1. THE EFFECTIVENESS OF CORPORATE BOARDS IN PAKISTAN ZAFFAR A. KHAN 30-November-2006

2. THE STUDY METHODOLOGY o Based on a questionnaire probing range of Board Practices o Sent to 40 leading listed companies –mix of MNC’s, SOE’s & Family Enterprises o Solicited responses from 2 Board Positions of each company o 35 companies / 54 Directors responded.

3. THE STUDY FINDINGS Does the Board assess it’s own performance.5481 Is the CEO formally appraised each year.27252 Is the Board empowered to set CEO’s Compensation.26271 Does the Board engage in succession planning.22311 Is it good to separate the Chairman & CEO positions.4941 Should non-executive Directors receive compensation.4671 The Responses YESNONR

4. THE STUDY FINDINGS………..continued Is the Board involved with debating and approving key business strategies.4880 Does the Board have any retreat meetings.7470 Does the Board formally assess the Human Resource Stock and employee morale.10422 Does the Board have a CSR policy.22311 The Responses YESNONR

5. FREQUENTLY CITED SUGGESTIONS FOR IMPROVING BOARD EFFECTIVENESS o The need for more independent directors – professionals with relevant industry experience. o Instituting a self evaluation process of the Board’s performance. o Better orientation and training of Directors. o Making effective use of Board Committees.

6. FREQUENTLY CITED SUGGESTIONS FOR IMPROVING BOARD EFFECTIVENESS …..continued o Less interference from government in Board’s decision making in case of SOE’s. o Limiting number of Directorships a person can hold. o Greater focus by the Board on strategy as opposed to management issues. o Boards should be required to set up HR Committees. Give same status as the Audit Committee in the Code.

7. CONCLUSION o In our top Co’s there is appreciable recognition & a desire to conform to principles of GCG. o There are, however, gaps and in some cases the practice is superficial. o The overall universe of Co’s requires a fair bit more to be done. o GCG can not be achieved through prescription alone. o All stakeholders must want it. Capital Markets and Society must be more demanding & discerning.

8. A PARTING THOUGHT o “Good Corporate Governance is about maximising wealth in a legitimate way and distributing it in an equitable way”. o An Effective Board is essential to meet the twin objectives stated above.