KARACHI, March 17: The chairman, Pakistan State Oil (PSO), M. Saleem has pointed out three main elements — good management, competent board and professional management— to make corporate governance a success.

“If the corporate governance is not achieved by any company, the company will collapse and even the economy will also feel its pinch,” he said while addressing the concluding session of a workshop on corporate governance for representatives of sectors and senior management listed companies, organized by the Securities and Exchange Commission of Pakistan (SECP) and United Nations Development Programme (UNDP).

He said corporate governance was a system, which managed and controlled companies for efficient operation and optimum financial results aimed at protecting stakeholders interests.

In order to achieve the success of this system, he said it was necessary to carefully develop modern management tools and an environment in which the companies had to operate.

The PSO chief said sound and good management practices involved development of corporate objectives, plans, programmes, policies, budgets, audits and other financial controls. Sound management also includes introduction of business ethic through a code of conduct by setting out ethical practices in business such as prevention of abuse or misuse of company’s resources to enhance personal interest.

Second element to achieve corporate governance was the selection of a competent board without any intervention from the vested interest. Board of directors had ultimate responsibilities of business results and conduct of business and took objective decisions, the PSO chairman said.

The third element, he said, was professional management to manage the company’s affairs and achieve corporate objectives as determined by the board of directors following the policies developed by board using company’s resources judiciary.

“The relationship between shareholders, board of directors and management, which determine the size, shape and future of a company, is another equation and is key to successful corporate governance,” he said. Saleem said shareholders (in a general body meeting) held the power of life and death over the company and its board. They were also the guardian of the company’s constitution since they alone could alter memorandum and article. He said that the board, which stood between shareholders (general body meeting) and the management, had an ultimate responsibility of business results and conduct of business.

The composition of the board was a critical and key factor in the success of good governance system. Therefore, the composition of the board and selection of individual director had to be very carefully and diligently considered.

He said the management was the front line body, which had to achieve these objectives by applying efficient use of company resources including manpower besides using high standard of business ethic, knowledge, integrity and fighting spirit.

He said that the Petroleum Ministry had introduced the corporate governance in the oil and gas sector three years back and all the companies had performed well owing to its successful implementation.