In order to improve the governance framework of public sector companies, the Securities and Exchange Commission of Pakistan (SECP) has formulated the draft Public Sector Companies Regulations2012.
These draft regulations have principally been based upon the Code of Corporate Governance, which has been customized in the context of public sector companies. Public sector companies operating in corporate form, which are directly or indirectly owned and controlled by the government, whether federal, provincial or local. These regulations have been designed in view of the distinct governance challenges faced by the public sector companies in Pakistan. The inefficiency of such companies is choking the economy and draining fiscal resources, necessitating urgent restructuring of their operations. Various recommendations have been made in the draft regulations aimed at optimizing the efficiency, enhancing the transparency in operations, and providing a mechanism for accountability of those charged with governance. The Federal Government had constituted a Cabinet Committee on Restructuring of public sector companies in January 2010 to improve their overall corporate governance and service delivery, and to move to a structural surplus and increased public sector savings.
Subsequently, in October 2011 the Federal Government formed a task force on corporate governance of public sector companies with the mandate to examine the prospects of developing a regulatory mechanism for improving the governance of public sector companies and enhancing board effectiveness and empowerment through a range of measures.
The measures to improve the governance of public sector companies include undertaking board composition reforms by including a certain number of independent non-executive directors on the boards of such companies, ensuring continuity in the tenure of board members, separating the roles of chairman and chief executive, forming specialized board committees, undertaking training and capacity building of the board members, strengthening the internal control mechanism, augmenting the disclosure and transparency requirements, and undertaking periodic performance evaluation of the board members, etc.
