Introduction:

Corporate governance broadly refers to the mechanisms, processes and relations by which corporations
are controlled and directed. Governance structures and principles identify the distribution of rights and
responsibilities among different participants in the corporation (such as the board of directors,
managers, shareholders, creditors, auditors, regulators, and other stakeholders) and includes the rules
and procedures for making decisions in corporate affairs. Corporate governance includes the processes
through which corporations objectives are set and pursued in the context of the social, regulatory and
market environment. Governance mechanisms include monitoring the actions, policies, practices, and
decisions of corporations, their agents, and affected stakeholders. Corporate governance practices are
affected by attempts to align the interests of stakeholders. Because there are so many interested
parties, its inefficient to allow them to control the company directly. Instead, the corporation operates
under a system of regulations that allow stakeholders to have a voice in the corporation commensurate
with their stake, yet allow the corporation to continue operating in an efficient manner. Corporate
governance also takes into account audit procedures in order to monitor outcomes and how closely they
adhere to goals, and to motivate the organization as a whole to work toward corporate goals. By using
corporate governance procedures wisely and sharing results, a corporation can motivate all
stakeholders to work toward the corporations goals by demonstrating the benefits, to stakeholders, of
the corporations success. Corporate governance may include :
- Control and direction processes.
- Regulatory compliance.
- Active ownership and investment in a company.
Primarily, though, corporate governance refers to the framework of all rules and relationships by which
a corporation must abide, including internal processes as well as governmental regulations and the
demands of stakeholders. It also takes into account systems and processes, which deal with the daily
working of the business, reporting requirements, audit information, and long-term goal plans.
Corporate governance provides a roadmap for a corporation, helping the leaders of a company make
decisions based on the rule of law, benefits to stakeholders, and practical processes. It allows a company
to set realistic goals, and methodologies for attaining those goals.
Efficiency of financial management in Bangladesh by follow code of corporate
governance 2006:

Boards Size
The number of the board members of the company shall not be less than 5 (five) and
more than 20 (twenty): Provided, however, that in case of banks and non-bank financial institutions,
insurance companies and statutory bodies for which separate primary regulators like Bangladesh Bank,
Insurance Development and Regulatory Authority, etc. exist, the Boards of those companies shall be
constituted as may be prescribed by such primary regulators in so far as those prescriptions are not
inconsistent with the aforesaid condition.

Independent Directors
All companies shall encourage effective representation of independent directors on their Board of
Directors so that the Board, as a group, includes core competencies considered relevant in the context
of each company. For this purpose, the companies shall comply with the following:-
At least one fifth (1/5) of the total number of directors in the companys board
Shall be independent directors.
The independent director(s) shall be appointed by the board of directors and approved by the
shareholders in the Annual General Meeting (AGM).
The post of independent director(s) can not remain vacant for more than 90 (ninety) days.
The Board shall lay down a code of conduct of all Board members and annual compliance of the
code to be recorded.
The tenure of office of an independent director shall be for a period of 3 (three) years, which
may be extended for 1 (one) term only.
AUDIT COMMITTEE:
The company shall have an Audit Committee as a sub-committee of the Board of Directors.
The Audit Committee shall assist the Board of Directors in ensuring that the financial statements
reflect true and fair view of the state of affairs of the company and in ensuring a good
monitoring system within the business.
The Audit Committee shall be responsible to the Board of Directors. The duties of the Audit
Committee shall be clearly set forth in writing.

Appointment of independent auditors:

Independent auditing firms provide credibility to financial statements by examining the evidence that
underlies the information provided and then reporting on those findings. Official oversight of the rules
for this process is in the hands of the Public Company Accounting Oversight Board (PCAOB) if the
audited company issues securities to the public and the Auditing Standards Board (ASB) if not. The role
of the Securities and Exchange Commission (SEC) is to ensure that this reporting process is working as
intended by the government. The SEC examines the filings of the various companies and can take
disciplinarian action if either the company or its officials fail to act appropriately.

General Meetings
The general meetings, in particular the AGM, are the primary for a for communication between
shareholders, management and the Board of Directors. Shareholders should be well informed regarding
general meetings and the meeting should be organized in a manner that allows for maximum
shareholder participation, subject to reasonable limitations, and equitable treatment of shareholders.
Shareholders have the right to receive information about company resolutions, decisions, and
operations described in a manner that can be understood by a layperson. Companies should explain
disclosures in detail and provide information about the effect of such.

External Auditors
audit firms should not be engaged in accounting or non audit consulting in enterprises in which they
have been appointed as the statutory auditors. The exception is tax work, which may be undertaken by
the statutory auditors of a firm. If, however, any non-audit work is performed by the statutory auditor,
both audit and non audit fees paid to the audit firm should be disclosed to shareholders. Auditors
should not hold shares in companies they audit. If auditors do hold shares in a company for which they
are appointed as the statutory auditor, the shareholding amount should be disclosed. A statutory
auditor must not hold more than 1% of the shares of a company.

Internal Audit
All listed companies must have an internal audit function within the organization. Private companies
should consider establishing a system of internal controls if they do not have an internal audit
department. The internal audit department should have a broad scope of work to investigate all levels
of the organization and be independent from management, with direct access to the Board of Directors
and the Audit Committee. Directors must take adequate action to protect the company and
shareholders based on internal audit reports. The internal audit department should have a letter from
the board or chairman of the audit committee giving it the authority to access any records in any
location at any time.

Disclosures
The Board of Directors should present a balanced assessment of the companys position and prospects
that may be understood by shareholders. All disclosures listed in this section should be disclosed in a
public announcement and made available to the public and to shareholders. Quarterly unaudited
results. Within 30 days after the end of the quarter, companies should provide unaudited quarterly
results . Interim announcements should be made available to shareholders when a material event
occurs. In addition to the material events required to be disclosed by the Companies Act, Dhaka Stock
Exchange, Chittagong Stock Exchange, and SEC notifications, the following material events should be
disclosed.

Responsibilities of Shareholders
Shareholders play an important role in the governing of any corporation. Shareholders should take
seriously their responsibilities. Shareholders should learn and exercise their shareholding and voting
rights in an appropriate and relevant manner. This includes the behavior of shareholders and
shareholder representatives at Annual General Meetings. Shareholders should also be mindful of the
legal rights and duties of directors and managing directors.

Responsibilities of Institutional Shareholders

Institutional shareholders are parties that control shares for the benefit of others, including mutual
funds, pension funds, other companies, and various government entities. Institutional shareholders have
a unique and important role to play in ensuring good corporate governance and have an important
responsibility to fiduciaries, the company, and other shareholders. Institutional shareholders can be a
powerful force for reform in company practices. In many developed and emerging markets they play an
important role in improving corporate governance. Institutional investors have the key ingredients to
motivate companies to change practices: they should have staff qualified to evaluate financial
statements, business strategy, and company performance; they control large amounts of capital that
must be invested; they serve as a leading indicator to other investors; and they control blocks of shares
which force companies to take notice of their concerns.

Notice of Meetings
Meetings of the Committee shall be summoned by the Secretary of the Committee at the request of any
of its members or at the request of external or internal auditors if they consider it necessary. Unless
otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda
of items to be discussed, shall be forwarded to each member of the Committee, any other person
required to attend no later than [5] working days before the date of the meeting. Supporting papers
shall be sent to Committee members and to other attendees as appropriate, at the same time.

Conclusion:
One of the challenges faced by both corporate governance and by organizations that intend to provide
enabling frameworks for good corporate governance is the complexity of the relationships that exist
between companies on one side and their shareholders, stakeholders and gatekeepers on the other
side. This complexity seems to be one of the main reasons why corporate scandals still occur, despite
the existence of corporate governance and the sustained efforts by national as well as cross-national
regulators over the last decades to improve corporate governance. The recent credit crunch is a
reminder that corporate governance at company and industry level, as well as regulation on corporate
governance more widely, is deficient in the sense that it does not properly deal with the complex nature
of these relationships and the potential conflicts of interests therein. Capital market over the last few
years have not only failed their shareholders, but also their customers, the taxpayer and society at large.
The fact that capital market failures have to a large degree been concentrated corporate governance .