All acts to be superseded by corporate governance code

Listed banks and insurance companies must follow the Bangladesh Securities and Exchange Commission's (BSEC) corporate governance code, even if it contradicts the bank companies and insurance acts, said the stockmarket regulator yesterday.

It was a reply of Swapan Kumar Bala, a BSEC commissioner, against a question during a “corporate governance” seminar organised by the BSEC at Bangabandhu International Conference Centre.

A participant pointed out that as per the bank companies act, a bank has to have two independent directors if it has fewer than 20 directors.

This contradicts the code, which stipulates that at least one-fifth of directors in a company's board shall be independent ones.

M Hasan Mahmud, executive director of the BSEC, while giving a presentation, clarified that as per the code, if the total number of directors divided by five results in a fraction, the next integer has to be considered as the required number of independent directors. The code has already been sent to Bangladesh Bank and the Insurance Development and Regulatory Authority so that it does not create any confusion, said Bala.

Shuvra Kanti Choudhury, managing director of Central Depository Bangladesh Limited, said the BSEC issued the code exercising section 2cc of the securities and exchange ordinance, for which it supersedes all acts. That is why listed banks and insurers have to follow the code, he said. 

The BSEC issued a corporate governance guideline in 2006 and reissued it with some changes under the name “corporate governance code” on August 8, 2018.

Listed companies have to follow the code which contains some directives on selecting independent director, directors' report to shareholders, formation of board, audit and remuneration committees, and maintaining websites. Abul Kalam Azad, principal coordinator for sustainable development goals affairs at the Prime Minister's Office, said the code would help the capital market's potential to bloom.

“Good governance is also needed in the public sector to keep pace with the private sector. So we took some initiatives to create competition among government service holders so that they do a good job,” he said.

M Khairul Hossain, chairman of the BSEC, said all listed companies have to comply with the code and it would be good for them.

M Shaifur Rahman Mazumdar, managing director of Chittagong Stock Exchange, said maintaining the code may initially seem to be an extra pressure, but it would help companies attain sustainable growth and bring transparency to the stockmarket.

Records show that failed non-listed companies normally lacked corporate governance, he added.

“If proper remuneration is not given to independent directors, we cannot expect good contribution from them. So we should take this into consideration,” said KAM Majedur Rahman, managing director of Dhaka Stock Exchange.

He also said the time has come to think about environmental social governance in the private sector and the BSEC could add the issue when the next phase of reforms was brought to the code.