This manual is for reference only and does not constitute any legal requirement on companies, their officers, directors or auditors. This manual may be used for guidance and compliance must be ensured with the provisions of applicable laws and regulations.
CONTENTS
I. II. INTRODUCTION WHAT IS CORPORATE GOVERNANCE? (i) The Background (ii) Definition of Corporate Governance (iii) The Benefits of Corporate Governance (iv) The Pakistani Corporation (v) The Origins of Corporate Governance in Pakistan THE NEED FOR CORPORATE GOVERNANCE THE STAKEHOLDERS (i) General (ii) Shareholders (iii) Directors (iv) Employees (v) Creditors PROMOTING REFORM AND SHAREHOLDER ACTIVISM ROLE AND RESPONSIBILITIES OF DIRECTORS AND MANAGERS (i) Directors and Managers Distinguished (ii) Appointment and Proceedings of Directors (iii) Fiduciary Duties (iv) Powers and Responsibilities of Directors (v) Liability of Directors (vi) Executive and the Non-executive Directors (vii) The CEO 1 3 3 4 7 8 10 12 17 17 19 20 20 21 22 26 26 26 32 38 42 42 45
III. IV.
V. VI.
(viii) (ix) (x) (xi)
The Company Secretary The CFO Internal Control System Reporting Requirements
47 49 49 50
VII.
SCRUTINIZING FINANCIAL STATEMENTS - WHAT EVERY DIRECTOR SHOULD KNOW (i) General (ii) Liability of Directors (iii) Preparation of Financial Statements (iv) Tools for Directors' Review (v) How to Prevent Misleading and Fraudulent Financial Statements (vi) External Auditors (vii) Role of the Audit Committee (viii) Role of Internal Audit CONCLUSION
54 54 54 55 60 61 65 75 79 81
VIII.
APPENDIX A
DIFFERENCES BETWEEN DIRECTORS AND MANAGERS 82
MANUAL OF CORPORATE GOVERNANCE
CORPORATE GOVERNANCE IN PAKISTAN
I. 1.1
INTRODUCTION
In March 2002, the Securities and Exchange Commission of Pakistan (the
