In Pakistan majority of listed companies are managed by controlling shareholders who are close family members. Other investors in these companies are in minority. According to section 196(2) of Companies Ordinance 1984, directors can exercise borrowing powers of the company by means of a resolution at a board of directors meeting. Code of Corporate Governance also allows directors to exercise all powers on behalf of the company and only binds them morally to do this “with a sense of objective judgment and independence in the best interests of the listed company.”
Further, it asks to maintain “a complete record of particulars of the significant policies, as may be determined, along with the dates on which they were approved or amended by the Board of Directors.” Practically, there is no check on the directors regarding imprudent decisions.
