core sector communique

Ensuring shareholder rights and transparency key to capital market development: Bangladesh Corporate Governance Country Assessment

 

 

DHAKA, September 14, 2009: Bangladesh faces significant challenges in improving corporate governance despite the improvements undertaken in the recent years. Good corporate governance helps to protect small shareholders, leads to better decision making and ensures that companies use their resources more efficiently. Good corporate governance is an important prerequisite for attracting the capital needed for Bangladesh's sustained long-term economic growth. Both the public and private sector in Bangladesh have taken steps to improve corporate governance in recent years, from the issuance of Guidelines on Corporate Governance 2006 by the Securities and Exchange Commission (SEC), to the Bangladesh Enterprise Institute's (BEI) provision of training to a number of board directors of listed companies and state-owned enterprises. These will need to continue, including professionalization of the board of directors and management.

The Corporate Governance Report on Standards and Codes (ROSC) provides an assessment of Bangladesh’s corporate governance policy framework. Today, the World Bank, Global Corporate Governance Forum of IFC, and Bangladesh Enterprise Institute (BEI) held a workshop to discuss the findings of the ROSC. The report was prepared in cooperation with the Securities Exchange Commission (SEC). The report highlights recent improvements in corporate governance regulation, makes policy recommendations, and provides investors with a benchmark against which to measure corporate governance in Bangladesh.

"While the SEC has been active in trying to protect investors, outdated laws, insider dominated boards, a shortage of qualified accountants and other professionals, and weak institutions all create problems for investors and hurt company performance." said Mr. David Robinett, Private Sector Development Specialist, World Bank and lead author of the report. "For capital markets to continue to grow and approach the size of other Asian economies, substantial and long term reform will be needed."

Bangladesh’s capital markets still remain some of the most underdeveloped in the region. The basic legal framework for corporate governance in Bangladesh is dated. There is a need to streamline rules and regulations that apply to listed companies. More needs to be done to protect shareholders’ rights regarding related party transactions, the choice of board members, or the disclosure of control.

The Boards of both listed companies and state-owned enterprises need greater independence and professionalism. Current efforts to improve accounting and auditing should be accelerated, and the disclosure of corporate control be improved. The Registrar of Joint Stock Companies and the courts must be able at enforcing the Companies Act (CA). Further, changes in CA are needed as part of broader reform to make the legal framework for corporate governance more coherent and effective.

The CG ROSC is part of a global initiative to benchmark relevant laws and practices against the OECD Principles of Corporate Governance. 72 ROSCs have been conducted in 59 countries, including many in South and East Asia.