SEC explains Corporate Governance rules
Operating in a competitive environment where not everybody plays fair, or fronting illicit requests from shady public officials are just two real examples that companies face every day.
However, it’s important for companies to recognise corruption as a significant risk to their bottom lines, top officials in the capital market said.
Faizal Saleh, Chairman Securities and Exchange Commission (SEC) said that companies engage in corruption at the strategy level where the board decides to engage in it to advance the company’s businesses or at the transaction level. A proper, transparent and accountable governance system along with checks and balances and an internal control system that is sufficient and appropriate are encouraged by the capital market regulator’s Corporate Governance rules, he added.
Alongside these mechanisms is due respect for the rights and equality of shareholders and accountability to all stakeholders. These key factors boost the company’s immunity and promote balanced and sustainable growth in the long term, he added.
Noting that it is important to create space for new blood in terms of independent directors, he said the age limit of 70 for independent directors was introduced. The board of directors cannot determine a director to be ‘nevertheless independent’ if they do not meet the criteria of below 70 years of age and below nine years on the board. They also should not have materially interesting companies that have the same cool business as the one they serve.
There are currently 29 publicly quoted companies where the chairperson and CEO position are held by the same individual, Renuka Wijewardena, Chief Operating Officer, Colombo Stock Exchange said.
The nomination and governance committees have been newly introduced. In the new rules the independent directors should appraise the chairman’s performance on an annual basis, Mr. Wijewardena said.
The new rules require a related party transaction review committee applicable for companies with only listed debt from next October, he said.
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