Forces Against and For Corporate Governance
Resistance comes from vested interests (oligopolists, relationship-based investors) who want to retain status quo. In Bangladesh there is a tendency to make large investments in highly capital intensive enterprises with an eye to price incentives through relationship. This leads to wastage of scarce capital resources. Many firms now need foreign capital to finance expenses that again can lead to demand for better CG. Political turmoil and vested interests are the key factors to hinder the process of good CG framework in Bangladesh. Thus, policy makers have to focus not only on regular / accurate financial accounts & transparency, but they have to address issues like whether a large business group should also be allowed to own a bank. In brief, following are the issues that hinder the enforcement of CG in Bangladesh:
The Boards of Directors:
- Inadequate examples of role in formulating vision and strategy
- Lack of independent representation
- Lack of power held by CEO
- Absence of accountability structure of management to the board/shareholders
- When the Board Chairman is also a Cabinet Minister there may be a tendency to treat the SOE as a Government department
Commercial focus:
- Procedures are set and not easy to deviate from
- Price controls are not market driven
- Sometimes face unfair competition from the private sector
Accountability and Monitoring
- Access to accurate information is difficult
- Ample of evidence of management collusion with trade unions
- Control Audits of Internal Audit, Government Commercial Audit, and External Audit
- Commercial Audits results are doubtful and not transparent
Employee incentives
- No genuine incentive for better performance
- Quality people not attracted to SOEs
- Pressure from trade unions