PSBA urges SECP to hold listed companies accountable for withholding dividends

May 08, 2023 (MLN): Since most of the shareholders of the listed companies have not yet received their due dividends, the Pakistan Stock Brokers Association (PSBA) has requested the Securities Exchange Commission of Pakistan (SECP) to intervene in the matter. 

In order to express deep concerns about the companies that are listed on the Pakistan Stock Exchange (PSX) and are not paying dividends to their shareholders which is detrimental to their interests, and the functioning of the economy as a whole, the PSBA wrote to letter to Mr. Akif Saeed, Chairman SECP seeking the commission's intervention and resolve of the aforestated matter. 

"This hoarding of profits can lead to decreased investment in the stock market and undermine investor confidence," the letter read. 

The primary objective of investing in shares is to earn a return on investment. Hence, it is essential for companies to pay dividends to their shareholders regularly in order to ensure fair distribution of profits to them, it added. 

This practice is inconsistent with the SECP Act of 2015, where the SECP, being a corporate regulator has to protect the interest of minority shareholders.

"Hence, we believe that it has now become crucial for the Commission to take note ensuring that companies listed on the stock exchange follow ethical and responsible practices and work to promote shareholder value," it said further. 

This proposal is also in line with International Best Practices, whereas, many countries have issued Corporate Governance Codes that require listed companies to maintain a certain dividend payout ratio. These codes provide guidelines and standards for the distribution of profits to shareholders and aim to ensure that shareholders are treated fairly.

Also, in some jurisdictions, companies are required to pay a minimum dividend or face penalties. This encourages them to maintain a regular dividend payment schedule to avoid any legal complications.

In view of the above, the association also requested to introduce policies/codes mandating companies to pay dividends to their shareholders, and that guidelines are established to ensure fair and consistent dividend payments.

This will also help re-establish trust between companies & shareholders and strengthen the financial market.

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