Islamabad, March 08, 2013 (PPI-OT): The Federal Minister for Finance Saleem H Mandviwala has said that the Public Sector Companies (Corporate Governance) Rules, 2013, are expected to bring about more transparency in the operational matters of the Public Sector Companies and plug their huge losses. He was addressing the launching ceremony of the rules at a local hotel on Friday.
He further said that the government took the initiative to turn around the public sector companies and constituted a cabinet committee on restructuring of public sector enterprises. He mentioned that the rules for public sector companies were also the outcome of efforts of cabinet committee on restructuring. In accordance with the reforms programme, the government has successfully constituted a new board of directors of public sector companies in a transparent way and also enhanced their autonomy and independence, he said.
The reconstitution of board of directors and appointment of chief executive officers on merit had already minimized political interference in the management of such companies. The Finance Minister asked the SECP Chairman and DG, ERU, to formulate a strategy to monitor and ensure the successful implementation of the Corporate Governance Rules.
The SECP Chairman, Muhammad Ali, said that a major challenge before us that the PSCs operate in various legal forms and shapes. The companies and entities governed under special enactments, statutory corporations, directorates, departmental undertakings, cooperatives and trusts, etc. non-corporate PSCs, e.g., NHA, Pakistan Railways, etc., shall be incorporated first as limited liability companies under the Companies Ordinance since the company law framework itself takes care of most of the governance issues and problems faced by such entities.
The Corporatization process of state-owned enterprises or state-controlled entities created by special statutes also needs to be considered on a priority basis. This harmonization of legal status would allow a levelling of the playing field with private competitors. Further, the fragmented ownership of the government in various PSCs, operating in different forms, also needs to be controlled through a centralized mechanism.
The corporate governance rules, specifically designed by the a task force constituted by the Cabinet Committee on restructuring of public sector entities to improve the governance of PSCs, include strengthening the internal control mechanism, augmenting the disclosure and transparency requirements, and undertaking periodic performance evaluation of the board members.
While highlighting the salient features of the Corporate Governance Rules, 2013, Mr. Moin Fudda, Country Director, CIPE, said that the Task Force held a number of group meetings and three roundtables in Islamabad, Lahore and Karachi to complete the process of consultation.
He informed the audience that more than 500 stakeholders participated in the deliberations and thereafter the draft rules were placed on the SECP official website for 60 days for feedback. After incorporating necessary input received from the stakeholders, the taskforce presented a consensus report in the SECP policy board for approval.
The SECP policy board approved the Corporate Governance Rules Draft report, 2013, and presented it for the approval of federal government. Dr Khaqan Hassan Najeeb, Director General, Economic Reforms Unit (ERU) and Convener of the Task Force, Mr. Asad Ali Shah, Chairman, Technical Committee of the Task Force, and other senior officials of finance division, FBR and the SECP attended the event.
The salient features of the rules are (a) The appointment of the board members and CEO will be subject to fit and proper criteria laid down by the SECP. This will include a person’s qualifications, experience and business expertise. (b) The position of the chairman and CEO are proposed to be separated to achieve an appropriate balance of power, increasing accountability and improving the board’s capacity for decision-making independent of management. (c) The CEO will be appointed on the recommendation of the board of directors.
The board will recommend three names and the government will appoint one of them. (d) The annual evaluation of directors and CEO will be done as per criteria specified by the SECP and will be submitted to the government. (e) The board shall have 40pc of its total members as independent directors within two years of the notification of the rules, and majority of independent directors within four years. (f) No person shall be elected or nominated as a director of more than five public sector companies, simultaneously, including listed companies. (g) The chairman of the board shall preferably be a non-executive director. (h) A system of internal audit shall be established in every public sector company. In addition, audit, H.R., procurement and risk management committees will be set up.
After 90 days of their promulgation, the rules will apply to all public sector companies which are directly or indirectly controlled, beneficially owned or in which government holds not less than 50% of voting securities. The Federal Minister for Finance Saleem H Mandviwala has said that the Public Sector Companies (Corporate Governance) Rules, 2013, are expected to bring about more transparency in the operational matters of the Public Sector Companies (PSCs) and plug their huge losses
Public Sector Companies (Corporate Governance) Rules have been approved by the government of Pakistan
The rules will improve the governance framework of public sector companies
The rules will minimize political interference in the management of public sector companies
The rules will necessitate restructuring of public sector companies
Improved corporate governance of public sector companies will lead to significant efficiency, improvement in the quality of public services and a decrease in the fiscal burden
For more information, contact:
Shakil Ahmad Chaudhary
Head, Internal and External Communication
Securities and Exchange Commission of Pakistan (SECP)
NIC Building, 63 Jinnah Avenue, Islamabad
Tel: +9251 921 4005 or 921 4009 (Ext. 378)
Fax: +9251 920 6459
Cell: +92302 855 2254