ISLAMABAD, May 7: The Code of Corporate Government will be extended to public-sector companies and all other non-listed firms to make them imbibe principles of transparency and accountability in their function.

This was stated by Finance Minister Shaukat Aziz at a seminar on 'Corporate Governance Beyond Listed Companies' attended by over a hundred executives of companies and corporate managers here on Thursday.

The seminar was organized by the Securities and Exchange Commission of Pakistan (SECP). At present, the code, which was enforced two years ago, is applicable only to listed companies.

Good governance, he said, was even more important in public- sector enterprises than the private sector because the former did not compete in a traditional way, nor was their performance driven by considerations such as market share, industry benchmarks or share value.

Noting that some of these enterprises had adopted features resembling private-sector entities and started declaring dividend for the first time, he said their executives still acted in such a way as to pander to senior bureaucracy.

Public-sector companies take decisions that affect the economic as well as social well-being of the country. They oversee the delivery of critical services to the public.

All public-sector organizations should be transparent, responsive and accountable for their activities, he remarked, stressing that the public was entitled to know whether public resources were being used in an efficient way and clear reports of performance were important for creating pressure for improvement.

The minister commended the SECP for its efforts to introduce the concept of corporate governance in Pakistan well before the outbreak of Enron scandal in the United States. The Code had brought about a paradigm shift in the way listed companies were run today.

He invited the participants' attention to lack of clarity about the role of the board of directors, particularly, as regards the role of the chairman and the chief executive officer.

Directing the SECP to remove the ambiguity on the issue, the minister expressed the view that the chairman, instead of involving himself in day-to-day affairs of the company, should concern himself only with its overall functioning and policy- making.

There was also the need to develop the concept of conflict of interest in Pakistan so that all appointments were made on the basis of merit instead of nepotism. The SECP chairman, Dr Tariq Hassan, explaining the objective of the seminar, observed that the corporate sector in Pakistan predominantly comprised non-listed public and private companies as well as public-sector enterprises.

It was, therefore, essential that "we involve these entities in our reform process as part of the government's objective of enhancing transparency and propelling economic growth," he stressed.

A large number of companies in Pakistan are family-owned concerns. Besides, there was also a tendency to develop pyramidal structures through establishing large interlocking networks of subsidies and sister companies that include partially-owned publicly-listed companies.

By conducting operations through a complex network of subsidiaries, controlling shareholders acquire control of operations and/or cash flows disproportionate to their equity stake in individual companies.

In formulating the Code of Corporate Governance, Dr Hassan said, the SEC was guided by its mandate to protect investors' interests which provided a framework for steering and conducting business in a responsible, ethical and transparent manner.