Listed cos to face action for not appointing women independent directors by Dec 31 deadline

Only 138 out of 360 listed companies have so far appointed women independent directors, although the extended deadline for the mandatory hiring of women on boards of directors will expire at the year-end.

"After the deadline, we will take action as per the regulations," warned Farzana Lalarukh, commissioner at the Bangladesh Securities and Exchange Commission (BSEC), at a discussion on inclusive directorship on Thursday.

Under the securities rules, at least one woman independent director must be on the board of each listed company.

The warning came as Lalarukh spoke as special guest at a roundtable meeting titled 'Advancing Inclusive Governance - Independent Directorship' at the CA Bhaban in the capital's Kawran Bazar.

The discussion was chaired by Institute of Chartered Accountants of Bangladesh (ICAB) President NKA Mobin, while Zareen Mahmud Hosein, council member of ICAB, moderated the event. It was jointly organized by the ICAB and the International Finance Corporation.

Lalarukh expressed frustration over faulty governance in many listed companies, noting that several firms still do not have a company secretary.

"When we asked them to appoint a company secretary, some reported their CFO as company secretary, which is not acceptable," she said.

Drawing an analogy from her teaching days at the University of Dhaka, Lalarukh said non-compliant companies were as difficult to deal with as inattentive backbenchers.

"The securities regulator has become a babysitter. We want to stop being that and become a true regulator," she added.

Referring to family-run listed companies, she pointed out that independent directors could hardly contribute to a company's management due to a lack of training and weak compliance structures.

She at the same time acknowledged that several companies that follow good governance practices have effective and performing independent directors.

Ms. Lalarukh also said the BSEC remains in a constrained position due to widespread non-compliance but hopes to improve its role once governance improves.

"We want to be a facilitator instead of just a regulator," she added.

Apex Footwear Ltd Managing Director Syed Nasim Manzur said independent directors were meant to protect the wider interests of minority shareholders.

"Women's inclusion on boards diversifies leadership. Companies with diversified boards tend to perform better," he said.

Syed Mahbub Rahman, managing director & chief executive officer of Mutual Trust Bank, highlighted delays in BSEC's approval of independent director appointments and called for greater transparency and regulatory flexibility.

The ICAB president said the existing provision that bars independent directors from serving as the head of the audit committee after completing three consecutive terms should be reviewed. He noted that boards would benefit if at least one independent director had a finance or Chartered Accountancy background.

Mr. Mobin also said that in multinational companies, the audit committee chair presents audit reports directly to the board - a practice that should also be incorporated into local corporate governance guidelines.

He further emphasized the need for mandatory training for independent directors, as is required in Malaysia and India.

"Emerging issues such as ESG reporting are still poorly understood by many directors. Without proper training, they cannot effectively carry out their responsibilities," he added.

Kamran T. Rahman, president of the Metropolitan Chamber of Commerce and Industry (MCCI), said the presence of women independent directors ensures gender balance and brings diverse perspectives.

"Training is essential for all directors - not just women or nominated directors. Many directors still do not fully understand their responsibilities," he noted.

Hossain Sadat, president of the Institute of Chartered Secretaries of Bangladesh (ICSB), said the qualifications of nominated directors must be prioritized over political or family affiliations.

"Companies must ensure a supportive board environment to get the best from independent directors," he said.

He suggested creating a mechanism within audit committees to collect feedback from independent directors and allowing them to speak at AGMs to share insights with shareholders, thereby improving governance.

Doulot Akter Mala, president of ERF, said the current nomination criteria for independent directors were too restrictive and should be relaxed based on academic qualifications and work experience.

She also proposed ensuring a 50:50 ratio of male and female directors on listed company boards.

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