The Notion of Corporate Governance in Islam

--Rukhsar Ahmed, Mufti Imamuddin and Kamran Siddiqui

This paper attempts to highlight the fundamental principles of corporate governance from an Islamic perspective. Quran-e-Kareem and Hadiths were consulted for basic Islamic principles. However, some renowned Islamic scholars were also contacted. It was found that Islamic principles on corporate governance provide an outline for managers of modern world to run their corporations.

© 2013 IUP. All Rights Reserved.

Corporate Governance in Pakistan: From the Perspective of Securities and Exchange Commission of Pakistan

--Faryal Salman and Kamran Siddiqui

The role of Securities and Exchange Commission of Pakistan (SECP) is of paramount importance for corporate governance in Pakistan. SECP acts as an implementing and monitoring body. Theoretically, when SECP frames a new law, it should consult the related authorities, but this is not happening in the true spirit. This study presents a brief understanding of evolution of corporate governance in Pakistan, covering the role of regulatory bodies in enforcing it in Pakistan.

© 2013 IUP. All Rights Reserved.

Corporate Governance in Pakistan: From the Perspective of Pakistan Institute of Corporate Governance

--Faryal Salman and Kamran Siddiqui

Pakistan Institute of Corporate Governance (PICG)’s role is to increase the level of awareness of the benefits of implementing and adhering to the code of corporate governance. It also encourages business schools to place corporate governance in their curricula to develop an understanding of the code, principles and benefits by future business leaders. This paper presents the views of PICG towards the prevailing corporate governance issues in Pakistan.

© 2013 IUP. All Rights Reserved.

NIB-PICIC Merger: Corporate Governance Compliance

--Kamran Siddiqui and Mahwish Anjam

The merger of NDLC-IFIC Bank (NIB) and the Pakistan Industrial Credit and Investment Corporation (PICIC) made NIB the 7th biggest bank in the country with 240 branches and a paid-up capital in excess of Rs. 27.5 bn (PKR). Temasek Holding is the single biggest investor in NIB and this group has an investment portfolio of approximately $100 bn. The legal merger of NIB, PICIC and PCBL happened on December 31, 2007. During the merger, NIB followed in letter and spirit all the regulations and code of conduct of Securities and Exchange Commission of Pakistan, and it is indeed a glaring example of compliance in corporate governance.

© 2013 IUP. All Rights Reserved.

Privatization of Habib Bank: Corporate Governance Compliance

--Syed Muhammad Fahim and Kamran Siddiqui

Habib Bank Limited (HBL) privatization is the hallmark for compliance with corporate governance practices. A tremendous increase in deposits and overwhelming profits of approximately Rs. 22.3 bn (PKR) for the financial year 2012, a network of over 1,500 branches, and recent acquisition of Citibank credit card, personal loan and car financing divisions are the milestones which HBL has achieved on account of good corporate governance.

© 2013 IUP. All Rights Reserved.

Privatization of PTCL: Corporate Governance Failure

--Riaz Ahmed Mangi and Kamran Siddiqui

Since 1990 Pakistan has sold 166 state-owned enterprises for Rs. 476.5 bn (PKR) to finance deficits and increase efficiencies of the mismanaged corporations to spur economic growth. It is said that strategic monopolies like PTCL should not be privatized because foreign intelligence can gain access to confidential telephonic conversations between Pakistan and foreign countries which can hurt Pakistan and its economic growth. A sale like PTCL has not been practiced anywhere else, which includes both equity and management control, and the buyers have not paid the full bid money even after five years of process completion. It is quite debatable whether the privatization deal has favored new buyers at the expense of public and national interest.

© 2013 IUP. All Rights Reserved.

Privatization of MCB: Corporate Governance Failure

--Kamran Siddiqui and Mahwish Anjam

This paper aims to highlight the failure of corporate governance in banking sector. Banking in Pakistan was predominantly controlled by the state until 1990. The five major commercial banks controlled 100% of the domestic banking market. However in 1990, the government declared privatization as one of its key policy objectives. The privatization of Muslim Commercial Bank (MCB) Limited was declared, and bids were requested from interested parties. Four bids were received and the evaluation committee headed by the then Governor of State Bank of Pakistan did not ratify the highest two bidders. Instead, the third highest bidder (the National Group) was invited to match the highest bid. The contract was agreed upon and signed. The natural question here is whether the bidding process was fair. Clearly, there are reasons to doubt the fairness, given that the deal was awarded to the third highest bidder.

© 2013 IUP. All Rights Reserved.

Mehrangate Scandal: Corporate Governance Failure

--Faryal Salman and Kamran Siddiqui

This paper illustrates one of the worst financial scams of 1990s, the Mehrangate Scandal. It shows how a senior army official withdrew a substantial amount of public money from Mehran Bank and directed it towards an ‘intelligence fund’. The scandal subsequently broke out after the new senior army management decided to transfer the intelligence fund back to state-owned bank as per official rules. It was discovered that large sums of money had been siphoned off to 39 fictitious parties/people. Mehran Bank was unable to return the money to the depositors due to its poor financial state and thus collapsed. This paper offers scope for a compelling discussion on the usual causes, events, and possible solutions of such failures of corporate governance in the context of the misuse of public money by influential people with political motivations as at the scandalous Mehran Bank.

© 2013 IUP. All Rights Reserved.

Banker’s Equity Limited: Corporate Governance Failure

--Kamran Siddiqui and Mahwish Anjam

This paper illustrates one of the biggest financial scams in the banking history of Pakistan, the fraud at Banker’s Equity Limited (BEL). It shows how senior management at BEL misused their powers and financial purview to divert public funds to personal benefits in collusion with private stock exchange brokers and other senior officials of BEL by making bogus entries and fake transactions in BEL record.

© 2013 IUP. All Rights Reserved.

Khanani and Kalia International: Corporate Governance Failure

--Kamran Siddiqui and Syed Muhammad Fahim

The objective of this paper is to highlight how Khanani and Kalia International (KKI) violated the rules and regulations formulated by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP). They used illegal methods of money transfer, commonly known as Hawala and Hundi system that has been banned internationally, specifically after the terrorist attacks of 9/11, to transfer billions of Pakistani rupee to different countries of the world. The paper describes the link between an organization’s success and failure and its corporate governance practices and implementation.

© 2013 IUP. All Rights Reserved.

ZARCO Exchange: Corporate Governance Failure

--Saima Husain and Kamran Siddiqui

The purpose of this paper is to provide an understanding of the different ways in which public money can be misappropriated by foreign exchange companies in developing countries like Pakistan. It attempts to highlight the importance of corporate governance, the lack of which may lead to closure of financial entities. The paper presents the incidence of noncompliance of corporate governance and discloses how ZARCO Exchange management while posing to be a due diligent company, indulged in financial embezzlement. The study unfolds the course of events that led to the identification of fraud and the consequences that were later faced by the ZARCO management.

© 2013 IUP. All Rights Reserved.

WAPDA-HUBCO Dispute: Corporate Governance Failure

--Mahwish Anjam and Kamran Siddiqui

For a poor country like Pakistan, corruption is a major political, economic and social issue. Despite the efforts of successive governments, this cancer continues unabated, and while the army-led governments undoubtedly provide better governance as compared to their civilian predecessors, corruption is too deeply ingrained as a way of life to disappear overnight. Hence, a mega project like HUBCO could not possibly be free from this taint. As a prominent Pakistani columnist famously retorted in response to a politician’s protest that there was no evidence of corruption, “Does a thief give you a receipt when he steals from you?”

© 2013 IUP. All Rights Reserved.