PAKISTAN V/S UK CORPORATE GOVERNANCE

ZOHAIB YASEEN
AVINA MUNAWAR
 INTRODUCTION
Pakistan
 The introduction of the corporate
governance in Pakistan for listed
companies by SECP (security exchange
commission of Pakistan) in 2002 and
subsequent revisions in 2012 and 2017
and later revised in September 2019.
 The 2019 Code is applicable to listed
companies only, while the 2017 Code in
its scope also included all other entities.
United Kingdom
 The first version of the UK Corporate
Governance Code (the Code) was
published in 1992 by the Cadbury
Committee.
 Renewed on July 2018 by FRC (Financial
Reporting council).
 The Code is applicable to all companies
with a premium listing, whether
incorporated in the UK or elsewhere.
The new Code applies to accounting
periods beginning on or after 1 January
2019.
 STRUCTURE AND COMPOSITION OF BOD
Pakistan United Kingdom
 The Code recommends that at least half
 The Code recommends that each listed
the board, excluding the chairman,
company shall have at least two or one comprises independent NEDs.
third members of the Board, whichever is
higher, as independent directors (for this
purpose, board shall be reconstituted not
later than expiry of its current term)
 RESPONSIBILITIES OF DIRECTORS
Pakistan
 Is responsible for the governance of risk
and for determining the company’s level
of risk tolerance by establishing risk
management policies.
 a system of sound internal control is
established, which is effectively
implemented and maintained at all levels
within the company.
 investments and disinvestment of funds.
 All directors of a company shall attend its
general meeting(s).
 fee for non-executive directors including
United Kingdom
 Act within the powers conferred by the
company's constitution.
 The board should identify in the annual
report each non-executive director it
considers to be independent.
 Not accept benefits from third parties.
 Avoid conflicts of interest.
 Evaluating financial report and annual
budgets.
 AUDIT COMMITTEE
Pakistan
 Audit committee shall comprise 3
members (non-executive) and at least 1
independent director
 chairman of committee shall be an
independent director not being chairman
of the Board
 at least one member of the audit
committee shall be “financially literate”
 secretary of the committee shall either be
the company secretary or head of internal
audit
United Kingdom
 The board should establish an audit
committee of independent non-executive
directors, with a minimum membership of
three, or in the case of smaller
companies, two.
 The chair of the board should not be a
member.
 The board should satisfy itself that at
least one member has recent and relevant
financial experience.
 OTHER COMMITTEES
Pakistan
 Human Resource and Remuneration Committee
 There shall be a human resource and
remuneration committee of at least of three
members.
 recommend to the board for consideration and
approval a policy framework for determining
remuneration of directors and the member of the
senior management.
 Nomination Committee
 It is responsible for keeping the structure, size
and composition of the Board under regular
review and for making recommendations to the
Board with regard to any changes necessary.
 Risk Management Committee
 Monitoring and review of all material controls,
financial and operational.
United Kingdom
 Remuneration Committee
 Ensures the reward, incentives and pays.
 The remuneration committee has
delegated responsibility for designing and
determining remuneration for the chair,
executive directors and the next level of
senior management.
 Nomination Committee
 The nomination committee is responsible
for board recruitment and will conduct a
continuous and proactive process of
planning and assessment.
 DELEGATION OF AUTHORITY
Pakistan
 The Chairman and the chief
executive officer of a company, by
whatever name called, shall not
be the same person.
 The board members name should
be stated in the annual report and
their qualifications as well.
 The executive directors, including
the chief executive officer, shall
not be more than one third of its
board of directors.
United Kingdom
 The roles of chairman and chief
executive should not be exercised by
the same individual. A chief
executive should not become
chairman of the same company.
 The board should identify in the
annual report each non-executive
director it considers to be
independent.
 At least half the board, excluding the
chair, should be non-executive
directors whom the board considers
to be independent.
 DELEGATION OF AUTHORITY
Pakistan
 The responsibilities of the
chairman, chief executive, senior
independent director, board and
committees should be clear, set
out in writing, agreed by the board
and made publicly available.
 The annual report should set out
the number of meetings of the
board and its committees, and the
individual attendance by directors.
 A director will not be considered
as independent if,
 A director is or has been an employee
United Kingdom
 The board of directors of a company shall
carry out its fiduciary duties with a sense
of objective judgment and in good faith in
the best interests of the company and its
stakeholders.
 The chief financial officer and company
secretary of a company or in their absence,
the nominee, appointed by the board, shall
attend all meetings of the board of
directors.
 The independent directors of each listed
company shall not be less than two
members or one third of the total members
of the board, whichever is higher.
 DELIGATION OF AUHTORITY

Pakistan United Kingdom

 Every independent director shall submit  Has served on the board for more than nine
along with his consent to act as director, a years from the date of their first appointment.
declaration to the company that he  Represents a significant shareholder.
qualifies the criteria of independence
 All directors should have access to the
notified under the Act.
advice of the company secretary, who is
 The board of directors shall determine
responsible for advising the board on all
appointment, remuneration, terms and governance matters. Both the
conditions of employment of chief financial
appointment and removal of the company
officer, company secretary and head of
secretary should be a matter for the whole
internal audit of companies.
board.
 The board shall take appropriate steps to
disseminate code of conduct throughout
the company along with supporting policies
and procedures and these shall be put on
the company’s website.
 EXTERNAL AUDITOR
Pakistan
 The Board of Directors of a company shall
recommend appointment of external auditors
for a year and his remuneration, as suggested
by the audit committee.
 No company shall appoint a person as an
external auditor or a person involved in the
audit of a company who is a close relative of the
chief executive officer, the chief financial
officer, the head of internal audit, the company
secretary or a director of the company.
 Any matter deemed significant by the external
auditor shall be communicated in writing to the
BOD with prior approval from the BOD.
United Kingdom
 Reviewing the company’s internal
financial controls and internal control and
risk management systems.
 Monitoring and reviewing the
effectiveness of the company’s internal
audit function.
 Providing advice on whether the annual
report and accounts, taken as a whole, is
fair, balanced and understandable.
 Provides the information necessary for
shareholders to assess the company’s
position and performance.