Corporate Governance in Emerging

Countries: A Case Study of Bangladesh

By
Pallab Kumar Biswas

This thesis is presented for the degree of

Doctor of Philosophy of
The University of Western Australia

UWA Business School

Accounting and Finance Discipline
2012

Appendix D
Corporate Governance Checklist
Serial

1
2
3

IA1
IA2
IA3

IA4

IA5

6
7

IB1
IB2

8
9
10
11
12

IC1
IC2
IC3
IC4
IC5

13

IC6

14

IC7

15

IC8

16
17
18
19

II1
II 2
II 3
II 4

Governance Element
I. Ownership Structure and Investor Rights
I.A Transparency of Ownership
Disclosure of ownership structure (% of equity held by Sponsors, Government, Institutions, Foreigners and
General Public)
Name-wise details of aggregate number of shares held by parent/subsidiary/associated companies and other
related parties
Name-wise details of aggregate number of shares held by directors, CEO, Company Secretary, CFO, Head
of Internal Audit and their spouses and minor children

Legal Reference

LR No. 20(2)
CG Guideline 1.4 (k)
CG Guideline 1.4 (k)
CG Guideline 1.4 (k)

Name-wise details of aggregate number of shares held by executives

Distribution schedule of each class of equity security for categories like less than 500 shares, 501 to 5,000
shares, ,over 1,000,000 shares
I.B Ownership Concentration
The identity of shareholder(s) holding less than 10% of voting shares in total
The number and identity of shareholders holding 10% or more
I.C Shareholder Rights
Availability and accessibility of AGM agenda/disclosure of AGM Notice
Date and location of AGM disclosed
AGM notice sent at least 14 days before the AGM
Availability and accessibility of proxy form/proxy form sent with annual report
There is no requirement for a proxy appointment to be notarize /signature by witness
Disclosure of the companys policy/strategy to facilitate effective communication with shareholders and
other stakeholders
Disclosure of companys policy on ensuring participation of shareholders in the AGM and providing
reasonable opportunity for shareholder participation in the AGM
Company has a formalized dividend policy and has disclosed of it
II. Financial Transparency and Information Disclosure in the Annual Report
Statement of the Boards responsibilities regarding financial communication
Statement of fairness of financial statements in the annual report
Statement of maintenance of proper books of accounts
Statement of consistent adaptation of appropriate accounting policies and estimates

Supporting Papers

Bauwhede and Willekens (2008)

Bauwhede and Willekens (2008)
Perrini, Rossi and Robetta (2008)
Chen et al. (2007a); Perrini et al. (2008); Yixiang
(2011)

LR No. 37(3)

CG Guideline 1.4 (k)

Chen et al. (2007a)

Chen et al. (2007a)

CA 1994 Sec. 85(1)(a)

CA 1994 Schedule-I
CA 1994 Sec. 85(1)(a)
CA 1994 Schedule-I

UNCTAD (2006b)

CG Guideline 1.4 (a)

CG Guideline 1.4 (b)
CG Guideline 1.4 (c)

UNCTAD (2006b)
World Bank (2009)
World Bank (2009)
World Bank (2009)

Serial
20

II5

21

II6

22

II7

23
24
25
26
27

II8
II9
II10
II11
II12

Governance Element
Statement of compliance with International Accounting Standards, as applicable in Bangladesh and
disclosure of any departure therefrom
Principal accounting policies followed in preparing financial statements are disclosed
Statement of significant changes in accounting and valuation principles and impact of alternative accounting
decisions
Disclosure of risk and uncertainty in use of estimates and judgments
Disclosure of the companys ability to continue as a going concern
Disclosure of significant deviation from last year operating results
Financial and operating results for at least last three years have been disclosed
Company has received an unqualified audit opinion

28

II13

Companys financial statements are audited within 120 days from the financial year end date

29
30
31
32
33
34
35
36

II14
II15
II16
II17
II18
II19
II20
II21

Companys annual accounts are approved at an AGM within 9 months from the financial year end date
Disclosure of related party transactions
There has been no related party transaction during the year
Dividend information and disclosure for non-payment
Disclosure of information on financing and management of the staff pension fund/employee provident fund
Disclosure of information about future plans
Disclosure of events occurring after the Balance Sheet date
The company has a Corporate Governance Charter or Code of Best Practice

37

II22

The details of the Corporate Governance Charter or Code of Best Practice are disclosed

38
39

II23
II24

40

III1

There is a separate Corporate Governance statement/separate section for CG

The company has complied with the SECB notification
III. Board and Management Structure and Process
Disclosure of the number of directors on the board and the identities of board members

41

III2

Number of directors on the board is between 5 and 20

42

III3

The board is reconstituted every year through the appointment and rotation of the board members

43

III4

Disclosure of classification of directors as an executive or an outside director

44

III5

Disclosure of the number of directorships held by individual board member

45

III6

Disclosure of the qualifications and biographical information of the board members

46

III7

Former CEO does not serve on the board

Legal Reference
CG Guideline 1.4 (d)

CG Guideline 1.4 (f)

CG Guideline 1.4 (g)
CG Guideline 1.4 (h)

SECB Notification 16
Feb2000
LR No. 19
BAS 24

CG Guideline 1.4 (i)

LR No. 37(5)

CG Guideline 5.0

CG Guideline 1.1

CA 1994 Sec. 91(2)

Supporting Papers
Garay and Gonzlez (2008); World Bank (2009)

UNCTAD (2006b)
UNCTAD (2006b)
World Bank (2009)
World Bank (2009)
World Bank (2009)
Ammann et al. (2011)
Garay and Gonzlez (2008)

World Bank (2009); UNCTAD (2006b)

Ammann et al. (2011)
World Bank (2009)

Aggarwal et al. (2010); Aggarwal et al. (2011);

Ammann et al. (2011)
Klein et al. (2005)
Klein et al. (2005); Bauwhede and Willekens (2008)
Jackling and Johl (2009)
Brown and Caylor (2009); Aggarwal et al. (2010);
Aggarwal et al. (2011); Ammann et al. (2011); Garary
and Gonzlez (2008)
Brown and Caylor (2009); Aggarwal et al. (2010);
Aggarwal et al. (2011); Ammann et al. (2011)
UNCTAD (2006b)
Klein et al. (2005); Jackling and Johl (2009); Perrini et
al. (2008)
Klein et al. (2005); Lazardies and Drimpletas (2011)
Brown and Caylor (2009); Aggarwal et al. (2010);
Ammann et al. (2011)

Serial
47
III8
48
III9
49
III10
50
III11
51
III12
52
III13
53
III14
54
III15

Governance Element
Disclosure of the role and functions of the board
The company has clearly distinguished the roles and responsibilities of the board and management
The company has appointed one or more independent directors to the board
The company has disclosed the number of independent directors
Independent directors constitute at least 1/10th of the board
The Chairman and CEO positions are held by different individuals who are not from the same family
The company has a non-executive director as the Chairman of the board
An independent director is the Chairman of the board

55

III16

An audit committee has been established

56
57
58
59
60
61
62
63
64
65
66

III17
III18
III19
III20
III21
III22
III23
III24
III25
III26
III27

Number of directors on the audit committee (AC)

AC has at least three members
Existence of non-executive directors on the audit committee
Existence of independent director(s) on the audit committee
Chairman of the audit committee is a non-executive director
Chairman of the audit committee is an independent director
Chairman of the audit committee is not the Chairman of the board
Disclosure of the professional qualification of the Chairman of the audit committee
Disclosure of the qualifications of audit committee members
The audit committee has a formal charter/disclosure of audit committee's roles and responsibilities
Audit committee reports its activities to the board of directors (BOD)

67

III28

Audit committee immediately reports conflicts of interest to the BOD

68

III29

Audit committee immediately reports suspect/presumed fraud/irregularity/material defect in internal control

system to the BOD

69

III30

Audit committee immediately reports suspected infringement of laws to the BOD

70

III31

Audit committee immediately reports all other relevant matters to the BOD

71
72
73
74
75
76

III32
III33
III34
III35
III36
III37

Audit committee reports irregularities to the SECB if not addressed properly by the BOD
Disclosure of audit committee report to the shareholders in the annual report
Disclosure of the number of audit committee meetings during the year
Audit committee meets at least two times during the year
Disclosure of the attendance in the audit committee meetings
Average attendance in the audit committee meetings is at least 75%

77

III38

A remuneration committee has been established

Legal Reference

CG Guideline 1.2(i)

CG Guideline 1.2(i)
CG Guideline 1.3

CG Guideline 3.0
CG Guideline 3.1(i)
CG Guideline 3.1(i)

CG Guideline 3.1(ii)

CG Guideline 3.2(ii)

CG Guideline 3.0
CG Guideline 3.3.1(i)
CG Guideline
3.3.1(ii)(a)
CG Guideline
3.3.1(ii)(b)
CG Guideline
3.3.1(ii)(c)
CG Guideline
3.3.1(ii)(d)
CG Guideline 3.3.2
CG Guideline 3.4

Supporting Papers
UNCTAD (2006b)

Klein et al. (2005)

Black et al. (2006a, 2006b)

Black et al. (2006a, 2006b); Garay and Gonzlez

(2008)

World Bank (2009)

World Bank (2009); Lazardies and Drimpletas (2011)

Standard & Poors (2004)

Black et al. (2006a, 2006b)

Ammann et al. (2011)

World Bank (2009)
World Bank (2009)
World Bank (2009)
World Bank (2009)

World Bank (2009)

Black et al. (2006a, 2006b)
Standard & Poors (2004)
Black et al. (2006a, 2006b)
Klein et al. (2005); Standard & Poors (2004)
Black et al. (2006a, 2006b)
Garay and Gonzlez (2008); Standard & Poors
(2004); Lazardies and Drimpletas (2011)

Serial
78
III39
79
III40
80
III41
81
III42
82
III43
83
III44
84
III45
85
III46

Governance Element
Number of directors on the remuneration committee
CEO/managing director does not sit on the remuneration committee
Existence of non-executive directors on the remuneration committee
Existence of independent directors on the remuneration committee
Chairman of the remuneration committee is a non-executive director
Chairman of the remuneration committee is an independent director
The company has disclosed the roles and functions of the remuneration committee
The company has disclosed the number of remuneration committee meetings during the year

86

III47

A nomination committee has been established

87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102

III48
III49
III50
III51
III52
III53
III54
III55
III56
III57
III58
III59
III60
III61
III62
III63

Number of directors on the nomination committee

Existence of non-executive directors on the nomination committee
Existence of independent directors on the nomination committee
Chairman of the nomination committee is a non-executive director
Chairman of the nomination committee is an independent director
The company has disclosed the roles and functions of the nomination committee are stated
The company has disclosed the number of nomination committee meetings during the year
The company has appointed a Chief Financial Officer (CFO)
The company has defined the roles, responsibilities and duties of the CFO
The company has appointed the Head of Internal Audit (HIA)
The company has defined the roles, responsibilities and duties of the HIA have been defined
The company has appointed a Company Secretary (CS)
The company has defined the roles, responsibilities and duties of the CS have been defined
The company has disclosed the number of board meetings held during the year
The board meets at least four times during the year
Disclosure of aggregate board attendance in the board meeting

103

III64

Average board meeting attendance is at least 75% during the year

104
105

III65
III66

The company has disclosed attendance of individual directors at board meetings

The CFO and CS have attended board meetings during the year

106

III67

Disclosure of information on a regular review of the performance of the board

107
108
109

III68
III69
III70

Disclosure of information on a succession plan

Disclosure of director remuneration (cash) in the annual report
Disclosure of director remuneration (non-cash) in the annual report

Legal Reference

CG Guideline 2.1
CG Guideline 2.1
CG Guideline 2.1
CG Guideline 2.1
CG Guideline 2.1
CG Guideline 2.1
CG Guideline 1.4(j)
CA 1994 Sec. 96

CG Guideline 1.4(j)
CG Guideline 2.2;

SECB Rules 87: 4

SECB Rules 87: 4

Supporting Papers

Ammann et al. (2011)

Klein et al. (2005)

Standard & Poors (2004)

Standard & Poors (2004); Lazardies and Drimpletas

(2011)

Klein et al. (2005)

World Bank (2009)

World Bank (2009)

World Bank (2009)

Standard & Poors (2004)
Klein et al. (2005); Jackling and Johl (2009)
Black et al. (2006a, 2006b)
Klein et al. (2005); Standard & Poors (2004)
Brown and Caylor (2009); Aggarwal et al. (2010);
Aggarwal et al. (2011); Ammann et al. (2011); Black
et al. (2006a, 2006b)
Standard & Poors (2004)
World Bank (2009); Standard & Poors (2004)
Brown and Caylor (2009); Aggarwal et al. (2010);
Aggarwal et al. (2011); Ammann (2011); Black et al.
(2006a, 2006b)
Aggarwal et al. (2011); Aggarwal et al. (2010);
Standard & Poors (2004)
Standard & Poors (2004)

Serial
110
III71
111
III72
112
III73
113
III74
114

III75

115

III76

116

III77

117

III78

118

III79

119

III80

120

IV1

121

IV2

122

IV3

123
124
125
126
127

IV4
IV5
IV6
IV7
IV8

128

IV9

129
130
131

IV10
IV11
IV12

132

IV13

133

IV14

134

IV15

Governance Element
Disclosure of managing agent/officers remuneration (cash) in the annual report
Disclosure of managing agent/officers remuneration (non-cash) in the annual report
Disclosure of information about induction/orientation program for all new directors
Disclosure of information on the professional development and training activities for directors
Disclosure of information on the availability and use of advisors by directors during reporting period at the
companys expense
Statement of director's responsibility to establish appropriate system of internal control
Disclosure of key features of the internal control system, and the manner in which the system is monitored
by the Board, Audit Committee or Senior Management
Statement that the directors have reviewed the adequacy of the system of internal controls
Statement of business risks facing the organization/disclosure of the identification of risks the company is
exposed to both internally and externally
Disclosure of information on risk management objectives, systems and activities in the organization
IV. Corporate Responsibility and Compliance
Statement of corporate social and environmental responsibility

Legal Reference
SECB Rules 87: 1G(8)
SECB Rules 87: 1G(8)

CG Guideline 1.4 (e)

Disclosure of information on social and environmental activities - quantitative (for example, scholarship
program, Zakat fund, Donations to charitable institutions, Direct philanthropic activities, Donations to Chief
Advisor's/PM's Relief fund etc.)
The company has complied with international and legal laws regarding environmental protection
The company has policies on recruitment and promotion of employees
The company explicitly mentions the safety and welfare of its employees
The company provides a retirement plan/fund or its equivalent for its employees
The company provides a continuing training program for its employees
The company explicitly mentions its obligations (for example, creation and growth in value; stability and
long-term competitiveness) to shareholders
The company explicitly mentions its obligation to creditors
Disclosure of information on the companys contribution to the national exchequer and to the economy
The company has a code of business conduct and ethics/core values
Disclosure of the contents of a code of business conduct and ethics/statement of ethics and values, covering
basic principles such as integrity, conflict of interest, compliance with laws and regulation etc.
Disclosure of information on dissemination/communication of the statement of ethics & business practices
to all directors and employees and their acknowledgement of the same
The company has disclosed the board's statement on commitment to establishing high level of ethics and
compliance within the organization

Standard & Poors (2004)

UNCTAD (2006b)

UNCTAD (2006b)
Ammann et al. (2011); Bauwhede and Willekens
(2008)

Disclosure of information on social and environmental activities - qualitative

Supporting Papers
Garay and Gonzlez (2008)
Garay and Gonzlez (2008)
Standard & Poors (2004)
UNCTAD (2006b)
Brown and Caylor (2009); Aggarwal et al. (2010);
UNCTAD (2006b)
World Bank (2009)

Ammann et al. (2011); Bauwhede and Willekens

(2008)

Ammann et al. (2011)

UNCTAD (2006b); Lazardies and Drimpletas (2011)

Ammann et al. (2011)

Serial
135

IV16

136

V1

Governance Element
Disclosure of information on effective anti-fraud programs and controls, including effective protection of
whistle blowers, establishing a hot line for reporting irregularities etc.
V. Auditing
The company has a brand name auditor (audit firms with international linkage)

137

V2

Audit firm is rotated at the AGM

138

V3

Auditor rotation takes place at least once every three years

139

V4

140

V5

141

V6

142

V7

The company has disclosed that external auditor has not been engaged in broker-dealer services

143

V8

The company has disclosed that external auditor has not been engaged in actuarial services

144

V9

The company has disclosed that external auditor has not been engaged in internal audit services

145

V10

146
147

V11
V12

The company has disclosed that external auditor has not been engaged in any other services as determined
by the audit committee
The company has disclosed information on the amount of audit fees paid to auditors
Disclosure of information on the amount of fees for non-audit service paid to auditors, if any

148

V13

Amount of audit fees is more than non-audit fees

The company has declared that external auditor has not been engaged in appraisal or valuation services or
fairness opinions
The company has disclosed that external auditor has not been engaged in financial information systems
design and implementation
The company has disclosed that external auditor has not been engaged in bookkeeping/accounting
records/preparing financial statements

Legal Reference

Supporting Papers
UNCTAD (2006b)

Garay and Gonzlez (2008)

Brown and Caylor (2009); Aggarwal et al. (2010);
Aggarwal et al. (2011)

SECB Order of 03
January 2002

CG Guideline 1.4 (e)(i)

CG Guideline 1.4
(e)(ii)
CG Guideline 1.4
(e)(iii)
CG Guideline 1.4
(e)(iv)
CG Guideline 1.4
(e)(v)
CG Guideline 1.4
(e)(vi)
CG Guideline 1.4
(e)(vii)
SECB Rules 87: 1(D)
SECB Rules 87: 1(D)

World Bank (2009)

World Bank (2009)
World Bank (2009)
World Bank (2009)
World Bank (2009)
World Bank (2009)

Klein et al. (2005)

Klein et al. (2005)
Brown and Caylor (2009); Aggarwal et al. (2010);
Aggarwal et al. (2011); Ammann et al. (2011)

This table presents the CG checklist. LR is the Listing Regulations of the DSE, 1996. CA is the Companies Act. SECB is the Securities and Exchange Commission Bangladesh.