The concept of
independent director (ID)
remains of primary importance in
protecting investors amidst a
more demanding economic and
regulatory environment. In
Bangladesh, in particular, there is
increasing recognition of the
pivotal role of IDs - play in providing an independent,
objective view and in balancing
the interests of different
stakeholders. It is not disputed
that there has been an ever
increasing role and importance of
IDs to further strengthen the corporate governance (CG) of
listed companies as they are the
key to good CG. The need for
quality ID is imperative
particularly in light of the
development of our economic
globalization and recent
examples of massive corporate
failures which forces us effectively
to play by a new set of rules to
conform to globally accepted practices. That is, one that
demands much greater integrity,
transparency and accountability
than in the past.
There have been substantial
changes concerning CG rules,
although each jurisdiction may
emphasise different aspects of CG
after taking into account the
special features in its local
community but one thing is
certain across all jurisdictions: the
increasing burden placed upon
IDs of listed companies.
Bangladesh is also not an exception to this. There have been
significant changes in the
Guidelines on Corporate Governance Practices and the
introduction of the ID is one of
them. The present revised
Corporate Governance Guideline
– ‘Comply basi's’ (BSEC, 3rd July,
2012) replaced the former
Guideline of Corporate
Governance – ‘Comply or explain
basis’ (BSEC, 20th February,
2006). This recent change to the
CG Guideline is evidence of the growing significance of
independent directors to act as
not only valuable strategic
advisers in providing to the board
valuable knowledge,
expertise and experience
but also corporate
guardians of shareholders’
interests.
Independent directors’
requirement is gaining
increasing significance and
importance. The statutory
framework exists with
regard to appointment of
‘Independent Directors’.
Such framework also
prescribes certain qualifications
and attributes to IDs that should be understood in the right
perspective. However, boards of
listed companies in Bangladesh
are facing extreme snag on how to
identify the right one as ID apart
from how increasing demand for
IDs will be met. Keeping this
perspective in mind, one should
consider the role of
company/chartered secretaries (CS) as ‘independent directors’.
How company/ chartered secretaries, by virtue of their
knowledge and training is
eminently to fit in the role of
independent directors, is
portrayed hereunder.
The Profile of a Company
Secretary
CS has important fiduciary and
company law responsibilities. The
CS is the nodal point for the Board
to get feedback on the status of
compliance by the organization in
regard to provisions of the company law, listing agreements,
BSEC regulations, shareholder
grievances, etc. CS occupies a
pivotal position in ensuring that
their companies function in
certain critical areas and such
functions are value based. While
accounting could be properly
described as a mirror reflecting
the entire face of the company and auditing could be considered
as the function that adds
credibility to what are stated in
the financial statements. CS
should function as conscience
keepers. It is this role that would
earn them an enviable position. It
depends on individuals. It
depends on his or her vision, the
length and breadth of his or her
profile, preparedness, presence of mind and involvement. So, it is
very clearly that within an
organization, a CS plays an
important role, which is unique in
nature. However, this is not the
role that a CS as an ‘Independent
Director’ is expected to do.
‘Independent Directorship’ is a
different cup of tea. It is important to know what is expected of
‘Independent Directors’. This will
help CS to cause a substantial
shift in their role to become
‘Independent Directors’.
Company Secretaries as
‘Independent Directors’
According to BSEC Guideline,
independent director shall be a
knowledgeable individual with
integrity who is able to ensure
compliance with financial,
regulatory and corporate laws and can make meaningful
contribution to business
[Condition 3.1 (i)]. The person
should be a business leader/
corporate leader/ bureaucrat/
university teacher with economics
or business Studies or law
background/ professionals like
Chartered Accountants, Cost &
Management Accountants,
Chartered Secretaries. The independent director must have
at least 12 (twelve) years of
corporate management/
professional experiences
[Condition 3.1 (ii)]. In special
cases, the above qualifications
may be relaxed subject to prior
approval of the Commission
[Condition 3.1 (iii)].
Independence is a state of mind
and it could change from time to
time. In this perspective one has
to see whether CS could add value
to a company as its ‘Independent
Directors’. While occupying the
position of an ‘independent
director’, a CS should not attempt to leverage his professional
achievements to obtain any
assignment for his firm or any
entity in which is he is interested.
He must understand that he
should be able to speak out what
he thinks about an arrangement.
If he looks up to the company or
its promoters or managers for
favours, he cannot be
independent in the true sense of
the word. Experienced CS, will certainly have an edge over
others. An experienced CS carries
with him enormous amount of
knowledge. In view of the position
he would have occupied in his
career as a CS of any large
enterprise, he would have
become so matured to understand not only what is
obvious but also what is not
obviously revealed. A CS has the
unique distinction of having the
required skills to analyze and
understand the real import of an
arrangement or transaction or
proposal. A CS would be the
best-suited person to keep his
observations on the one side and
consider the objectives and
perspectives of the proposals or arrangements on the other side
and consider them in the light of
the letter and spirit of the
applicable regulatory framework.
He will be able to not only assist
the Board in its decision making
process but also add value. The
ability of CS to understand the
growing complexities of modern
day business, their
co-coordinating skill sets would
help them become lead ‘Independent Directors’. As
conscience keepers, Company
Secretaries become the befitting
professionals to lead as ‘Lead
Independent Directors’.
Conclusion
Following the implementation of
the revised CG Guideline, the
independent directors are
expected to play more important
roles and have more
responsibilities, as evidenced by
their representation in the
different board committees which
are required or recommended to
be set up, as the case may be. In an attempt to advance the pivotal
role of independent director in
CG, representation of
company/chartered secretary as
ID on board will definitely aid in
improving the standards of CG.
Besides the apparent benefits,
the presence of
company/chartered secretary (as
ID) will strengthen the hands of
the CEO in resisting the usual pulls
and pressures to which the entities are subject to.
Company/chartered secretaries
who have the ability to visualize
the complete ramifications of any
arrangement or proposal or
transaction would be able to
function effectively. As
‘Independent Directorship’ is a
coveted post, original application
of mind is needed to occupy such
positions. One must understand
the nature of the job and train his thoughts accordingly. In order to
be ‘independent directors’,
company/chartered secretary
have to be courageous and
confident and their approach
should be broad.
