CORPORATE GOVERNANCE

The Code of Corporate Governance was incorporated in the Listing Regulations of the Exchange in year 2002. In true sense, it has no statutory force or penalty provisions. Its implementation through the Listing Regulations requires companies to disclose in their annual reports whether or not they are complying with its provisions and if they are not, to explain why.

The main purpose / objectives of Code of Corporate Governance is to:

1. Stimulate the performance of companies
2. Limit insider’s abuse of power
3. Monitor manager behaviour to ensure corporate accountability and protection of interest of investors and society.

The Exchange has played a proactive role in safeguarding small shareholders' interest and has strengthened its monitoring and enforcement capability to monitor compliance with the Code of Corporate Governance by the listed companies.

Being a front line regulator, the Exchange initiated action against such companies which do not comply with the requirements of Listing Regulations, particularly Regulation No. 32, which includes:

1. failure to declare dividend or bonus for the last five years;
2. failure to hold its annual general meeting for a continuous period of three years;
3. has gone into liquidation either voluntarily or under court order;
4. failed to pay the annual listing fees of the Exchange for a period of 2 years;
5. failed to comply with any of the requirements under Listing Regulations.
6. failed to join CDS after its securities have been declared eligible security by the CDC.

The Exchange after adopting the due process has placed a number of companies on the “Defaulters’ Counter”, whose names are quoted separately through the Daily Quotation of the Exchange along with nature of default(s) mentioned against each company.

The purpose of placing the companies on separate counter namely; “Defaulters’ Counter” is to create awareness amongst the shareholders / investors that the company is in default(s) of the Listing Regulations.

In order to encourage good corporate governance and appreciate outstanding performance of the companies, the Exchange has a practice to give away the awards to top companies each year.

The criteria for selection of top companies has been regularly reviewed to ensure that only such companies are rewarded that not only pay good returns to their shareholders but also comply with the Listing Regulations, particularly the Code of Corporate Governance. Amendments / additions in the Criteria for selection of Top Companies in relation with good Corporate Governance point of view including Corporate Social Responsibility have been included.