Table of Contents

Executive Summary......................................................................3
Chapter 01: Introduction...............................................................5
1.1 Origin of the report.................................................................5
1.2 Background of the Study.........................................................5
1.3 Objectives of the study...........................................................5
1.4 Methodology...........................................................................5
1.5 Scope of the Study..................................................................6
1.6 Limitations of the Study..........................................................6
Chapter 02: Summary and critical analysis of the article and
implication for Bangladesh............................................................7
Codes of corporate governance (Article: 02).................................7
1. Summary of the article:............................................................7
2. Methodology analysis of the article:.......................................11
3. Criticism of the article:...........................................................11
4. Implication for Bangladesh:....................................................12
Development of Corporate Governance Regulations: The Case of
an Emerging Economy (Article-06)..............................................14
1. Objectives of the Article:........................................................14
2. Summary of the Article:.........................................................14
3. Methodology analysis of the article:.......................................19
4. Critical analysis of the Article:................................................20
5. Implications for Bangladesh:..................................................20
The adoption of international accounting standards in Bangladesh;
An exploration of rationale and process (Article-09)....................22
1. Summary of the article...........................................................22
2. analysis of the article:............................................................26
3. Implication for Bangladesh:....................................................27

Rationality, traditionalism and the state of corporate governance

mechanisms: illustrations from a less developed country
(article10)...................................................................................28
1. Summary of the article...........................................................28
2. Methodology analysis of the article:.......................................29
3. Criticism of the article:...........................................................30
4. Implication for Bangladesh.....................................................30
Chapter03: Conclusion................................................................32
Reference.................................................................................... 33

Executive Summary
Corporate governance can be defined as a combination of fairness, precision, accountability and
sustainability of corporate behavior. Good Corporate governance is a key factor to achieve the
improved performance of an organization. It is fundamental element to safeguard interest of
shareholders. For continuous and sustainable growth of an organization, there is no alternative to
effective Corporate Governance.
The report Corporate governance model in Bangladesh perspective and critical analysis on
articles has been prepared by collecting information through corporate governance book,
articles and the internet.it is a descriptive research that is conducted for our course corporate
governance.
The entire report is the combination of three portion. Chapter one is the introduction part of the
report.it describe the introduction, objectives of the report, methodology, scope and limitation of
the report. The main objectives of the report is understanding of the importance of proper
corporate governance practice and procedure in the organization, understand the opportunity and
limitation of corporate governance practices and understanding the corporate governance
practice and procedure in the emerging economics. The problem and limitation that we face
during the preparation of this report is the lack of experience for the analyzing data.
Chapter two is mainly article based description.it is based on four articles: -codes of corporate
governance, Development of Corporate Governance Regulations: The Case of an Emerging
Economy, The adoption of international accounting standards in Bangladesh; An exploration of
rationale and process and Rationality, traditionalism and the state of corporate governance
mechanisms: illustrations from a less developed country. They describe various information of
different factors affecting corporate governance, the problems of developing countries in
adopting proper corporate governance, different weaknesses of developing countries, problems
of adopting IAS in the developing and least developed countries, the importance of strong capital
markets, banking sectors, representation of different parties interest on board, role of government
and many other factors affecting adaption of proper corporate governance structure and
implication in Bangladesh.

Chapter three draws the conclusion by mentioning some of the finding from the research and
recommends the ways to solve these problems and to ensure good corporate governance. Our
findings show that family controlled business is the main problem in developing countries, lack
of accountability, lack of representation of different parties, lack of government initiatives and
the reliance on external fund creates pressure to comply with the IAS. The recommendations of
the report are to follow stakeholders model in Bangladesh. So the entire report focuses to solve
the present problems of emerging countries to ensure practicing proper corporate governance.

Chapter 01: Introduction

1.1 Origin of the report
Good Corporate governance is a key factor to achieve the improved performance of an
organization. It is fundamental element to safeguard interest of shareholders. The report on
Corporate governance model in Bangladesh perspective and critical analysis on articles was
carried out as a part of our corporate governance course. The report was assigned by our course
teacher as a part of our academic requirement.

1.2 Background of the Study

The global business pattern and business management pattern is changing rapidly because of the
growing national and international market competition, economic instability fast moving
financial market and those factor create pressure on the organization to come up with fruitful
response to survive. The prosperity of an organization depend on the proper planning, execution
and management and those all task depends on choosing and practicing proper corporate
governance norms, regulation, practice and procedure around the organization.

1.3 Objectives of the study

Understanding of the importance of proper corporate governance practice and procedure

in the organization.
Understand the opportunity and limitation of corporate governance practices.
Understanding the corporate governance practice and procedure in the emerging

economics.
Fulfilment of out course requirement.

1.4 Methodology
The study undertook descriptive research approaches to perform with qualitative data.

1.5 Scope of the Study

In preparing this report we try to cover these topics:

The codes of corporate governance mechanisms.

Development of corporate governance regulation, practice and procedure in emerging

economies
Issues regarding the adoption of International Accounting Standard.
Focus on developing countries likely Bangladesh.
Practicing CG in corporate and government organization.

1.6 Limitations of the Study

The preparation of this report was not an easy task. The problem and limitation that we face
during the preparation of this report is the lack of experience for the analyzing data.

Chapter 02: Summary and critical analysis of the article

and implication for Bangladesh
Codes of corporate governance (Article: 02)

1. Summary of the article:

The article mainly deals with the main issue of present world that which type of corporate
governance code should be developed? Whether it should be hard laws like USA or comply or
explain like UK? It also discusses about corporate accountability and disclosure. The first
country to issue the code was USA in the year 1978, then Hong Kong, Ireland, and the UK in
1992.By 2008, 64 countries issued 196 distinct codes of good governance. Besides, there are
other issuers of governance code such as market regulators, investors etc.

Though code of good governance is important for us, yet we are not aware of what we know and
dont know. It has moved in two directions where one tends to focus on the particular code has
influence on a firm in a country and other tends to describe the existence and content of the
codes in multiple countries. There are few analytical, rather than descriptive, studies of codes
across countries. All this is resulting in an apparent divergence in development between the real
world, where codes continue to be developed and revised, and the academic world, where there
is limited theoretical advancement on this topic.

This paper takes stock of where we stand regarding codes of good governance, identifying what
we currently know about the topic, the theoretical and empirical debates that are raging, but have
not been settled, and the areas of research that have not been explored yet.
Since the first code was issued in the US and the middle of 2008, codes of good governance have
been created in 64 developed, transitional, and developing countries. Although it was not until
1989 that a second country issued a code of good governance, in the 1990s codes were quickly
developed in many countries, partly inspired by the Cadbury Code that had been created in the
7

United Kingdom in 1992. The spread of codes of good governance around the world was aided
by the push from international entities, such as the World Bank and the Organization for
Economic Cooperation and Development (OECD).
.OShea (2005) shows that most codes have some recommendations on the following six
governance practices, explicitly or implicitly1)

A balance of executive and non-executive directors, such as independent non-executive

directors
2)

A clear division of responsibilities between the chairman and the chief executive officer

3)

The need for timely and quality information provided to the board

4)

Formal and transparent procedures for the appointment of new directors

5)

Balanced and understandable financial reporting; and 6) maintenance of a sound system

of internal control.
The article excludes three sets of corporate governance documents. First, we exclude laws that
have been issued by governments, because these are legal requirements to operate in the country
rather than a set of voluntary best practices like codes. Second, it excludes codes of good
governance developed by a firm that only apply to the firm in question, because they are not best
practices for firms in the country, but only address the needs of one specific firm. Third, it
includes only one version of each code in the count, excluding initial drafts and updates of codes
to avoid double-counting codes. Many codes of good governance are first circulated in draft
form to receive comments and are later issued in a final version. Additionally, some codes have
been issued multiple times to update certain recommendations. It only includes the initial version
in the count of codes.
In the mid- 1990s, transnational entities started to look at good governance as a condition
necessary for the development of countries and suggested to their member countries to adopt best
governance practices; these included not only good governance at the country level, in the form
of control of corruption and efficient state bureaucracies but also good governance at the firm
level in the form of best practices for publicly traded firms.

Codes have also been created by transnational institutions to address the need for better corporate
governance of multiple countries, not just the needs of a country in particular, as is generally the
case with national codes of good governance. These codes of good governance issued by
transnational institutions are important for two reasons.
First, they signal the importance of corporate governance and help establish sets of best practices
that address common corporate governance problems of firms around the world. Second, they
serve, in some cases, as the basis for the creation of codes of good governance in individual
countries.
Countries vary significantly in the number of codes that have been created. At one extreme are
the United States and United Kingdom, where 25 distinct codes have been issued. Next most
codes are Hong Kong with nine; Belgium and France with eight each; Canada with seven;
Australia, Spain, and Sweden with six each; and Denmark, Germany, Italy, Netherlands, and
Portugal with five each.
The rest of the countries have four or fewer codes. There appears to be a connection between the
development of capital markets and the number of codes issued. Countries with not only larger,
but also deeper, capital markets have more codes of good governance; the need for good
governance increases as the number of public firms grows because agency problems between
disperse owners and managers increases.
Codes of good governance by transnational entities also vary. These codes are designed to
improve corporate governance of multiple countries and as such are more general than the codes
developed in each country, which focus only on issues that need to be addressed there.
In addition to these transnational entities, the World Bank has taken an active role in promoting
good corporate governance around the world, helping developing and transitional countries
evaluate their current corporate governance practices and upgrade them to international levels.
In this section, the article reviews and discuss three main topics that have emerged within the
codes literature: the motivations behind the diffusion of codes across countries and its
implications for convergence of corporate governance practices; the content of the codes and
their comply or explain dimension; and the relationship between code compliance and firm
performance.
9

The first empirical study to examine the determinants of the diffusion of codes of good
governance across countries is given by Aguilera and Cuervo-Cazurra (2004). They argue that a
combination of efficiency and legitimacy reasons trigger countries to issue codes of good
governance. Their analysis of the adoption of codes of good governance in 49 countries reveals
that codes are more likely to emerge in countries with a common-law legal system, a lack of
strong shareholders protection rights, high government liberalization, and a strong presence of
foreign institutional investors.
A critical debate in the diverse capitalism literature, as well as more generally in comparative
political economy, is to what degree corporate governance systems and business systems in
general are converging toward the Anglo-Saxon model of corporate governance, or the so called
shareholder value model.
The article now turns to the question that has been asked in the literature of how codes get
implemented once they are developed and adopted as a guiding governance principle. There are
two mechanisms for code implementation mandatory or voluntary regulation. One mechanism
to implement code is through the development of stringent corporate legislation. Voluntary firm
compliance is the other mechanism used to implement the codes, as it was originally done in the
Cadbury Report.
Although codes of good governance have been developed around the world for more than a
decade, the degree to which firms adopt codes varies across countries, and the decision to adopt a
given code does not automatically guarantees effective corporate governance. Several factors
might account for the mixed and inconclusive findings. Other factors related to governance and
broader than governance may affect the relationship between code compliance and firm
performance.
The article reviews of the worldwide diffusion of codes of good governance and of the codes
literature highlights the importance of and interest in this governance topic. Codes of good
governance have become a central issue in policy and in academia.
Four areas are noticeable in terms of the lack of research being done the systematic analysis of
the content of codes of good governance and the issuers of the codes, a better understanding of

10

the consequences of codes issued by transnational entities, and finally the evolution in the
recommendations of codes.
First, many studies take the codes as a black box and focus on the diffusion of codes or the
impact of codes on performance. Second, studies have identified that the nature of the issuer of
the codes can differ significantly, with codes being issued by the countrys stock exchange,
director associations, employer associations, investors and investors associations, professional
associations, or the government. Third, the importance of transnational entities in the creation
and diffusion of codes of good governance has not been analyzed properly. Fourth, the
recommendations contained in codes of good governance have evolved over time as some
corporate governance problems are solved and others emerge productive.
In conclusion, there has been much discussion and research in the area of codes of good
governance, particularly in understanding their diffusion, adoption, and impact on performance.

2. Methodology analysis of the article:

This article was made mainly by applying qualitative techniques. But it has also included some
charts and graphs as quantitative analysis. The graph describes about the number of codes been
developed in each of 64 countries by countries themselves and as well as transitional and charts
gave a brief of the same thing. Thus the authors used pretty simple techniques to explain all the
facts. Thus it is mainly a theoretical study of code of good governance around the whole world.

3. Criticism of the article:

The article reviews the recent developments in the area of codes of good governance, a set of
best practice recommendations regarding the behavior and structure of the board of directors.
Research findings are on the literature on codes of good governance. It highlights the rapid
spread of codes of good governance around the world and how academic research has lagged
behind in analyzing this topic.

11

The authors used techniques that are very simple and has a scope of limiting study. They could
find better results by using many other quantitative tools and techniques for better accuracy.
They also used backdated information regarding articles and used those that were made earlier
rather than the one with updated recommendation. It also did not clarify the fact that which
country should use which type of codes of good governance. It only gave us a hint.
Despite the criticism that the codes voluntary nature limits their ability to improve governance
practices, codes of good governance appear to have generally improved the governance of
countries that have adopted them, although there is need for additional reforms. The research on
codes of good governance has been studied in insolation with little cross-fertilization across the
different disciplines.

The authors propose a multi-level framework to discuss three main topics that have emerged
within the codes literature: the motivations behind the diffusion of codes across countries and its
implications for convergence of corporate governance practices; the content of the codes and
their comply or explain dimension; and the relationship between code compliance and firm
performance. It is concluded by proposing four areas of future research.

Practical Implications are Code development, adoption, and compliance are directly related to
issues surrounding the governance of the firm, and in particular to all the interactions that a
director has inside and outside the firm. Codes are regulations that emerge from policy-making
negotiations between the different stakeholders, such as the state (via the stock market
regulators) and the investors.

4. Implication for Bangladesh:

This article mainly deals with developed country perspective. It deals less with developing or
least developed ones. Bangladesh is new in corporate governance practice. So the codes of good

12

governance has just recently made in 2004.Whereas during this time, many developed countries
had 2-5 codes of governance. So Bangladesh is lagged behind in this.

Another important issue is which type of code Bangladesh should follow? Whether it should go
for forced one or like comply or explain mechanisms? I think Bangladesh should have a
combination of both .Because only comply doesnt make sense always. The board members
should be such that they encourage the practice of good governance. There should be
accountability, transparency in decision making.

Bangladesh needs to go a long way in practicing code of good governance. Recent issues of
Bangladesh bank, Hallmark etc. created a more serious challenge for this country and pressure
from transitional to follow corporate governance code more strictly.

13

Development of Corporate Governance Regulations: The

Case of an Emerging Economy (Article-06)
1. Objectives of the Article:

Investigates the development of corporate governance regulations in emerging

economies, using the case of Bangladesh.

The shareholder theory or the stakeholder theory which is preferable for emerging

economic countries.
Literature concerning CG regulations in emerging economies.
The application of stock-holder and stakeholder models as market based and

institutionally based systems of governance in emerging economies.

To identify the problems of adopting Anglo Saxon (shareholder) model of CG in

emerging economies.
To identify the codes of corporate governance for corporate sector of developing
economies and the problems of adopting the codes of CG in developing countries like

Bangladesh.
To identify the initiatives for adopting CG in emerging economies.

2. Summary of the Article:

International financial agencies (IFAs) such as the World Bank included corporate governance
reforms as a development goal, significant changes have taken place in the regulatory
environment guiding corporate governance in emerging economies. These agencies have
prescribed models of corporate governance that have been tested and developed in developed
economy conditions as a powerful tool to battle against poverty.
The primary objective is to investigate the development of corporate governance (CG)
regulations in emerging economies, using Bangladesh as a case. Like many other developing
economies, the Bangladesh corporate sector is characterized by high ownership concentration,
reluctance of the corporate sector to raise funds through the capital markets, lack of shareholder
activism, availability of bank financing, and poor enforcement and monitoring of regulations.
In this paper the author seeks to address three questions: What type of CG model is conducive to
14

Bangladeshs current state of economic, legal and socio-political environment? What type of CG
reform has Bangladesh adopted? And, what has prompted such adoption?
After investigates the role of different actors, professional buddies, the private sectors and the
regulators the finding suggest that Bangladesh has also adopted the Anglo-American shareholder
model of CG, although is not considered to be entirely suitable for emerging economies, given
the economic, legal and corporate environment of these countries. An analysis of the behavior of
the principal actors in the Bangladeshi CG scenario indicates that the lack of self-regulation by
the professional bodies, and the absence of private-sector rule-making bodies have created the
scope for the IFAs operating in Bangladesh to intervene with policy-making decisions through
private-sector think-tanks.
The shareholder theory emphasizes that corporations are extensions of their owners, who should
be benefiting from it. Therefore, the corporation should be accountable only to the shareholders.
On the other hand, the stake-holder theory acknowledges corporation as a social entity that has
responsibility to a wider group of stakeholders including shareholders, creditors, management,
employees, the government and other interested groups. The shareholder model views that the
purpose of the corporation is to maximize shareholders wealth and the absence of stakeholders
involvement is viewed as the main obstacle for ensuring efficient controls because this model
emphasizes a trust based long term relationship between firm and stakeholders. Under pressure
from external forces, governments may be forced to change governance practices in order to
legitimize the economic system and attract foreign investments. The paper refers to stock-holder
and stakeholder models as market-based and institutionally based systems of governance. The
market-based system of governance is considered to be more appropriate where company shares
are generally owned by dispersed owners, and the managers are relatively free from close
scrutiny and control. Such systems are characterized by one-tier board leadership structure. The
socio-political and economic instability prevailing in many developing economies or emerging
market makes it harder to predict future prospects.
According to united nation Bangladesh is classified in to least developed countries. The
corporate environment in Bangladesh is characterized by concentrated ownership structure, bank
financing, poor legal framework and lack of monitoring.
15

Ownership structure like many other developing countries, most companies in Bangladesh are
either family owned or controlled by substantial shareholders. Company managements are
effectively just extensions of the dominant owners. They are closely held small and mediumsized firms where corporate boards are owner driven and most of the companies have executive
directors, CEO and chairman from the controlling family.
Shareholder involvement in Bangladeshi companies are reluctant to hold annual general
meetings (AGMs) even though this is a statutory requirement. When AGMs are held, these are
characterized by domination by a small group of people, poor attendance and discussion of
trivial matters.
The capital market in Bangladesh is still in primitive stage. The country has two stock exchanges
the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). The capital market
in Bangladesh has not flourished in comparison with its South Asian counterparts.
Despite having a very large population, the number of auditors in Bangladesh is surprisingly low,
even compared with its neighbors because audit fees in Bangladesh are significantly low. ,
Bangladesh lacks the presence of any second-tier accountancy bodies to cater to the needs of the
corporate world, although neighboring countries have similar institutions. This means that a vast
majority of accountants working in the corporate sector do not possess any accounting
qualifications. In addition to this, the other second-order institutions, such as the judiciary, suffer
from lack of skills and proper training, especially in dealing with corporate cases.
Bangladesh is a former British colony, and has inherited the common legal system. The
Companies Act 1994 defines the structure of the firms, including the composition of the board of
directors, appointment of the CEO, appointment and remuneration of the auditors etc. The
financial sector is also regulated by the Banking Companies Act and the Insurance Act. The
problem with the legal environment has always been its poor implementation and the lack of
legal enforcement as a major problem.
Bangladesh inherited a private-sector-dominated economy. For this, from the independence to till
maximum investment occurs by the IFAs such as World Bank and IMF. Poor economic
performance and change in the government, allowed IFAs such as the World Bank and the IMF
to start intervening in economic policy making in Bangladesh.
16

The Bangladeshi banking sector is characterized by presence of large number of commercial

banks, excess liquidity in the banking sector and default culture. The main problem in the
Bangladeshi banking sector is the presence of default culture. The total default loan rate of all
banks was 33.49% (of total loans) in 1997, 40.65% in 1998, 41.11% in 1999 and 34.92% in
2000.
CG reforms in Bangladesh are still in very initial stages. So far, Bangladesh has failed to develop
any recognized code of CG. . The only code of CG developed so far has been through the
Bangladesh Enterprise Institute (BEI) a donor-funded private-sector think-tank without any
statutory power. The Bangladesh Bank (BB), the central bank of Bangladesh, issued a number of
circulars relating to formulation of audit committees, CG and appointment of the board of
directors.
According to Bangladesh Bank the board of directors of bank companies should be constituted of
a maximum of 13 directors. According to the BEI code, the size of the board should be between
7 and 15. The SEC suggests that the number of board members should be not less than 5 and not
more than 20. . According to SEC, at least one-tenth of the total number of the companys board
of directors, subject to a minimum of one, should be independent directors.
According to the SEC order the company should have an audit committee as a sub committee of
the board of directors. The audit committee should assist the board of directors in ensuring that
the financial statements reflect a true and fair view of the state of affairs of the company and in
ensuring a good monitoring system within the business. BB circular mentions that there should
be three directors nominated by the board for a period of 3 years. SEC states that in an AC there
should be three members selected by the board of directors, one of whom would be the chairman.
SEC mention that the chairmen would have to possess a professional qualification and must have
knowledge, understanding or experience in accounting or finance.
Bangladesh enterprise institute suggest that external auditors should be independent, well
qualified and free of conflict of interest. . Except tax work, the audit firms should not go for any
non-audit services and if they perform any non-audit service, both audit and non-audit fees
should be disclosed to the shareholders.
All three CG regulations are also similar in term of the bases of compliance. The Bangladesh
bank makes CG mandatory for the banking companies to follow the rules relating to composition
17

of the board of directors, regarding the formulation of audit committee. SEC adopt the CG code
on a compliance or explain basis and BEI adopt the CG code on comply and explain basis.
The early CG regulation have been rooted on the basis assumption of the agency theory. The
agency-based notions of market efficiency, opportunism and self-interest-driven motivations for
disclosure are also essential attributes of the Anglo-American model of CG. The authors argue
that economies in emerging markets are subject to abuse by managers, politicians and
institutions. Therefore, the assumptions of the agency theory do not hold. Consistent with
Paredes, the paper finds that the Anglo-Saxon open market models are not appropriate for
emerging economies. In the seminal paper on institutional isomorphism, DiMaggio and Powell
identified three mechanisms through which institutions become similar: coercive isomorphism,
mimetic isomorphism and normative isomorphism. According to them, coercive isomorphism
generates from political influence and problems of legitimacy; mimetic isomorphism is a result
of a standard response to uncertain environments; and normative isomorphism is associated with
professionalism. DiMaggio and Powell state that coercive isomorphism may arise due to formal
or informal pressures.
In Bangladeshi CG scenario is dominated by few professional accountancy groups who are
supposed to self-regulate their members.
At present, the Institute of Chartered Accountants of Bangladesh (ICAB) is the only professional
association for chartered accountants. The ICAB is responsible for developing the codes of ethics
for its members, as well as self-regulating them. The ICAB has its code of professional ethics,
and preserves the right to take disciplinary actions, including cancellation of membership against
members violating said code. Bangladesh Accounting Standards are actually carbon copies of the
International Accounting Standards.
The absence of self-regulation in Bangladeshi corporate sector would then create a scope for the
development of private regulations. However, there have not been any attempts by the
professional accountancy and business bodies in Bangladesh to initiate any private regulatory
initiatives in CG such as Bangladesh Enterprise Institute (BEI), the SEC, the Bangladesh Bank
and the Registrar of Joint Stock Companies (RJSC) and those committee remained largely
ineffective due to lack of capacity and qualified personnel.
The primary government regulator in the Bangladesh CG scenario is the Securities and
18

Exchange Commission of Bangladesh (SEC). Established in 1993, the SECs objective is to

protect the investors, promote and develop capital markets in Bangladesh, and regulate the
securities market. In 1999, the Asian Development Bank (ADB) initiated a US $1.07
million project to strengthen the capacity of SEC so that it can perform its regulatory
functions.
In this article the author investigate the development of CG codes in Bangladesh. It is found
that the Bangladesh corporate and economic environment is characterized by high
ownership concentration, primitive capital markets, and high government dependence on
IFAs, easy availability of bank credit and subsequent default culture, and poor labour
conditions. The presence of all these factors suggest that the Anglo-American shareholder
model of CG, based on agency-based notions of market efficiency, will not be entirely
suitable for Bangladesh. Rather, the presence of representatives of banks and workers, as
suggested by the stakeholder model, could contribute to better loan recovery and
improvement of working conditions. The adoption of the stakeholder model may be even
more appropriate against the backdrop of the ongoing financial crisis, which has seen major
slowdown in global economy.

3. Methodology analysis of the article:

The article is written for the purpose of theoretical study based on qualitative technique. The
maximum datas of the article are collected previous reports that were written in this sector.
In the whole report author only focus on three question and try to finding the answer of
those question based on Bangladesh and other least developing countries. After reading the
article we say that mainly it focuses on the problem of corporate governance structure of
Bangladesh, how to solve this problems and the appropriate corporate governance structure
for Bangladesh.

19

4. Critical analysis of the Article:

The article mainly focuses on only the qualitative data.
In the article author try to solve mentioned three question one by one in the entire
article.
The author critically analyze the corporate governance structure of different
developing countries and suggest some indicators when choosing appropriate
corporate governance structure.
The author focus on Bangladesh corporate structure and describe the initiative for
adopting the CG only in Bangladesh perspective.
Author only focus on the actors of corporate governance of Bangladesh without
considering other emerging economies.
The author focus on only Anglo Saxon (shareholder) model of CG for emerging
economics.

5. Implications for Bangladesh:

The corporate environment in Bangladesh is characterized by concentrated ownership structure
(either family owned or controlled by substantial shareholders), bank financing, lack of
shareholder involvement, the reluctance of firms to raise capital through the stock markets poor
legal framework and lack of monitoring and eventual nonpayment of such loans, and lack of
quality manpower for operating the second-order institutions. In addition, the Bangladesh
corporate and economic environment also suffers from lack of timely information, political
instability, less developed capital market, absence of an active market for corporate control,
generally concentrated ownership, high reliance on bank financing and a passive managerial
labor market.
The article mainly focused on corporate governance structure of Bangladesh, problems of
corporate governance practice in Bangladesh and suggest stakeholders model as the best
suitable corporate governance structure for Bangladesh.
The number of auditors in Bangladesh is surprisingly low, even compared with its neighbors. So
increasing the number of audit firms for the fairness in the corporate sector.
20

According to World Bank and IMF it seems that stakeholder model is more appropriate then the
Anglo Saxon or shareholder model.
The IFAs have encouraged adoption of internationally accepted accounting and corporate
governance practices as a prerequisite for obtaining loans. In many cases, these agencies have
prescribed models of corporate governance that have been tested and developed in developed
economy conditions as a and the socio-economic conditions of the developing countries have
been ignored. Though its a problem for emerging countries they couldnt but take the loan. In
this case the countries need to focus on financing from banks and have representatives from
different groups to protect interest of each group and the society. The adoption of stakeholder
model will be beneficial for Bangladesh. The Bangladesh authority should give proper attention
to ensure appropriate corporate governance structure.

21

The adoption of international accounting standards in

Bangladesh; An exploration of rationale and process
(Article-09)
1. Summary of the article
Developing countries continue to adopt foreign accounting and educational systems. This is often
expensive, and the adopting country has little control over the relevance of imported accounting.
The main issue is whether the objectives of the assistance-granting country and receiving country
are congruent. This article focus is not to criticize the quality of IASs rather it contends that the
decision to adopt IASs is driven by institutional legitimization without a careful appreciation of
the differing contextual variables in Bangladesh.
Since the early 1970s the accounting profession in Bangladesh has witnessed a tremendous
growth in membership numbers culminating into two main accounting professional bodies, the
Institute of Chartered Accountants of Bangladesh (ICAB) and the Institute of Cost and
Management Accountants of Bangladesh (ICMAB) established in 1973 and 1977 respectively.
The principal objective of the two bodies is to promote the development of accountancy practice
in Bangladesh through engaging in activities that enhance the recognition and independence of
professional accountants in the country.
While the Companies Act 1994 legislates for companies operating in Bangladesh to prepare
financial statements which show a true and fair view and the Laws on Securities and Exchange
provide some guidelines for listed companies, the lack of accounting standards to guide the
preparation of these reports has always been a problematic issue.
The lack of accounting standards has made international lending/donor agencies very uneasy to
the extent that, in recent times, these agencies have put the Government of Bangladesh under
immense pressure to standardize financial reporting practices in the country. As a result, after a
long period without any involvement or interference with the practice of accounting, the
Government of Bangladesh has started lobbying the accounting profession to adopt all applicable
IASs for use in Bangladesh.
22

It seems that a common trend that binds the literature together is that the role and relevance of
the IASs in the developing world depend largely on the processes through which these standards
are adopted. While exploring the status of IASs and the harmonization drive, Carlson (1997)
pointed out that there has been little analysis of the processes that are involved in the adoption of
IASs by nations. Carlson recommended that IASC might achieve a greater level of adoption of
IASs if it were to more fully examine the processes of adopting standards rather than assuming
that nations will use their products
Most of the data and information are collected from interviewers. Most interviewees were senior
accountants in various sectors, academics including business law experts and business executives
who were capable of providing informed views on the adoption process. The objective of the
interviews with the lending and donor agencies was to explore the funding negotiation process as
well as the motivation for such lending. In addition, interviews were conducted with a random
sample of members of the two main professional accounting bodies (the ICAB and ICMAB). In
particular respondents were asked to identify perceived major benefits and critical problems (to
accounting practice, the accounting profession and the Bangladeshi economy) associated with
the decision for a wholesale adoption of IASs.
DiMaggio and Powell identified three mechanisms through which institutional isomorphic
change occurs, these are:
(1) Coercive isomorphism:
(2) Mimetic isomorphism; and
(3) Normative isomorphism.
They pointed out that while the three types intermingle in empirical settings, they tend to drive
from different conditions and may lead to different outcome.
The members of the ICMAB have interests in the adoption process for two main reasons: First,
the majority of the members hold high level financial positions in many organizations and their
responsibility includes meeting external reporting requirements. Second, the Companies Act
1994 has made provisions for the audit of cost accounts by Cost and Management Accountants
for companies engaged in production, distribution, marketing, transportation, processing,
23

manufacturing, milling, extraction, and mining activities. These statutory cost audits have a
strong impact on the external financial reporting of many organizations. The financial statements
of an issuer of a listed security shall be prepared in accordance with the requirements laid down
in the Schedule and the International Accounting Standards as adopted by the Institute of
Chartered Accountants of Bangladesh.
A key issue is the need to satisfy international investors. The government and international
institutions protect their interest with these policies. There is obvious tension between the two
professional bodies provoked by the apparent lack of consultation with members of ICMAB. The
SEC and Western lending institutions collaborate with the ICAB to the virtual exclusion of
ICMAB and other interested parties. Some members of the ICMAB expressed dissatisfaction on
grounds that the responsibility for adoption of IASs should have been delegated to an accounting
standard setting committee, as in most countries, with representative members from both bodies
and other interest groups such as academics and corporate leaders.
This proposal was rejected by ICAB which perceives itself as the only competent legal
authority in the country to adopt IAS and there was no justification whatsoever for formation of
the proposed Bangladesh Accounting and Auditing Standards Monitoring Board. This proposal is
still under consideration by the government of Bangladesh and the ICMAB have started to
actively lobby the World Bank Team for the establishment of the Board. Respondents believe
that the Ministry is not sincere about establishing the Board and simply wants to keep a
bureaucratic control over the accounting standard determination and monitoring process in the
country.
No progress has been made towards the development of an independent Board since then. We
dont know what is going on in reality as far as the compliance with various IASs are concerned.
There is a communication gap between us the professional accountants.
We have always thought that compliance with IASs was voluntary we are a bit disappointed
about the roles played by auditors concerning compliance with IASs for preparing financial
statements. They are signing reports without properly investigating whether compliance is okay
24

If this continues like that we will never be able to make sure concerning the compliance with
IASs in Bangladesh Some interviewees argued that there are key benefits to the Bangladeshi
economy as a whole in spite of the institutional legitimization that underlies the wholesale
adoption of IASs.
We are developing and these are changes that help the development process. Every country goes
through these changes. The adoption of IASs is one of the positive changes that are happening in
Bangladesh We have the people who are capable of setting local standards, but where is the
money to do that. Yes, lack of [financial] resources is the main problem. This applies to other
developing countries. The easiest way out is to adopt IASs. They may not be exactly tailor-made
for Bangladesh but they will provide a common accounting practice in the country . . . I think the
government is doing the right thing Accountability is one of the key issues that the government
needs to address. The adoption of international accounting standards will go a long way to assist
in this regard. With accountability, we can expect a change in culture or attitudes that will result
in economic growth.
In addition, the adoption of IASs should be perceived as a short-term solution to the current lack
of local accounting standards in Bangladesh. Future expansion of emerging sectors, such as the
garment export sector, would render problematic any institutionalized behaviors that seek the
legitimation of external constituencies, as these changes will further highlight the limitations of
importing readymade accounting standards. The long-term objective of the government and
various other institutions promoting the adoption of IASs should therefore be to encourage
Bangladesh to develop accounting standards that reflect the countrys growing needs and level of
socio-economic development. Indeed, accounting standards (whether local or IASs) per se, do
not improve the quality of financial reporting other environmental factors need to be carefully
considered.
We believe that in the long-term, IASs could be carefully examined and adapted to reflect the
environment of Bangladesh. This not only has the obvious advantage of cost effectiveness, in a
country with meagre resources, but also consistent with the calls for global harmonisation of
accounting standards Making changes to IASs to reflect the Bangladeshi legal and socio

25

economic environment should be less cumbersome because, as argued earlier, Bangladesh does
have the capacity/expertise to achieve this.

2. analysis of the article:

A key issue is the need to satisfy international investors. The government and
international institutions protect their interest with these policies. There is obvious
tension between the two professional bodies provoked by the apparent lack of
consultation with members of ICMAB.

The lack of consultation of the ICMAB makes some of its members very resentful of the
process and in some cases there is evidence of attempts to emasculate it.

The Ministrys involvement is opposed on the grounds that the majority of the proposed
members of the Board would be Government bureaucrats having little or no knowledge
about the accounting profession and accounting practice in the country.

We dont know what is going on in reality as far as the compliance with various IASs are
concerned. There is a communication gap between us the professional accountants.

IAS may not be exactly tailor-made for Bangladesh but they will provide a common
accounting practice in the country.

The ICAB and SEC appear to be uncritically supportive of the uncoordinated efforts by
the World Bank and other lending/donor agencies to encourage the adoption of IASs in
Bangladesh without reflecting on the long-term implications of such proposals.

We argue that the aid provided by the donor agencies to adopt IASs in Bangladesh
without considering the basic problems of the accounting infrastructure and institutions
may face a similar outcome in the not too distant future.

26

3. Implication for Bangladesh:

The biggest problem developing countries have is that of too many foreign experts
marketing half-baked solutions to problems that neither they nor the recipient nations

understand.
Donor agencies should collaborate more closely with the recipient country to ensure that
their assistance is delivered only in accordance with national accounting development
plans.

Local investors pay significant attention to the information provided in published annual
reports of listed companies in making their investment decisions.

Author observed that the mean economic growth rate of developing countries when
grouped by their approach to adoption or non-adoption of IASs was not significantly
different.

All interview questions were open-ended and unstructured to allow respondents to

provide their views through a free-flowing discussion. Among the most critical issues
discussed with respondents was the rationale for the wholesale adoption of IASs and the
respondents opinion in this regard.

The study draws on new institutional sociology as a theoretical resource for appreciating
the process and rationale for the adoption of IASs in Bangladesh.

Author argues that IASs are not a one-size-fit-all solution to developing countries and
some modification to either the standards or corporation laws in these countries may be
required for an effective implementation of these standards.
27

The ICAB and SEC appear to be uncritically supportive of the uncoordinated efforts by
the World Bank and other lending/donor agencies to encourage the adoption of IASs in
Bangladesh without reflecting on the long-term implications of such proposals.

Rationality, traditionalism and the state of corporate

governance mechanisms: illustrations from a less
developed country (article10)
1. Summary of the article
This paper is basically based on Webers work on Traditionalism and capitalism. Based on the
Webers work writer tried to show corporate governance practice in Bangladesh under capitalism
and rationality. For corporate governance Bangladesh follow Anglo American model of corporate
governance. This paper helps us to understand why managers of public limited companies show
loyalty to some owner shareholders rather than general shareholder.
Webers work is focused on the development of accounting practice to identify accountability,
transparency in corporate governance. For understanding the development of accounting practice
three level of analysis is required like the structural condition historical perspective and
organizational practice.
The development of Bangladeshi capitalism, as argued, is shaped by colonialism, exploitation,
interventions and families which reveals the traditionalist feature of capitalism. The majority of
the business corporations in Bangladesh are not listed on stock exchanges research has also
shown that the ownership structure of the large stock exchange listed companies is dominated by
families, not unlike other LDCs.
In Bangladesh traditionally most of the companies are family owned as a result majority of the
board director are family members. As a result decision tends to the benefit of the owner. It has
some benefit like when board of directors consist of family members important information
28

remain safe from unwanted disclosure. In this sense boar consist of family members is rational.
But general shareholders are dominated by the family owners which is not rational.
According to the law of Bangladesh meetings of board of directors must held at least 4 times a
year but this rules is not followed by most of the companies. According to Weber family or clans
take precedence over the legal authority. Often, there is no separation between the enterprise and
the household, and it is frequently difficult to discern larger segments of capital divided along
coherent sectorial lines. Due to the strong presence of close family members on the board, board
meetings turn into family meetings. Family meetings are not held publicly and information about
their outcome is not disclosed, as the business is seen as a household matter and therefore
confidential. This is also similar in other LDCs.
In last two decades many rules and regulation are formulated to protect the interest of
shareholders and make annual general meeting mandatory. It is also ensured than a number of
representatives in board of directors must be from the general shareholder. But author still
believe that annual general meeting does not serves its purpose properly like accountability and
transparency.
Dividend policy is another aspect of Bangladeshi companies where malpractice reaches its peak.
General shareholders have a strong preference for dividends in Bangladesh. SEC of Bangladesh
has introduced numbers of rules and regulation to ensure regular announcement of dividend. But
in Bangladesh most of the companies does not announce dividend timely. It is also found by the
author that some company announce dividend but do not pay it. Some other problem are also
prominent like it takes too long time for the payment of divided, companies declared only a part
of the dividend.
Auditing of companies financial document is also faulty in Bangladesh. While the financial
disclosure requirements and auditing standards set out by the SEC for listed companies are quite
comprehensive, actual compliance is highly questionable. Author found that owner manager
were not interested to the disclosure of financial information. They also wanted

representing

financial report according to their will to reduce tax payment. There is a close connection
between the auditor and owner to misplace the auditing process so that the owners interest is
served.

29

Finally this paper present an account of the corporate governance practice in Bangladesh and
traditionalist culture and capitalist mechanism in corporate governance practice in Bangladesh
and the effectiveness of corporate governance practice I in Bangladesh.

2. Methodology analysis of the article:

A series of semi-structured interviews were conducted. Observations and the personal working
experience of one of the researchers, along with documentation, provided rich sources of
information for the paper.

3. Criticism of the article:

Here researcher used a semi structured method and personal experience to find out the result.
Here researcher basically does qualitative research because this research is based on theoretical
aspects. Researcher also used some quantitative table to show some information. Methodology
that researcher used is quite good but for the perspective of Bangladesh structured and
specialized question pattern is appropriate.
In this paper researcher used simple technique for finding out the result but it is recommended
that there are many other methods that can be used so that the result would be more appropriate.
Here researcher took some voluntary interview and depends on personal experience which is not
adequate for finding out the actual result.
To make the paper more authentic and resourceful researcher should have gone through some
more in depth interview with the some key personnel of some top level companies and
regulatory authority. Author had to use a structured questionnaires and some quantitative
technique.

4. Implication for Bangladesh

In this article author basically focused on the corporate governance practice in Bangladesh. So in
this article there are some issues which can be implemented to improve the corporate governance
practice in Bangladesh. As most of the companies in Bangladesh are family owned board of
30

directors mainly focuses on their own interest so there is lack of transparency and accountability.
So board of directors must take into account the benefit of the general shareholder while taking
any decision. Every company must follow the rule of including at least some members from the
general shareholder.
Moreover companies are unwilling to announce dividend which I also reduce their credibility.so
companies must announce dividend timely and properly according to the rules set by the
government.
And finally most of the companies are unwilling to audit their accounts properly. Government
should implement strict regulation and create pressure so that companies audit their account
properly and ensure good corporate governance practice.

31

Chapter03: Conclusion
Although corporate governance is a hot topic in boardrooms today, it is a relatively new field
of study. Corporate Governance is the system by which business corporations are directed
and controlled. Its structure specifies the distribution of rights and responsibilities among
companys different actors such as board, management, shareholders and other stake holders.
Transparency and accountability are its major attributes. Beyond this there is a growing
recognition that a good Corporate Governance system actively adds value to the long run.
Viewed in this context, Corporate Governance is the enhancement of the long term
shareholders value while at the same time protecting the interest of other stake holders.
Developing good corporate governance structure is important for each country. To develop a
proper CG model each country should establish some mechanisms and infrastructure like
strong capital market, good code of corporate governance, strong government and nongovernment authority to establish, define and monitor CG practice and identification of
factors that affect CG practice and solve them. Developing countries like Bangladesh lacks
behind those requirements. Strengthening the corporate governance practice in Bangladesh
arises with a global demand for a sound and transparent corporate world system. Having so
many problems, Bangladesh is trying to adopt proper CG structure. The positive effect of
corporate governance on different stakeholders ultimately is a strengthened economy, and
hence good corporate governance is a tool for socio-economic development in Bangladesh.

32

Reference

Shahzad Uddin and Jamal A Choudhury (2008) Rationality, traditionalism and the state

of corporate governance mechanisms: illustrations from a less developed country

Javed Siddiqui, (2010) Development of Corporate Governance Regulations: The Case of

an Emerging Economy Journal of Business Ethics 91: pp. 253-274.

Ruth V. Aguilera and Alvaro cuervo-Cazurra, (2009) Codes of Good Governance

Corporate Governance: An International Review May Vol.17 No.3.

Monir Zaman Mir, Abu Siraz Rahman, (2005), The adoption of international accounting
standards in Bangladesh, Accounting, Auditing & accountability Journal, Vol. 18 Iss 6

pp. 816-841
Christine A. Mallin, (2013), Corporate Governance, 4th Edition. Oxford University Press.
Bob Tricker, (2012), Corporate Governance, 2nd Edition. Oxford University Press.

33

Refection Account
(The contribution of the group members)
1. Abdullah-Al-Mamun. Roll-03
Rationality, traditionalism and the state of corporate governance mechanisms:
illustrations from a less developed country (Article-10): summary, critical analysis of
the article, critical analysis on methodology and implications for Bangladesh.
2. Md.Monir Hosen. Roll-16
Development of Corporate Governance Regulations: The Case of an Emerging
Economy (Article-06): objectives, summary, critical analysis of the article, critical
analysis on methodology and implications for Bangladesh.
Chapter 01 & 03 and the final completion of the report.
3. Faria Naz Lamia. Roll-87
Codes of Good Governance (Article-02): summary, critical analysis of the article,
critical analysis on methodology and implications for Bangladesh.
4.

Shahanaz Pervin. Roll-91

The adoption of international accounting standards in Bangladesh; An exploration
of rationale and process (Article-09): summary, critical analysis of the article,
implications for Bangladesh.

34