Importance of Corporate Governance Code

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 Importance of Corporate Governance Code:

 

·       A regulatory provision can enhance the governance scenario of a company.

·       The identification of areas of non-compliance is expected to help code formulators, regulators, and companies to understand why and where companies are falling behind in compliance with the code.

·       Bangladesh as an emerging economy presents a prosperous scenario, whilst the other side raises questions about its sustainability. However, the other side of the reality of the country does not speak the same.

·       Despite this robust growth rate, the country has remained one of the poorest countries in the world. Whilst attaining MIC (middle-income country) goal demands good governance in all spheres of the economy of the country.

·       the number of corporate scandals is increasing over the years (e.g. Hallmark, bismillah group, oriental bank, modern food ltd, etc.) Along with two major stock market failures (one in 1996, and the second in 2011).

·       it helps to improve the governance standard, which in turn benefits companies through greater access to financing, lower cost of capital, better performance, and more favorable treatment of all stakeholders; and that is why it is fundamental for Bangladesh to ensure good governance standard if it must attain its development goals.

·       Every country is unique with its cultural and demographic features

·       The development of codes is the right starting point for reforming corporate practices, but in developing countries which are characterized by pervasive corruption, and a weak legal system

·       regular monitoring over compliance, reviewing their effectiveness, and understanding the possible scope for their improvement.

·       Based on the Code, a corporate governance index (CGI) was developed. The CGI includes 79 provisions of the Code which were divided into three sub-indices – board issues, shareholder issues, and issues related to financial reporting, auditing, and non-financial disclosure.

·       The findings indicate that the overall level of compliance is 67%, indicating a moderate/intermediate level of compliance.

·       Compliance is comparatively higher with the provisions related to the financial reporting system, and on the contrary is lower for the board-related provisions.

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