Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

Table of Contents Contents Executive Summary Problem statement Research objectives Literature Review Benefits of the study Methodology Data collection Data Management Data Analysis Work Plan Budget Limitations of the project Appendix Page No 2 2 3 3 4 4 5 5 5 6 7 7 8

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Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

Executive Summary:
Corporate governance means a framework which ensures the satisfaction or trade off of every stakeholder group shareholders, employees, community, customers, government, suppliers etc. The aforementioned stakeholders have different goals while they engage with a corporation. Corporate Governance ensures that there is congruence of goals the organizations goal is set considering the individual goal of every stakeholder. The goal congruence leads the corporation to tradeoff among all stakeholder groups. By a good corporate governance framework, an organization is administered and operated in a transparent, accountable and responsible way. Thus, it helps the stakeholders to protect their interest in a corporation and exercise their every right which they deserve. But this concept does not have a long history in the corporate world of Bangladesh. This concept is in a pre-matured stage in our corporate world. So, various regulatory institutions like SEC, DSE, Bangladesh Bank and one private institution BEI are working to formulate suitable codes of corporate governance. On 20th February, 2006 the Securities and Exchange Commission introduced some conditions on Board of Directors, Chief financial officer, Head of internal Audit, Audit committee, External/ Statutory Auditors, Reporting the compliance in the directors report as comply or explain basis. This research shall be conducted to find out the present compliance status of these codes of corporate governance by the listed firms.

Problem statement:
The issue of corporate governance has been largely discussed, analyzed, propagated in many ways by specialists, researchers, government bodies and also development partners. In the existence of weak form of efficiency of financial market, the emergence of corporate governance framework for the financial sector of Bangladesh has been well acknowledged. Since information asymmetry, moral hazard these two major but common problems of our financial sector is prevailing at large, ensuring corporate governance has become more in light with the growth of the country. This survey will provide an understanding of the corporate governance practices and board effectiveness among different organizations in Bangladesh, and will show in which aspects of corporate governance are considered to be most important by the organizations. This study is also useful because it will provide critical information regarding the extent

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Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

to which the firms in Bangladesh currently confirm to the principles of the codes of Corporate Governance for the listed firms.

Research objectives:
The general objective of the proposed study is to know the compliance and practice status of the Corporate Governance codes by the listed companies of Bangladesh. To achieve this objective, the specific objectives are 1. To be familiar with the various codes of corporate governance imposed by various technical institutions. 2. Understand the governance pattern of the organizations. 3. Examine the main problems faced by the firms for the implementation of the codes of corporate governance. 4. Determine the awareness level regarding the code of corporate governance in the management level. 5. Recommend measures to overcome the problem by the effected parties.

Literature Review:
Literature review is a precondition for an effective and efficient movement for any research. Review of the relevant literature prompts and strengthens to assess approaches to the problem and revise the plan accordingly. It will provide a fair chance of providing credibility. I shall go through the book Incentives, control and development-governance in private and public sector with special reference to Bangladesh by Dhiman Chowdhury for better understanding the concept of Corporate Governance. Again the article Corporate governance & listing by listed companies in Bangladesh by Md. Salim Uddin, Draft code of corporate governance-Bangladesh by J U Ahmed, Corporate governance: Bangladesh perspective by Mamtaz Uddin Ahmed and Md. Abu Yusuf and a research topic on A comparative analysis of corporate governance in South Asia: Charting a roadmap for Bangladesh by Bangladesh Enterprise Institute. I shall also try to review the related articles published by SEC, Bangladesh Bank, DSE, CSE, ICMAB, ICAB and BEI. This review will help to focus on the shortcomings of the previous works, tools and techniques used by them for research, weakness of their methodology and to reduce duplication of works.
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Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

Benefits of the study:

Code of corporate governance has been introduced in the year 2006 by the Securities and Exchange Commission of Bangladesh. But we do not know even now how the companies are reacting to this new concept. This study will help us to understand the present compliance status of the corporate governance codes by the firms in Bangladesh. Besides, this study will make us familiar with various rules and regulations imposed by the various regulatory bodies for better practice of this concept by the firms. This research will also provide the opinions and suggestions by various private institutions like BEI form their point of view. At the end, this research will try to find out the major problems faced by the firms, their suggestions and opinions. Beside this, this will also provide information about the role of various agents related with the capital market.

Methodology:
In Dhaka Stock Exchange, total 288 companies were listed on 1st September, 2008 under thirteen (13) categories. These categories are Banks, Investment, Engineering, Food and Allied, Fuel and Power, Jute, Textiles, Pharmaceuticals and chemicals, Paper and Packaging, Services, Miscellaneous, Insurance and Debentures. My ultimate sampling units are these listed firms. As 10% of the listed firms, twenty nine (29) firms will be selected from these using a systematic sampling procedure with a random start. The annual reports and various publications of these selected firms shall be examined for understanding the compliance status of the codes of corporate governance. Beside this, representatives of various regulatory authorities like Securities and Exchange Commission, Bangladesh Bank and Dhaka Stock Exchange should be interviewed for their opinion about the topic. Along with, Bangladesh Enterprise Institute, one and only private institution for such research topic, may be another source of data collection.

Data collection:
A structured questionnaire will be prepared for the shareholders and CEOs of the firms to collect primary data related to the research topic. I shall also try to go through the various publications, annual reports and internal reports produced by the firms annually and semiannually. I shall also try to focus on the important rules and regulations imposed by
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Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

the SEC, Company Act,1994, Banking Act, 1991, Bangladesh Bank and Bangladesh Enterprise Institute for better understanding of the codes of Corporate Governance. I shall also take interviews of the representatives of the DSE, SEC, Bangladesh Bank, BEI & also the ICB, the only institutional investor in Bangladesh, for understanding their views and opinions.

Data Management:
All questionnaires will be manually edited. After collecting the required data from the primary and secondary sources, data will be computerized.

Data Analysis:
The collected data will be analyzed by personal computer following a planned analysis strategy. This plan will largely follow the objectives of the survey. From the answer papers of the questionnaire, the current status, codes of corporate governance, roles of various regulatory bodies and problems of implementation should be identified. Annual report and publications should be checked for finding the compliance status of the codes of corporate governance during the projected year. I shall also try to find out the reasons for non compliance of those codes and any new concept developed from the practical experience of the corporate world.

Work Plan: A tentative time schedule displaying the major activities in shown below:
1. 2. 3. 4. 5. 6. 7. 8. 9. Activities Planning and preparatory work Literature review Preparation and finalization of the questionnaire Field interviewing and collection of secondary data Data editing, cleaning and entry Data processing Data analysis Preparation of draft report for key result Finalization of the report Required weeks 1 2 1 2 1 1 1 2 1

There will of course overlaps of the activities listed above. In any event, the study will be completed in Twelve (12) weeks. A simple 12 week work plan is given in the following Grantt chart: Work plan
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Week

Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

Activities Planning and preparatory work Literature review Preparation and finalization of the questionnaire Field interviewing and

1 0

1 1

12

collection of secondary data Data editing, cleaning and entry Data processing Data analysis Preparation of draft report for key result Finalization of the report

Budget: Budgeted costs for performing the research have been determined on the basis
of the present market price of the items. Materiality and reliability have been ensured here as much as possible. Cost items A. Materials, supplies and computer service: 1. Questionnaire printing 2. Project proposal preparation and printing 2. Paper, pencil, pen and eraser 3. Internet service 4. Report printing and mailing 5. Report binding Sub-total B. Conveyance: Sub-total C. Data collection costs: 1. Photocopy 2. Annual report collection costs 3. Literature review Sub-total D. Miscellaneous Sub-total Total estimated costs Amount required (BDT) 300 200 500 200 400 200 1800 1000 1000 200 500 300 1000 1200 1200 5000

Limitations of the project:

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Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

Limitation is a common phenomenon of any research study. But these limitations create the bases for creation of further research and knowledge. I also hope to face some limitation/ hindrances to perform my research topic. The limitations may be: 1. The representatives of the firms may not want to provide the internal data by saying confidential 2. Corporate governance concept may not be very clear for all of the representatives. 3. Not muck work may be done before on this topic. 4. The concern persons may be so busy to provide the related information 5. Load at work place may also be a barrier to do my research.

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Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

Appendix: A: Bibliography
1. Chowdhury, Dhiman (2004), Incentives, Control and Development-Governance in private and public sector with special reference to Bangladesh, 1st edition, Nilima printers. 2. Ahmad, J.U (2004), Draft code of corporate governance-Bangladesh, Quartely journal of the Institute of Chartered Accountants of Bangladesh, OctoberDecember. 3. Ahmed, Mamataz Uddin and Yusuf, Md. Abu, Corporate Governence: Bangladesh perspective, Journal of Institute of Cost And Management Accountants if Bangladesh, Vol No 6, November-December 2005, pp. 18-26. 4. Bangladesh Enterprise Institute (BEI-2003), A comparative analysis of corporate governance in South Asia: Charting a Roadmap for Bangladesh. 5. www.dscbd.org 6. www.bei-bd.org 7. www.sec.gov 8. www.bangladesh_bank.org

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Project proposal: Compliance status of the corporate governance codes by the listed firms in Bangladesh

B: List of acronyms
1. 2. 3. 4. 5. 6. 7. 8. 9. DSE = Dhaka Stock Exchange BB = Bangladesh Bank SEC = Securities and Exchange Commission BEI = Bangladesh Enterprise Institute CG = Corporate Governance ICMAB = Institute of Cost and Management Accountants of Bangladesh ICAB = Institute of Charted Accountants of Bangladesh ICB = Investment Corporation of Bangladesh CEO = Chief Executive Officer

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