Corporate governance in Bangladesh has evolved significantly over the past two decades, marked by the issuance of several key guidelines and codes aimed at enhancing transparency, accountability, and investor protection in the corporate sector. The journey of corporate governance reforms in Bangladesh can be traced through three major milestones: the issuance of the Corporate Governance Guideline (CGG) in 2006, its subsequent revision in 2012, and the introduction of the Corporate Governance Code (CGC) in 2018.
1. Corporate Governance Guideline (CGG) 2006 #
The first formal attempt to establish a corporate governance framework in Bangladesh was made with the issuance of the CGG in February 2006 by the Bangladesh Securities and Exchange Commission (BSEC). This guideline aimed to introduce best practices in corporate governance among listed companies. It focused on key areas such as the composition and responsibilities of the board of directors, the role of independent directors, and the establishment of audit committees. The CGG 2006 was a voluntary guideline, encouraging companies to adopt these practices to enhance their governance standards.
2. Corporate Governance Guideline (CGG) 2012 #
In August 2012, the BSEC revised the CGG to address the evolving needs of the corporate sector and to strengthen the governance framework. The revised guideline introduced more stringent requirements, including mandatory provisions for the appointment of independent directors and the establishment of nomination and remuneration committees. The CGG 2012 also emphasized the importance of board diversity and the separation of the roles of the chairperson and the CEO to avoid conflicts of interest. This revision marked a shift from voluntary to mandatory compliance, reflecting the BSEC’s commitment to improving corporate governance practices.
3. Corporate Governance Code (CGC) 2018 #
The most significant development in the corporate governance landscape of Bangladesh came with the issuance of the Corporate Governance Code in June 2018. The CGC 2018 replaced the previous guidelines and introduced a comprehensive set of rules aimed at further enhancing corporate governance standards. Key provisions of the CGC 2018 include:
- Board Composition and Independence: The code mandates that at least one-fifth of the board members must be independent directors, who should meet specific criteria to ensure their independence.
- Separation of Roles: The roles of the chairperson and the managing director (MD) or chief executive officer (CEO) must be separated to prevent conflicts of interest.
- Board Committees: The establishment of audit committees and nomination and remuneration committees is mandatory. These committees play a crucial role in overseeing financial reporting, internal controls, and the nomination and remuneration of directors and top executives.
- Reporting and Compliance: Companies are required to obtain a certificate from a practicing professional accountant or secretary regarding compliance with the CGC. This certificate must be disclosed in the annual report, ensuring transparency and accountability.
- External Auditors: The code prohibits external auditors from providing certain non-audit services to avoid conflicts of interest. Auditors must also attend the annual general meeting (AGM) to address shareholders’ queries.
- Website Maintenance: Companies must maintain an official website linked to the stock exchange’s website, ensuring that investors have access to up-to-date information.
Download:
Corporate Governance Code 2018
Notification of amendment to the Corporate Governance Code, 2018
Clarification for Orders and Notifications including Corporate Governance Code