors might bring. In
general, board size will differ depending on country-specific factors,
regulatory requirements, types of business and complexity of the business.
In Bangladesh, the Guidelines has set maximum and minimum
numbers of board members for listed companies at 20 and 5 respectively,
of which one-tenth (subject to minimum of one) has to be independent
non-shareholder directors. The Guidelines also suggest that boards of
banks and non-bank financial institutions, insurance companies and
statutory bodies should be constituted as prescribed by their respective
primary regulators.
Independent directors
Independent directors are those board members who do not hold
any executive position in the company or have any direct or indirect
interest in the company (Suchard et al., 2001). According to agency
theory, independent directors are expected to enhance a boards
monitoring capabilities (Hermalin and Weisbach, 1988). It is generally
argued that independent directors are more likely to protect shareholders
interests and reduce agency problems. Fama (1980) and Fama and
Jensen (1983a) argue that board outsiders add value to firms by providing
expert knowledge and monitoring services. Being financially independent
of management, these directors have an ability to withstand pressure from
management (Hermalin and Weisbach, 1988). Agency theory also
suggests that a greater proportion of independent directors will be able to
monitor any self-interested actions of managers and thus minimize agency
costs (Fama, 1980; Fama and Jensen, 1983a).
By considering the above issues, the Guidelines encourage all
enlisted companies to have independent, non-shareholder directors. The
term independent, non-shareholder means directors who hold less than 1
% or no company shares and have no direct personal or business relations
with the company, its promoters or directors. SEC also directs that nonshareholder directors should be appointed by elected directors. The
emphasis on independent, non- shareholder directors suggested in the
Guidelines is consistent with the Cadbury Report (1995) which emphasizes
improved board monitoring by increasing its independence from
management and independent directors working for the best interests of
shareholders.
Nowhere independent director is mentioned in the Companies Act,
1994.Sections 94 and 97 deal about disqualification and qualification
respectively.
According to these sections every director must have
qualifying shares and he may acquire qualification shares at any time

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within two months after his appointment as a director. There is nothing in

the language of this Act which prohibits additional or different
qualifications for directorship apart from the holding of shares. [AIR 1951,
Mad 520]. In this connection the Company Act has a limitation to the
appointment of independent director.
Separate role of Chairperson and CEO
In business, the two most important positions in firms are the chair of
the board and chief executive officer (CEO). The positions should be filled
by different individuals since their functions are necessarily separate
(Cadbury, 1995). The position of chair significantly influences the outcome
of board decisions as the person controls board meetings, sets its agenda,
makes committee assignments and influences the selection of new
directors. The position of CEO is also influential as he/she is responsible for
any operating and financial decision-making.
Section 109 of Companies ACT, 1994 provides the appointment of
managing director without mentioning any special qualification. It also
provided that no appointment under this section shall be made without
the consent of the company in a general meeting. No separate provision
is mentioned in the Companies Act 1994 about the appointment of CEO.
The guidelines emphasize on separate appointment of CEO apart from
the position of managing director. But in this context, company law does
not contain any provision which prohibits the separate position of CEO.
The Companies Act, 1994 should contain specific separate provisions
regarding the position of MD and CEO i.e. their qualifications, terms,
functions, relation with other employees etc.
It has been argued that dual chair-CEO leadership role enables a
CEO to have more opportunity to act in their self-interest (Jensen, 1993).
Holding the position of both CEO and chair has been criticized as
inappropriate in terms of influencing critical power relationships in the firm
(Jensen, 1993). It is argued that where the two roles are combined in one
person, it is more likely that the CEO will be able to control the board,
reducing the boards independence from management, and making
decisions in their self-interest at the expense of shareholders. To maintain
independence, it is necessary that the board is independent from the
CEO (Hermalin and Weisbach, 2001).
In the Guidelines, SEC added the condition that the chair and CEO
(or Managing Directors) are held by separate persons. In Bangladesh,
companies have a CEO position but managing director (MD) is a more
commonly used term. The SEC needs to explain these terms clearly,
otherwise companies might take advantage of this confusion. The
Guidelines stated the chair of the board should be elected from the
directors. This means an independent, non-shareholding director can be
elected as chair. This might create some concern regarding
confidentiality of information, as an independent, non-shareholding
director can also be a director of other companies with similar operations
and interests.
The dual role of CEO and chair is more common in US companies.
For example, Monks and Minow (2001, p. 175) found a combined
leadership structure in 93% of companies, whereas others find that it has
been between 70% and 80% (see Berg and Smith, 1978; Rechner and
Dalton, 1991; Brickley et al., 1997). In Australia, duality is less common (Kiel
and Nicholson, 2003), and Arthur (2001) reports that only 21% of Australian

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companies have a combined role. In Japanese, British, Italian and Belgian

companies only 10%20% of companies combine the roles of CEO and
chair (Dalton and Kesner, 1987). In Bangladesh there is no significant
evidence of dual leadership structures (Imam, 2006). Agency problems
increase when management power and board leadership is
concentrated in a single person (Jensen, 1993). The emphasis on
separating the roles of chair and CEO will help to implement best
practice.
Appointment of the chief financial officer, head of internal audit and
company secretary
The company must appoint a chief financial officer, head of internal
audit and company secretary. The board of directors should clearly define
these roles and it is mandatory for these persons to attend board meetings
except where any agenda items relate to them.
The chief executive officer with the board provides overall
leadership and vision in developing the companys strategic direction,
tactics and business plans necessary to realise revenue and earnings
growth, and increase shareholder value.
Section 210 of the Companies Act 1994 makes inspection and audit
compulsory for every company to appoint qualified auditors to make a
systematic examination of books and records of the company. The head
of internal audit is responsible for focusing and planning specific audits.
The responsibilities of the internal audit division vary with the size,
complexity and type of business. Some of the internal audit division
functions are routine compliance auditing but may include duties in
general accounting areas and even performance auditing. The functions
and duties of the head should be defined clearly.
The company secretary is the chief administrator of the company.
Company secretarys functions are connected with convening meetings
of the board of directors. This requires the company secretary to be fully
conversant with relevant law and meeting procedures. The Cadbury
Committee on Corporate Governance (Cadbury, 1995) recognized the
company secretarys unique position as a key role in ensuring that board
procedures are followed and regularly reviewed. The chair and board
look to the company secretary for guidance on their responsibilities. The
contract made and signed by the secretary if it is authorized by the
article, binds upon the company. [Panorama developments Ltd. Vs. Fidelis
Furnishing Fabrics Ltd.1971. WLR 440]
Audit committee
The Guidelines also make mandatory for all the enlisted companies
to have an audit committee. The audit committee, a sub-committee of
the board, is delegated specific financial oversight responsibilities (Menon
and Williams, 1994). The primary function of the audit committee is to
review management information, financial statements and internal control
systems (Bosch, 1995; Klein, 1998). In reducing agency conflicts, audit
committees function as a monitoring mechanism and their function has
been emphasized by many researchers (e.g., Abbot and Parker, 2000;
Chen et al., 2005).
A critical aspect of audit committee structure is composition of its
membership. Good corporate governance practice suggests having only
non-executive directors on the committee with the majority independent

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(ASX, 2003). The Guidelines provide that the audit committee should be
comprised of at least three members including one independent, nonshareholder director.
The Guidelines emphasize that the chair of the audit committee
should have professional qualifications, knowledge, understanding or
experience in accounting or finance. If members of the audit committee
are financially literate, it is expected they will work more efficiently for the
best interests of shareholders. Frequent audit committee meetings with
independent and financially literate directors on the committee will
enhance the monitoring ability of audit committees. The provisions set by
SEC implicitly impose the condition that there should be at least one
member on the audit committee with a professional qualification or
knowledge, understanding or experience in accounting and finance.
These Guidelines also state that the audit committee reports to the
board on its activities and any conflict of interest, fraud or irregularity,
suspected infringement of laws or any other matter which they think
necessary to disclose. The Guidelines empower the audit committee to
report to the SEC directly in case its proposals are ignored by the board
and management without valid reason. Audit committees should also be
responsible to the shareholders and that report should be signed by the
chair of the audit committee.
External Auditors
Auditors serve to increase the quality of financial reporting. To
maintain the quality of an audit, auditors need to be independent.
Auditors do not directly monitor management; however, they provide an
assurance service that improves the quality of information. Independent
audits are used to increase the reliability of financial statements (Chow,
1982). The extent to which financial statements can reduce agency costs
is dependent on the quality of the audit, and audit quality acts as a
monitoring mechanism. Although the preparation and audit of financial
statements is required by Companies Act 1994, there is significant variation
in the quality and independence of audits. A major threat to audit quality
and independence is the provision of both audit and non-audit services
by accounting firms, very common in Bangladesh. Sharma and Sidhu
(2001) find that auditor independence is compromised when non-audit
services are high in relation to audit fees.
The Guidelines prohibit the external/statutory auditors to provide
selected non-audit services such as (i) valuation services or fairness
opinion, (ii) financial information systems design and implementation, (iii)
bookkeeping or other services related to the accounting records or
financial statements, (iv) broker-dealer services, (v) actuarial services, (vi)
internal audit services, and (vii) any other service determined by the audit
committee.
It is also mentioned in the Guidelines that directors should state in
statutory declarations which of conditions the company complies with
and which they do not, with explanations for non-compliance.
The directors report to shareholders
In the Guidelines there is a section dealing with the directors report
to shareholders. In addition to the Companies Act, 1994 (section 184), the
directors of companies will report to shareholders on a wide range of
additional financial and operational issues: (i) whether financial reports are

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fairly stated, (ii) proper books of accounts are maintained, (iii) appropriate
accounting policies have been constantly (and consistently) used, (iv)
appropriate International Accounting Standards (lAS) have been
followed, (v) efficiency of the internal control system, (vi) any going
concern issues, (vii) proper explanation of any significant deviation in
operating results, (viii) summarization of the key operating and financial
information of the last three years (minimum), (ix) explain reasons for not
declaring any dividend, (x) probability of having any restructuring!
Expansion of or discontinuation of operation and risk attached to this
decision, (xi) disclose the number of board meetings and attendance of
directors, and (xii) pattern of shareholding. These pieces of information
enable the investors and users of financial reports to gain an overview of
the companies policies and business.
Compliance in the Second Year
A study by Imam (2008) examining compliance with conditions
imposed by SEC through its Guidelines found that of 111 listed companies
(in industrial sectors) which held annual general meetings after the
notification of the Guidelines, the majority (63%, n= 70) furnished
compliance reporting in the directors report contained in the annual
report.
Forty-one companies (37%) did not provide any reporting on the
status of compliance. With regard to board size, 58 companies of 70 (83%)
complied with the Guidelines, and only 23 (33%) are reported to have
complied with the provision of independent directors. The majority-64
companies (91.4%) have the chair and CEO as different individuals.
With regard to the appointment of separate CFO, head of internal
audit and company secretary, of 70 companies that furnished
compliance reporting, 55 (78Io), 48 (69%) and 61 (87%) companies
reported to have complied with these conditions respectively. From the
explanations for non-compliance, it can be inferred that the size of listed
companies matters in complying with the condition of separate CFO,
head of internal audit and company secretary.
In regard to the constitution of audit committee and reporting to
the board and shareholders, of 70 companies that furnished compliance
reporting, 31 (44%) companies have such a committee. The majority of
companies (56%) does not have such a committee but reported that they
are in the process of developing such committees; however, companies
felt this condition would be complied with after the selection of
independent director. In addition, 56% of the companies could not
comply with the condition of defined qualifications of the chair of the
audit committee, with most cases not providing any explanation for noncompliance. A significant number of companies reported that this
condition is under review. With regard to engagement of external auditors
for non-audit services, 67 companies (95.7%) complied with the Guidelines.
Limitations of the Guidelines and the Companies Act, 1994
One of the major limitations of the Guidelines and the Companies
Act 1994 is that there is no specific requirement for directors educational
and service background. Company directors background and
experience have an influence on his/her monitoring ability and the more
experience and/or financial background, the better monitoring of
management. Agrawal and Chandha (2005) report that financial
expertise on boards limit the likelihood of accounting fraud. Financial
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literacy of the directors assists understanding of basic financial decisions.

Livingston (2002) also agreed that financial literacy can be acquired
through education, both formal and self-guided.
It is expected that directors who are financially literate can monitor
management more efficiently. Ramsay (2001) notes that financial literacy
is an important component of the general standards of care, skill and
diligence required of company directors. Similarly, Bull and Sharp (1989)
and DeZoort (1997) find it important for board members to have
accounting and auditing expertise. It is a general expectation that when
a person sits on a public companys board, they are able to understand
the financial matters of the business. Higher levels of educational
background and relevant work experience assist in achieving a better
understanding of the business. So it should have a statutory obligation
regarding the work experience and educational qualification for the
appointment of director. At first the law makers should include this issue in
the company law then policy makers can address this issue in the
Guidelines. The Company Act Should contains such provisions which can
ensure the quality of the directors.
According to agency theory, independent directors are expected
to enhance a boards monitoring capabilities (Hermalin and Weisbach,
1988). It is generally argued that independent directors are more likely to
protect shareholders interests and reduce agency problems. But there is
no provision regarding the appointment of independent director in the
Companies Act, 1994.So with a view to giving statutory obligation
Companies Act should mention the provisions for the appointment of
independent director and their qualifications.
Another concern that may rise from the Guidelines is the disclosure
of the names of shareholders who hold 10% or more shares of the
company. This may have an impact on privacy issues. Although listing
shareholder names are plausible from the shareholders point of view, as
this will ensure more accountability.

Conclusion
Given the globalization of business and improvement in monitoring
of corporate governance, investors are willing to invest in companies
where there is demonstrated good corporate governance practice.
Therefore, the Guidelines are a timely attempt by policy makers in
Bangladesh to improve the general quality of corporate governance
practices. In an emerging investment market like Bangladesh, the SEC
provides conditions to have independent directors on the board and
audit committee. The independent directors must work with integrity and
should keep board decisions confidential. However, there is no indication
of the qualification of independent directors and selection processes.
This guideline is expected to increase levels of efficiency, quality,
and competitiveness throughout the national economy. The Guidelines
provide a standard that can be used to measure progress towards best
practice. The Guidelines will assist listed companies to improve their
corporate governance practices, a precondition of a sound capital
market. This is not to suggest that the Guidelines can simply eliminate an
entire deep rooted governance problem where many other
complementary reforms are necessaryhowever, this can begin the
reform process.

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