Dr Mahmood Osman Imam, executive director of Centre for Corporate Governance and Finance Studies of Dhaka University, presented the paper at the roundtable on 'Corporate Governance Guidelines of SEC and its Implementation Practices in Bangladesh' held at the CIRDAP auditorium in the city.

Dhaka Stock Exchange (DSE) and Centre for Corporate Governance and Finance Studies of Dhaka University in association with The Financial Express and Channel i jointly organised the roundtable with DSE President Abdullah Bokhari in the chair and Moazzem Hossain, editor of The Financial Express, as moderator.

The sample of the paper includes those listed companies whose annual general meetings were held after the notification of SEC on corporate governance guidelines. The sample covers 111 listed companies.

According to the paper, out of 70 companies furnishing compliance reports, 83 percent complied with the condition of board size and only 33 percent are reported to have complied with the provision of independent director.

With regard to the conditions of appointment of separate chief financial officer (CFO), head of internal audit and company secretary, 78 percent, 69 percent and 87 percent companies are reported to have complied with these conditions respectively.

It was also disclosed in the paper that 44 percent companies followed the guideline with regard to the formation of audit committee and its reporting to the board or chairman and the stakeholders, while 56 percent companies were found to be defaulter in this regard. Such defaulting companies, however, are reported to be in the process of having audit committees in near future.

Addressing the function, Asian Development Bank (ADB) Country Director Hua Du said the capital market in Bangladesh is still at an emerging stage with market capitalisation amounting to only 6.5 percent of GDP as investors show least confidence in the corporate governance and financial disclosures practiced by many companies listed in the bourses .

"The neighbouring countries are well ahead of Bangladesh in terms of depth in capital market. In India, Pakistan and Sri Lanka, the amount of market capitalisation is 56 percent, 30 percent and 18 percent of their gross domestic products respectively," she said.

There has been limited investment interest and the supply of capital market instruments remains inadequate, Hua Du said, adding that overall transparency of market transactions is low compared to international standards and generally there has been slow development of the underlying market infrastructure.

"Based on the experiences of other countries, sound corporate governance is a prerequisite to developing a deep-rooted and well-functioning capital market. In Bangladesh, development of a well-functioning capital market is critical to achieve success of the government's national poverty reduction strategy that aims to substantially increase private investment, savings and economic growth," the ADB country director went on.

She said corporate governance interventions are often linked to other reform programmes that include enterprise reform, restructuring state-owned enterprises (SoEs), financial governance and financial market reforms and capital market development.

"Development of the financial markets depends on the corporate governance framework and how closely the country adheres to it. A sound corporate governance structure and a strong regulatory, supervisory and enforcement system need to be in place so that the country can improve the investment climate and attract foreign capital on a competitive international basis," she observed.

Hua Du also laid emphasis on corporate governance guidelines for the non-listed companies too.

Chairman of the Security Exchange Commission Faruq Ahmed Siddiqi said performance of the capital market depends on how far the corporations are practicing the principles of corporate governance.

"The corporate governance framework depends on the legal, regulatory and institutional environment. Stock exchanges, investors, corporations and other stakeholders have important roles to play in the process of developing good corporate governance," he said.