Corporate Governance Development in Pakistan – Connecting the Dots


This year the Securities and Exchange Commission of Pakistan (SECP) celebrated its 12th anniversary. Over the past decade as a regulator and facilitator in Pakistan, the SECP has worked to revolutionize corporate governance in Pakistan.

Though governance was adversely affected by the global financial crisis and political turmoil, the SECP took various initiatives towards reforms intended to reduce economic immobility, such as consulting on a demutualization bill, passed in May, that improves governance structures by segregating regulatory and commercial functions and separating trading and ownership rights; and producing a revision of the 2002 Code of Corporate Governance, which launched in April.

The SECP has also made efforts to make Pakistani capital markets an internationally recognized place to do business by promoting a “compliance culture,” providing structures for product innovation (such as Islamic finance), reforming commodity markets, facilitating the growth of the insurance industry, and ensuring that market functions run smoothly on a day-to-day basis.

In 2006, participants at a roundtable organized by CIPE Pakistan in cooperation with the Pakistan Institute of Corporate Governance (PICG) and the Institute of Chartered Accountants of Pakistan (ICAP) recommended two reforms to be considered: a review of the 2002 corporate governance code and the preparation of a corporate governance guide for family-owned companies.

CIPE Pakistan partnered with PICG and ICAP to develop a Guide of Corporate Governance for family owned businesses which was launched in 2008 and later translated into Urdu. After that CIPE conducted several workshops through chambers which were attended by more than 500 members of family-owned companies. One attendee, Razzak Dawood, chair of Pakistan’s first family-owned multinational company,  encapsulated his experience in an article on how good governance addresses problems that tear families apart.

With the help of various family owned companies, CIPE Pakistan developed case studies for how family-owned enterprises that can safeguard their legacy and longevity by following guiding principles of corporate governance. The process of revising the code took over two years and involved several focus group meetings and three roundtables, as well as public comments solicited through SECP’s website and follow-up meetings to finalize the code.

With the assistance of CIPE and other partners, revision of the code of corporate governance 2002 is yet another breakthrough for SECP in keeping the country’s corporate governance framework relevant, efficient, and effective. A comparison of the 2002 and 2012 codes can be viewed on the SECP website.

 “I am confident that with commitment from all concerned, the corporate compliance, transparency, disclosure and accountability standards will improve significantly in the capital markets and I am certain that together we will attain excellence in corporate governance standards.”

– Muhammad Ali, Chairman, Securities and Exchange Commission of Pakistan.

CIPE Pakistan also assisted the task force constituted by Economic Reform Unit of Ministry of Finance in October 2011. Public sector enterprise owners, the SECP, the PICG and the PBC (Pakistan Business Council) advocated for a viable governance structure for state -owned enterprises (SOEs) in Pakistan, which are direly in need of attention. A draft regulation has now been designed to address various governance challenges at SOEs.

Fairness, transparency, responsibility, and accountability are the core values of corporate governance. They are also core principles of democracy. This is why it is important for the SECP to develop a fair, efficient and transparent regulatory framework for the financial sector, which is very important for Pakistan’s economy. But the government cannot act alone in promoting strong, ethical business norms. Companies must also place integrity at the forefront. By adopting a culture of self-improvement, both regulators and firms will benefit the economy in a long run.