KARACHI, Oct 13: State Bank Governor Dr Ishrat Husain has asked banks to adopt best international practices in corporate governance.
Speaking at the concluding session of the “conference on corporate governance” organized by the SBP here on Monday, he outlined the following principles of good corporate governance on best international practices:
* Selection of right people as directors who possess the courage to challenge the CEO and who can engage in real debate without dragging in their egos.
* Training of directors by arranging face-to-face meetings with all the top executives of the banks and providing them with briefings, books and arranging site visits, etc.
* Prompt delivery of relevant information in multiple formats and structure board meeting in such a way as to provide ample time for discussion.
* Balancing the CEO’s power by making sure that the independent directors appoint new directors, take control of committees’ chairmanship, hold meetings with CEO and control succession planning in the organization.
* Establishment of new behaviour by appointing CEOs who value teamwork and want full feedback with a tone of collegiality and constructive skepticism.
* Allow time to board members for preparing discussion and developing interaction for the board meetings.
* Establishment of a tradition to continuously evaluate and improve the performance by refining practices.
According to a press release, the SBP governor impressed upon the board and management of the banks to work in close cooperation to achieve better results. He also stressed upon the management of the banks to adopt self-regulatory approach with regard to corporate governance.
Earlier, SBP Deputy Governor Tawfiq Husain while inaugurating the conference said the SBP had provided framework of good corporate governance by issuing instructions in areas of ‘Fit and Proper’ test for board/senior management of banks. He was of the view that there were four lines of defence in case of banks and DFIs. First line of defence is the professional and sound management of these institutions. Second is a responsible board of directors. Diligent external auditors are the third line of defence and the State Bank playing its role of an effective firm but fair regulator comes as the last line of defence. He made it clear that there is zero tolerance for unprofessionalism, poor ethics and bad governance on the part of board of directors or senior management.
Director of SBP Banking Supervision Department Jameel Ahmad gave an overview of the roles and responsibilities of the board of directors as well as the guidelines on risk management recently issued by the SBP. He also apprised the participants of the conference of a survey done by the SBP on shortcomings in the corporate governance of banks.
Senior country managing partner and CEO of Ford Rhodes Sidat Hyder & Co Ebrahim Sidat, senior partner of Taseer Hadi Khalid & Co Masood Ali Naqvi, SECP Commissioner Etrat H. Rizvi, HBL president Zakir Mahmood, MCB President Aftab Manzoor and ABN Amro country-manager Naveed A Khan also spoke on the occasion.