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SUMMARY This research is done by global cooperate governance forum based on cooperategovernance standards in common wealth countries in Asia. Pakistani cooperate sector is characterized by closely held family owned and controlled companies. Cooperategovernance is the set of processes, customs, policies, laws and institutes affecting theway a cooperation is directed or controlled. It also include relationship among manystakeholders involved and the goals for which the cooperation is governed. Theprinciple stakeholders are shareholders, management and board of directors. Theprocess of cooperate governance does not exists in isolation but draws upon basicprinciple and values which are expected to permeate all human dealings includingbusiness dealing principles such as utmost good faith, trust, competency and the listcan go on cooperate governance builds upon the basic assumptions and demands fromhuman dealings and adopts and refine them to the complex web of relationships andinterests which makes up a cooperation. F rom time to time, crisis of confidence ineffective compliance with, or implementation of, prevailing corporate governanceprinciples act as a catalyst for further refinement and enhancement of the laws, rulesand practices which make up the corporate governance framework. The result is anevolving body of laws, rules and practices, which seeks to ensure that high standards of corporate governance continue to apply.

The Impact of cooperate governance on different stakeholders ultimately is astrengthened economy, and hence good corporate governance is a tool for socio-economic development. After East Asian economies collapsed in the late 20th century,the World Bank's president warned those countries, that for sustainable development,corporate governance has to be good. Economic health of a nation dependssubstantially on how sound and ethical businesses are.

PAKISTAN COOPERATE SECTOR:

Pakistani cooperate sector is characterized by closely held family owned and controlledcompanies. F amilies can control shares in a target company either by owning shares or indirectly through associated companies, which are under their control. By retainingdecision making control over capital that has been invested by external investors (banksand minority shareholders), the controller (a family-based owner manager in the case of Pakistani listed local companies) exercises and enjoys considerable discretion over theuse and allocation of external investors capital.

BEST PRACTICES:

Several local and almost all multinational listed companies operating in Pakistan areeither subsidiaries of or group of companies locally or internationally. In most cases thecooperate governance benchmarks, internal reporting and disclosure requirements thatsuch companies comply to are set out by the parent company.

Pakistan, this means following international benchmarks. In business groups with aclear corporate governance vision and an internal commitment to it, this translates intogovernance practices that go beyond the regulatory require me The Pakistan Institute of

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Corporate Governance (PICG) has recently been created as a public privatepartnership, with the goal of training directors and building more awareness. While stillin its nascent stages, the PICG recently held its first seminar for the Boards of Directorsin November 2005. The PICG is also the focal institution to carry out the objectives of arecently launched International F inance Corporation (I F C) project, aiming at enhancing

and inculcating good corporate governance practices in the country.The Institute of Chartered Accountants (ICAP) has been an important force for corporate governance reform in Pakistan. However its role in the oversight of theaccounting and auditing professions is now under review, given the internationalconsensus that the professions self regulatory arrangements and authority to imposesanctions should be balanced with adequate and independent oversight systems. SBPmaintains a list of approved auditors for banks/D F Is. The SECP monitors and regulatescompliance with international standards in financial reporting and auditing.Other elements of the enforcement regime are not as strong. ICAP has some self regulatory functions, and the stock exchanges are responsible for overseeing listingrequirements (including the Code). Although the stock exchanges have traditionally

lacked the resources and expertise to effectively monitor implementation of the code,the KSE is now working to enhance its capability to monitor and ensure compliance withthe Code. It has set up a Board Committee on the Code of Corporate Governance anda unit in the Company Affairs Department to monitor compliance with the Code. Marketparticipants consider the judiciary to be inefficient and expensive, and an ineffectivesource of shareholder redress.

F amily owned companies are typically managed by the owners themselves. In thecase of SOEs and multinationals, there is often a direct relationship between thestate/foreign owner and management, again bypassing the boards. Many importantcorporate decisions are thus never made at the board (or AGM) level and as a resultboardsas distinct from managementare frequently not the driving force behindcorporate strategy and strategic issues.

While the CO addresses conflicts of interest, fiduciary duties are based primarily ona small body of case law. The Code explicitly mentions directors duties to act withobjective an independent judgment and in the best interest of the company. Overallhowever a robust duty of care is absent, as is developed guidance on the duty of loyalty. Suits against directors are rare.

In business groups, boards are dominated by executive and non-executive membersof the controlling family and by proxy directors appointed to act on their behalf. Inter-locking directorships are often used to retain majority control. F amily-dominated boardsare less able to protect minority shareholders, and risk a loss of competitiveness asother boards become more professional.One of the objectives of the Code is to revitalize the role of boards in the governance of firms. The Code strengthens the role of non-executive directors, restricting thepercentage of executive directors to 75 percent in non-financial firms, andrecommending that institutional investors be represented. However, given the dominantownership structure, this does not prevent controlling families from havingdisproportionate representation on the board. In order to make the board moreprofessional and accountable to all shareholders, it is necessary for outsiders to play amore prominent role on the boards of listed companies.

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