Corporate Governance Ideals vs. Genie of Noncompliance

February 28, 2025 (MLN): Waves Corporation Limited (PSX: WAVES) disclosed through a Notice on PSX that its Chief Executive Officer traded in the shares of the Company way back in December 2024.

The relevant PSX Regulation obligates the insiders to report their transactions within 7 days. The said transactions indicate that these were carried out for financing reasons.

The lack of Corporate Governance in Pakistan is often pointed out by many investors at the Pakistan Stock Exchange, local as well as foreigners.

Be it reporting failures, concealment of information in Directors' Reports, avoidance of appropriate minuting of AGM proceedings, or a number of other ailments.

Recently, during an AGM of a Sugar Company, there was a run on the counters within the Meeting Hall where the Management was distributing sugar bags to minority investors.

Despite the fact that companies are forbidden from distributing gifts at AGMs, this unnamed company did so in the presence of Directors.

Another company is pursuing a takeover battle that some allege with shareholders' money, running from court to court while SECP is as mute as one could seriously not expect.

Ironically, it is much easier to make laws than to police the system. Some suggest harsher punishments, others blame the lack of education, and still others blame a culture of weak governance.

In the olden days, kings used to make one-off examples out of severe punishments that were to hinder future non-compliance.

These days few and far between show cause notices are issued, stays are granted, and matters linger for a few days until the passage of time washes the dirty laundry.

What is required of system regulators is to ensure compliance not by churning new rules, but by ensuring that noncompliance of existing rules is methodically weeded out.

Every non-compliance is information, as every error is a piece of information. By delving deep into the reasons, one can easily fix the system, modify existing rules, and keep the battle on.

Are regulators those sleeping giants that never awake or they are those sleeping giants that are paper tigers? We let you decide.

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