KARACHI, Sept 11: From Paris to Athens and London to Luxembourg, Pakistani companies, mainly banks are increasingly holding meetings of their board of directors outside Pakistan.

State Bank of Pakistan has been gracious. Banks having more than 51 per cent foreign shareholding have been allowed to convene four meetings abroad; those with 40 per cent but less than 51 per cent foreign equity holding could convene three meetings and directors in banks having more than 30 per cent but less than 41 per cent foreign shareholding could meet once a year outside the country.

The small investor might grudge that it was the shareholders’ money, which provided the bank’s top brass to sauna and saunter in some of the world’s most beautiful spots, but market participants generally endorse such opportunities to boards to meet on foreign lands.

“With the acquisition of several local banks by foreign financial giants, it is only natural that majority shareholders would call a meeting at a destination convenient to them”, says an investment banker.

The investors’ objection has been in respect of extra costs that the banks would incur while sitting atop the depositors’ money.

The one meeting that banks with just about 31pc foreign equity holding had been allowed to hold outside the country was likely to be the board’s annual meeting. The law provided that a nominee of a director unable to attend board meetings could participate instead. “So why not take that cheaper route instead of taking a whole entourage at an expensive recreational city?” asks an ex-official of the corporate regulatory body.

But there were justifiable reasons. A stock broker said he would view it positively in the sense that it provided Pakistani banks/companies to be introduced abroad (a road show). He also said that several directors did not participate in the meetings held in a local city, but they joyfully join others in travelling to foreign lands on banks’/company’s expense.

“For a one time cost, the idea is not too bad”, he pondered.

But a cement company with predominantly local stake, held its board meeting in August this year at Hotel Intercontinental Dusseldorf, Germany. Justified? A senior banker responded that it had best be left to the shareholders to assess the merits and demerits.

He pointed out that listed companies including banks were now under greater scrutiny, both by the corporate monitors as well as investors. In a free market economy over-regulation was undesirable. He believed that most banks and other companies would give due consideration to costs and if they found them really high, they would decide to hold the meetings in the country.

He, however, agreed that banks/companies should be directed to show the cost of holding board meetings separately in their Profit & Loss Account.

In regard to costs, a director on the board of a bank mentioned that it would not just be the dozen members sitting on the board who could leave leisurely for Geneva, but a happy team of dozens of officials would accompany them.

“Consider the huge costs that would be involved,” he said. When a company secretary due to leave for Caribbean Islands for a board meeting next week was asked if it would not have been proper for the bank to discuss the items on the agenda — which would scarcely take half an hour — at a local hotel in Karachi instead of convening the meeting at such an expensive place, he turned around and barked: “What makes you so jealous!”