Ceci n'est pas une pipe!Corporate Governance practices under two political regimes in

Bangladesh: A political economy perspective

ABSTRACT

This study investigates self-reported paper-based tick-box corporate governance (CG) compliance and actual CG compliance, and also the effectiveness of the Anglo-Saxon model of CG in Bangladesh. This study provides one of the very few studies utilising an emerging economy data in international business governance research under two very different political regimes. A survey of annual reports, 1,194 SEC enforcement documents were evaluated and 20 semi-structured interviews were conducted. Drawing on political economy theory, this study contributes to the international CG literature in two ways. First, actual CG compliance and falsification were stable under two political regimes. This indicates that, at least from the point of view of CG and the stock market, the democratic and military governments in Bangladesh were equal. However, the rate of falsification of information is an alarming issue for both local and international policy-makers. Second, the Anglo-Saxon model of CG is not conducive in Bangladesh because of contextual factors including: (a) family ownership, (b) political businessmen, (c) corruption and lack of enforcement, and (d) the donor’s continual intervention. It can be argued that Anglo-Saxon model of CG transplanted in completely different institutional environments may outweigh its benefit and ultimately challenge appropriateness in emerging economies.

Keywords: CG; Democratic and military governments; Emerging economy; Political

economy theory

JEL: K22, M41, M42, M48, P16

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1. Introduction

In ‘The Treachery of Images’ (1928-29) Magritte painted a tobacco pipe and beneath it he wrote, ‘Ceci n'est pas une pipe’, which translates as ‘This is not a pipe’. Magritte said about this painting: “And yet, could you stuff my pipe? No, it’s just a representation, is it not? So if I had written on my picture ‘This is a pipe’, I’d have been lying!”. Likewise this metaphour, the true nature of CG has often been called into question in international corporate governance (CG) literature.

Over the last decade, many emerging economies have adopted the Western model of CG Codes (Rossouw, 2005; Okike, 2007; Li, Parsa, Tang and Xiao, 2012; Mahadeo and Soobaroyen, 2013; Munisi and Randoy, 2013; Biswas, 2015; Subramanian, 2015; Adegbite, 2015; Christensen, Kent, Routledge, and Stewart, 2015; Ntim, Opong, and Danbolt, 2015; Al-Bassam, Ntim, Opong, and Downs, 2015, forthcoming). According to Sir Adrian Cadbury (head of the Committee on ‘Financial Aspects of CG’), “CG is the system by which companies are directed and controlled” (The Cadbury Committee Report, 1992, paragraph 2.5). Meanwhile, according to the Financial Reporting Council’s (FRC) UK CG Code [formerly the Combined Code] (2014, paragraph 1), “The purpose of CG is to facilitate effective, entrepreneurial and prudent management that can deliver the long term success of the company”. Two different schools of thought exist regarding the adoption of CG Code in emerging economies. One group suggests that the adoption of such Codes contribute to corporation‘s growth and value creation (Jamali, Safieddine, and Rabbath, 2008), high level financial performance (Rajagopalan and Zhang, 2008), and foreign direct investment (Hermes, Postma, and Zivkov, 2006). The second group argues that the Western model is not suitable and is, to some extent, irrelevant to the emerging markets context due to institutional settings (Uddin and Choudhury, 2008; Siddiqui, 2010; Samaha, Dahawy, Hussainey, and Stapleton, 2012). However, relatively little research effort has been devoted to CG issues in emerging economies (Davis, 2005). The emerging economies, in particular, provide unique opportunities and challenges for governance practices and research (Reed, 2002; Davis, 2005). According to Rajagopalan and Zhang (2008, p. 56), “Well-functioning CG mechanisms in emerging economies are of crucial importance for both local firms and foreign investors that are interested in pursuing the tremendous opportunities for investment and growth that emerging economies provide”.

The study focuses upon Bangladesh because of several reasons. After Bangladesh gained independence from Pakistan in 1971, it has experienced a large number of military coups. This means that Bangladesh has been controlled by both democratic and military governments. Out of 45 years of independence, Bangladesh has had military-backed governments for 19 years and democratic governments for 26 years. Meanwhile, modern Bangladesh has a population of over 160 million people and it is one of the world’s most densely populated countries. Table 1 presents the market capitalisation of the Bangladesh’s stock market, which is ranked the second largest in South Asia (in US$ mn 29,839.30) after India (in US$ mn 1,263,335.50). Similar to other South Asian economies, family based ownership is a common CG feature in many firms in Bangladesh and concepts of the Anglo-Saxon CG model dominate in the local practice of CG (Siddiqui, 2010). Bangladesh first started to make liberal market reforms in the mid-1980s during Lieutenant General Ershad’s military-backed government. However, despite liberalisation, modern Bangladesh continues to face numerous political,

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economic, social and environmental challenges, including: political instability, corruption, poverty, overpopulation and climate change. The comments from the World Bank (2009) and International Finance Corporation, (2010) call for the strengthening of the CG of Bangladeshi listed companies to make them more accountable to the various stakeholders has gained momentum following the corporate collapse of Bangladesh in the late 1990s and early 2000s. Therefore, this study aims to explore the reality of CG compliance under democratic and military governments in an emerging economy.

[Insert Table 1]

During 1996-1997, an estimated 300,000 small investors were drawn into the Bangladeshi stock market, this was a period which The Economist described as a “slaughter of the innocents” (The Economist, 1997). After the stock market crashes of 1996-1997 and 2010-2011, the biggest scandal in Bangladesh history occurred in 2012 when the Sonali Bank (a state-owned commercial bank in Bangladesh) was found to have been involved in money embezzlement that amounted to Tk 36.48 billion (US$460 million). The largest share of the money, Tk 26.86 billion (US$340 million), went to the Hallmark Group. This major crime exposed the weaknesses of the CG structures currently in place in Bangladesh (The Financial Express, 2013). Although the Bangladesh Bank’s (Central Bank of Bangladesh) investigation team identified massive corruption at the Sonali Bank in 2010, they did not take major steps against Sonali Bank due to political pressure (Siddiqui, 2012). This scandal demonstrates the necessity of actual implementing CG. Furthermore, according to Forbes (2014), “With about 4% of public listings on Bangladesh’s stock exchanges held by foreigners,  foreign investment in Bangladesh stock market has always been low compared to other frontier markets such as Vietnam, Pakistan and Sri Lanka”.

In this study, an initial CG compliance disclosure score describes the company’s self-reporting CG compliance tick-box checklist in the annual report, as mandatorily required by the BSEC CG Guidelines (No. SEC/CMRRCD/2006-158/Admin/02-08) from 2006. The actual CG compliance disclosure score describes the detailed investigation of CG practices of company based on the BSEC’s CG checklist (rather than relying upon companies’ self-reported disclosure). Falsification describes the difference between the self-reported disclosure score (initial disclosure) by the company and the actual score the actual score through detailed investigation of annual report (i.e. initial CG compliance disclosure score [maximum of 1] > actual CG compliance disclosure score [maximum of 1]; falsification arises if this is positive).

The central contention of this study is to addresses two related research questions: (a) What was the state of CG compliance in Bangladesh under the military-backed governments and democratic governments?, and (b) To what extent is the Western model of CG (Anglo-Saxon) (in)effective in a developing country like Bangladesh? To address these research questions, this study has adopted longitudinal multi-methods including: a survey of annual reports, interviews and documentary analysis. The period of study was selected because CG was mandatory in Bangladesh from 2006 and two political regimes existed (2007–2011 a military-backed government, and 2011–on a

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democratic government). In addition, this period of time corresponds with a period of significant change within both the market and the political regime, including comments from the Institute of Chartered Accountants of Bangladesh (ICAB) on the quality of annual reports, the BSEC CG Ordinance 2006, and recommendations for Financial Reporting Act under the military-backed government.

Drawing on political economy theory (Zald, 1970; Hoogvelt and Tinkler, 1978; Cooper, 1980; Cooper and Sherer, 1984; Gomez and Korine, 2005; Pagano and Volpin, 2005; Clift 2007; Arnold, 2009), this study contributes to the international CG literature in two ways. First, the actual CG compliance and falsification were stable under two political regimes. This means that, at least for CG and the stock markets, the democratic and the military governments in Bangladesh were equal. Similar to Haggard and Kaufman’s (1997) argument that an immature democracy led to poor governance, our findings demonstrate that Bangladesh’s political instability and immature democracy over the last 45 years has prevented the rule of law and poor governance. The findings of this study also raise a significant question for both the local and international policy-makers, and (most importantly) for local and international investors. Second, political economy theory argues that Anglo-Saxon model of CG is not conducive in an emerging economy like Bangladesh because of four contextual factors, which are: (a) family ownership and the absence of independent director, (b) political businessmen, (c) corruption and the lack of enforcement, and (d) the donor’s continual intervention. It can be argued that it is not appropriate to transplant the Anglo-Saxon model of CG directly into a completely different institutional environment without some form of modification. Unlike Shleifer and Vishny (1997), and La Porta et al. (1998 and 2006), even though Bangladesh is a common law, it lacks shareholder protection and good governance. The formal institutional change has not been transformed into firm practices and the emergent transparency norms have only been slightly inculcated into Bangladeshi society. Our findings also demonstrate that the current state of CG compliance in Bangladesh is little more than a box ticking compliance, which shows that CG is symbolic (Clift, 2007).

The remainder of this paper is organised as follows. In section two, we discuss political economy theoretical framework and research gap. Section three outlines the political regimes and CG regulatory framework in Bangladesh. Section four contains research methodology. In section five, we report the findings and discussions of the study. Section six provides the conclusions of the study.

2. Political Economy Theory and Research Gap

2.1 Political Economy Theory

The phrase ‘political economy’ is a combination of two Greek words: ‘polis’ (city or state) and ‘oikonomos’ (one who manages the household). Initially, ‘political economy’ defined the relationship between government and the economy to promote competitive markets that efficiently allocate resources (Wehner and de Renzio, 2013). Political economy has been defined as ‘the study of the interplay of power, the goals of power wielders, and the productive exchange system’ (Zald, 1970, p. 233). Arnold (2012, p.

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362) uses this term as ‘a broader conceptualisation of institutional research in accounting that includes a macro political and economic perspective’. Prior researchers have used this term but they have failed to define it explicitly (Aglietta, 1976; Peltzman, 1976; Cooper, 1980; Cooper and Keim, 1983; Boyer, 1990, 2007; Shleifer and Vishny, 1997; LaPorta, Lopez-de-Silanes, Shleifer, and Vishny, 2006; Bushman and Piotroski, 2006; Arnold, 2009; Harvey, 2010). Marx’s ‘bourgeois’ (or ‘vulgar’) political economy negates the qualitative analysis of political economy. In addition, ‘bourgeois political economy’ largely ignores pluralistic view (Tinker, Lehman, and Neimark, 1991; Gray, Owen, and Maunders, 1988; Arnold, 1990; Gray, Walters, Bebbington, and Thompson, 1995). Lowe and Tinker (1977) argue that accounting research should be based on a pluralist conception of society. This view assumes that ‘power is widely diffused and that society is composed of individuals whose preferences are to predominate in social choices and with no individual able to consistently influence that society (or the accounting function therein)’ (Cooper and Sherer, 1984, p. 207). People are seen to act solely within their own economic self-interest, which may be seen as a consequence of the way that society is organised rather than an unchangeable characteristic of the human race (Hoogvelt and Tinkler, 1978; Tinker, 1980, 1984). According to Clift, (2007, p. 549), “CG involves a ‘nexus of institutions’ through which governments, state actors and stakeholders organise and regulate corporate and economic activity. Its impact on actors’ behaviour, norms and incentive structures shapes how capitalism works in any given setting. Key mechanisms of change within CG, often associated with restructuring along the lines of Anglo-Saxon capitalism, include the market for corporate control, transparent accounting and shareholder value norms”.

In the case of CG, the political economy theoretical framework view that there are a number of actors under various political regimes who may influence the State’s policies and its implementation. I will focus on the democratic and military political regimes, and the contributions of sociological institutionalism to the study of CG. Political economy in this study also explicitly includes a macro (external) and micro (internal) political and economic perspective for a broader conceptualisation of the analysis because the different actors involved in the process may have potentially conflicting interests and incentives (Wehner and de Renzio, 2013, p. 84).

Political Regimes and Legal System

Military-backed governments can be a ‘perfect agent’ for some social groups, such as the elite (Acemoglu, Ticchi, and Vindigni, 2010, p. 3). Military-backed governments emerge either as a result of a coup against a nondemocratic regime or against a democratic government (Haggard and Kaufman, 1997). In particular, in societies with very high levels of inequality, society is more likely to be nondemocratic (either oligarchic or a military-backed government). For example, following the Egyptian Revolution of 2011, Mohamed Morsi was elected as a president 2012. However, Egypt's fifth president was removed by the head of the army, General Abdel Fattah el-Sisi, who was subsequently elected as president in 2014. Similar evidence of military regimes can be found in Pakistan (General Ayub Khan in 1958, General Muhammad Zia-ul-Haq in 1977, and General Pervez Musharraf in 1999), Guatemala (Carlos Castillo Armas in 1954), El Salvador (Lieutenant colonel José Maria Lemus in 1956), Brazil (overthrow of President João Goulart by part of the Armed Forces in 1964), and Greece (Brigadier

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General Stylianos Pattakos, Colonel George Papadopoulos and Colonel Nikolaos Makarezos in 1967). Repeated military interventions can also be found in Turkey (General Cemal Gursel in 1960; Memduh Tağmaç in 1971; Ahmet Kenan Evren in 1980; military memorandum in 1997); and in Thailand (military is the dominant political force since 1932).

On the other hand, according to Haggard and Kaufman (1997, pp. 263-283), “democratic governments enjoy advantages that authoritarian regimes lack”. Democratic procedures play a critical role in achieving consent by the governed in modern society [Tocqueville’s hypothesis on democracy] (Gomez and Korine, 2005). According to Tocqueville (2000) [1830], enfranchisement refers to equal treatment for every citizen, separation of powers refers to the protection of individual freedom, prevent the abuses of military-backed government/autocracy, and representation with public debate refers to welcoming differences of opinion, transparency and strengthening individual freedom (in contrast to authoritarian regimes). Examining the historical record of institutional reform in France, Germany, the United Kingdom and the United States, Gomez and Korine (2005) find that “CG has indeed evolved to make increasing use of democratic procedures. Viewed over the long term of two centuries of capitalist development, CG is seen to have successively incorporated enfranchisement, separation of powers and representation”.

The legal system is an important element of CG in which investor protection is rooted (Shleifer and Vishny, 1997; Morin, 2000; O’Sullivan, 2003). This approach was initially proposed by La Porta, Lopez-de-Silanes, Schleifer, and Vishny (1998). La Porta et al. (1998) classified legal systems into four ‘families’: the common law system and the French, German, and Scandinavian civil-law traditions. They show that shareholder protection is significantly higher in the common law countries. They also argue that the quality of law protecting minority shareholders is the crucial determinant of the degree of dispersion of share ownership (La Porta et al., 2006). Tsamenyi et al. (2007) stressed how the ownership effects influence the processes of CG disclosure, namely: families or government and shareholder-managers maintaining relationships despite national legal or stock market listing requirements.

In the Anglo-Saxon CG model, one of the key mechanisms is dispersal of ownership and “institutional investors are as active shareholders, monitoring management methods and decisions and making their voices heard” (Morin, 2000, p. 36). Reed (2002) argued that although many emerging economies were adopting the Anglo-American model of CG due to historical reasons, they lacked the capacity and robustness to tackle locally peculiar challenges. For instance, the adoption of CG in India was encouraged by a combination of global political economy pressures (p. 249). Like India, many emerging economies are former British colonies and their regulations are predominantly based on the British common law system (Ahunwan, 2002; Wood and Frynas, 2006; Adegbite, Amaeshi, and Amao, 2012; Adegbite, Amaeshi, and Nakajima, 2013). Anglo-Saxon countries, whose political systems tend to be majoritarian, have strong investor protection in contrast to continental European countries and Japan, which tend to have proportional voting systems and have weak investor protection (Pagano and Volpin, 2005).

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Internal and External Actors

External actors or donors, such as the World Bank and the International Monetary Fund (IMF), can play an important role in reforming governance and economic policy. The donors’ development agenda is somewhat subject to political and ideological influence (Chang, 2007; Siddiqui, 2010; Lynch and Crawford, 2011). Lassou, Tsamenyi and Hopper (2014, p. 13) opined that “Alongside their financial support, they transmit their influence over government policy and reform through loan conditionality, the use of advisers (or technical assistants), and the provision of direct training”. However, researchers like Bräutigam and Knack (2004) and Haggard and Webb (1993) argue that institutional reforms are more likely to succeed if insulated from external pressure in emerging economies, especially in Africa where weak institutions and rule of law often prevail. Siddiqui (2010), Adegbite et al. (2012), and Adegbite, Amaeshi and Nakajima (2013) argued that donor agencies were influencing many emerging economies to adopt these practices. On the other hand, Qu and Leung’s (2006) studied the Chinese context to link cultural factors and CG.

In terms of internal actors, Gourevitch and Shinn (2005, p. 8) point out that “laws express the outcome of political processes”. In countries with poor political institutions and weak CG, ownership tends to be more concentrated. Prior studies such as Milhaupt and Pistor (2007), and Qi, Roth, and Wald (2010), have suggested that legal institutions which impact financial development are affected by a country’s political institutions (such as the implementation of specific rules and regulations). Lassou et al. (2014, p. 11) argued that “the sphere of internal political system and institutions includes transition to democracy, constitutions, the electoral cycle, the quality of bureaucrats, and relations between institutions, especially the interest groups of political parties and civil society (including trade unions and media)”.

Business and industry groups and civil society are important internal actors in developing good governance and democracy (Sandbrook, 1996). Civil society includes most organisations outside those controlled by the state (Sandbrook, 1996). Lipset (1996, p.169) define political groups as those “who seek to gain or keep office must present the voters with alternative policies, personalities, or critiques of extant institutions-- political, economic, or otherwise”. The United Nations (UN) Millennium Project (2005) [The United Nations Development Programme - UNDP] also highly emphasised for strong civil society engagement and participation in emerging economies because these actors tend to influence governance systems (p. 8). In Stigler’s (1971, pp. 3-7) analysis “industry groups and other social factions seek to capture the state’s regulatory apparatus in order to expropriate wealth or income”. Jensen and Meckling (1980, p. 305) also refer to “the abuse of state power by politicians, bureaucrats, and various special interest groups to increase their welfare at the expense of others”. Adegbite et al. (2013) examined the influences of three major actors (i.e. international organisations, rating agencies, and local institutions) on the development of CG practices in Nigeria and found that the understanding and practice of CG in Nigeria are in a flux and are being pulled in multiple directions by the actors that they studied.

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2.2 Research Gap

To date, limited studies have been conducted on CG practices and implementation in emerging economies (Ahunwan, 2002; Reed, 2002; Rossouw, 2005; Qu and Leung, 2006; Okike, 2007; Tsamenyi, Enninful-Adu, and Onumah, 2007; Uddin and Choudhury, 2008; Wanyama, Burton, and Helliar, 2009; Siddiqui, 2010; Ararat and Dallas, 2011; Samaha, Dahawy, Hussainey, and Stapleton, 2012; Mahadeo and Soobaroyen, 2013; Sharma, 2014; Biswas, 2015). The majority of these studies have examined the firm-level determinants and CG disclosure practices. Prior studies also found a low level of CG compliance in emerging economies (Tsipouri and Xanthakis, 2004; Wanyama, Burton, and Helliar, 2009; Tsamenyi et al., 2007; Al-Bassam, Ntim, Opong, and Downs, 2015, forthcoming). Surprisingly, most of the prior studies were unable to explain the contextual factors of CG compliance while political economy issues were rarely explored. Some challenges were also reported, particularly in sub-Saharan African countries, including: widespread corruption, political instability, bad leadership, ethnic rivalry and religious tensions (Ahunwan, 2002; Okike, 2007; Adegbite et al., 2012; Adegbite, 2015). Prior research thus calls for further study of the effect of internal and external influences on the evolving landscape of CG and accountability in emerging economies (Ahunwan, 2002; Rossouw 2005; Okike 2007; West 2009; Adegbite et al., 2013).

In the light of the previous literature, it is important to note that the literature on CG does not fully recognise the actual implementation of CG practices in a developing country under two very different political regimes and it does not detail the Anglo-Saxon model’s appropriateness in a different institutional setting in an emerging economy. These important issues have received very little attention in prior research, and accordingly this present study seeks to find answers to the following interrelated research questions (RQ):

RQ-1: What was the state of CG compliance in Bangladesh under the military-backed government and democratic government?

RQ-2: To what extent is the Western model of CG (Anglo-Saxon) (in)effective in a developing country like Bangladesh?

3. Political Regimes and CG Regulatory Framework in Bangladesh

Since independence in 1971, Bangladesh has had two political regimes: military governments and democratically elected governments. In total, Bangladesh has had 19 years of military governments and 26 years of democratic governments. Although democracy was restored in 1990, the military intervened from 2006 to 2008. Sometimes, the regime exerts “elections without democracy”; such as the democratic, Awami League led government, which finished its term in 2014. Although elections were called on 5 January 2014, the largest opposition party, the BNP, did not

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participate. Consequently, the current Awami League led government has consecutively ruled for two terms. Most recently, on the day of the city corporation elections in 2015, the BNP-led candidates withdrew their names from the election due to corruption at the ballot box and allegations that the election was neither free nor fair (The New Nation, 2015). This illustrates some of the tension that has arisen between democratic and military governments in Bangladesh. Evans and Andersen (2004) argue that both ruling and opposition parties are likely to bring attention to how governance institutions can improve the rule of law and, hence, improve economic and social conditions, and can also help to secure the election.

Bangladesh is a common law country, and much of its corporate legal framework is based on significantly older UK legislation. Key laws include the Companies Act 1994, the Bank Companies Act 1991, the Bangladesh Securities and Exchange Ordinance 1969, the BSEC Act 1993, and the Insurance Act 2010. The BSEC is the supervisor of the markets and listed companies. The Companies Act 1994 is based on the 1913 UK Companies Act. According to the World Bank (2009, p. 2), “Compliance is at its early stage - in 2007, about 33 percent of the companies declared full compliance with the Guidelines and 60 percent declared partial compliance”. The Companies Act 1994 of Bangladesh defines the rights of both the majority and the minority shareholders (Section 233, the Companies Act 1994) but does not refer to CG.

The CG initiative for Bangladesh started under democratic era (2002). In doing so, the Bangladesh Enterprise Institute (BEI), a private sector research think tank, examined the state of CG norms and practices in the country, as compared to India, Pakistan, and Sri Lanka in 2003. This report concluded that there was poor understanding about CG in Bangladesh because it is the only country within South Asia without a ‘Code of CG’. The report also provided a way forward for Bangladesh, which included recommendations to draft a Code of CG for Bangladesh (Sobhan and Werner, 2003). Consequently, in August 2003 a National Task Force including 35 members was formed to draft the CG Code. The ‘Code of CG for Bangladesh’ was published in March 2004 (http://www.ecgi.org/codes/documents/code.pdf). According to the Code of CG (BEI, 2004, p. 6), “CG can be a catalyst for change, for higher economic growth, for a more efficient use of resources, for a private sector that is accountable to investors and society, for a reduction in corruption, and for a healthy inflow of funds from domestic and foreign investors”. The Code prescribes the principles, procedures and process through which better CG practices may gradually be introduced. As such, the Code is organised into ‘Principles and Guidelines’ (p. 5). The Code of CG for Bangladesh outlined six major areas: a) board issues, role of shareholders; b) financial reporting, auditing and non-financial disclosures; c) sector-specific provisions: financial institutions; d) financial institutions; e) state-owned enterprises (SOEs); and, f) exhortations to other entities.

However, the BEI had no power to enforce the Code of CG for the listed companies in Bangladesh because the Code was voluntary (World Bank, 2009). The BEI (2004, 2006) advises that the Code of CG should be adopted by the BSEC on a ‘compliance or explain’ basis. Afterwards, the ICAB issued a set of principles and rules to be followed by companies in Bangladesh which was also voluntary in nature. The Code for CG practices developed by the ICAB was based on the Organisation for Economic

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Cooperation and Development (OECD) principles of CG and other best practices (Ahmed, 2004). The Bangladesh Bank (BB) is the central bank of Bangladesh and it regulates the financial sector under the 1991 Bank Companies Act and the 1993 Financial Institution Act. Although it issued Prudential Regulations on CG for banks in 2003, this is applicable only for financial companies. Consequently, the legal system in Bangladesh did not provide sufficient legal, institutional, or economic motivation for stakeholders to encourage and enforce CG practices until 2006 (under military-backed government) and the BSEC has played an instrumental role in safeguarding the public interest as a regulatory agency. The following two comments from the World Bank describe the reform of Bangladesh’s capital market in terms of regulation and market supervision.

“Bangladesh’s capital markets remain some of the most underdeveloped in the region. The basic legal framework for CG in Bangladesh is dated, and there are a number of contradictions and points of confusion between the various rules and regulations that apply to listed companies. Shareholders do not have sufficient rights regarding related party transactions, the choice of board members, or the disclosure of control. Building on current efforts, more needs to be done to raise the quality of accounting and auditing. Greater independence and professionalism is required in the boardrooms of both listed companies and state-owned enterprises. Neither the Registrar of Joint Stock Companies nor the courts are particularly effective at enforcing the Companies Act” (World Bank, 2009, p. 3).

“While the SEC has been active in trying to protect investors, for capital markets to continue to grow and approach the size of other Asian economies, substantial and long term reform will be needed” (Mr. David Robinett, Private Sector Development Specialist of World Bank, International Finance Corporation (IFC), 2010, p.1).

Under the military-backed government, on 9 January, 2006, the BSEC (2006a) issued a notification on CG Guidelines under section 2CC of the Securities and Exchange Ordinance, 1969 (Order No. SEC/CMRRCD/2006-158/Admin/02-06). Later, on 20 February 2006, BSEC (2006b) issued a revised notification on CG Guidelines (No. SEC/CMRRCD/2006-158/Admin/02-08) and superseded its earlier Order (No. SEC/CMRRCD/2006-158/Admin/02-06 dated the 9 January, 2006). According to the BSEC (2006b), listed companies in Bangladesh are mandatorily required to report CG compliance under the CG Guidelines issued by the BSEC. A company needs to disclose whether it has complied with the items of the CG information mandatorily. There are 16 disclosure items, which are summarised in Appendix 1. It is interesting to note that despite the provision of an independent director on the board, there is no clear definition or guideline about the qualification for the appointment of an independent director. In addition, the CG Guidelines do not deal with other aspect of CG, including shareholder rights. Additionally, there are no penalty provisions for companies who fail to comply with the CG Code issued by the BSEC and there is no mention about related party transactions.

4. Research Methodology

Political economy theory has been used to inform several previous multi-method studies (e.g. Cooper and Sherer, 1984; Clift, 2007). Accordingly, this longitudinal study use

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multi-methods, which includes: (a) a survey of annual reports; (b) documentary analysis; and, (c) interviews. The multi-methods enabled triangulation of the findings and made the research more robust and reliable (Jick, 1979; Miles and Huberman, 1994; Patton, 2002; Creswell, 2003; Maxwell, 2004). The distinctive advantage of employing multi-methods is that this research paradigm is theoretically sound and highlights any inherent bias in the data sources (Creswell, 2009). This approach has enabled the authors to understand the events and address the “why” and “how” questions that are established out in the research setting (Yin, 2009).

(a) A survey of annual reports

Firstly, a survey of annual reports was conducted for two years (2007 and 2011) in terms of CG compliance. The period of study was selected because it covers various political regimes. The year 2007 refers to military-backed government while the year 2011 refers to democratic government. The BSEC rules require that listed companies mandatorily report CG compliance under the provisions of the CG Code 2006. In addition, the BSEC CG Ordinance 2006 was revised during this period.

Companies that were listed throughout the two year period (2007 and 2011) were selected. The listed companies in the DSE for the year 2007 and 2011 were 278 and 232, respectively (as reported in Table 1). The sample excludes Corporate Bond (8), Debenture (1), Mutual Fund (18), and Treasury bond (135) because these companies are not required to provide an annual report to the DSE. Unlike other markets, the annual reports were not available on the website of the DSE. Instead, the authors had to collect the address from the DSE and then collected the annual reports directly from the head office of the companies. It is worth noting that 22 companies refused to provide annual reports. Hence, the available companies for the study (i.e. target population) were 112 in 2007 and 66 in 2011. The final sample consists of 40 companies listed with the DSE in Bangladesh, producing a total sample of 80 firm-year observations. These companies1

were selected based on the random sampling method because each company in the target population had equal probability of being chosen (Cooper and Schindler, 2008). According to Sharma (2014, p. 430), the random selection process could be used for two reasons: “(a) it had little or no bias; and (b) the sample provided an adequate meticulousness”. The sample of the present study represents 35.71% in 2007 and 60.61% in 2011 of the available population. The sample companies fall into ten industries (banks, insurance, textile, engineering, tannery, cement, ceramics, pharmaceuticals and chemicals, fuel and power, and service and real estate), as categorised by the Dhaka Stock Exchange including 20 financial and 20 non-financial companies.

The two disclosure scores (Initial CG compliance disclosure score and Actual CG compliance disclosure score) that were used in this study are based on the most popular unweighted approach (see Equations 1 and 2). An unweighted approach assumes the significance of each item of information equally important to the users (Owusu-Ansah, 1998; Abd-Elsalam and Weetman, 2003). The weighted approach is not considered in

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this study because of subjectivity in determining weights (Elsayed and Hoque, 2010; Al-Akra, Eddie, and Ali, 2010).

[Insert Figure 1]

An initial CG compliance disclosure score is the sum of all the items self-reported by a company as required by the BSEC’s CG Guidelines 2006 (dated 20 February 2006) divided by total disclosure score. For example, Figure 1 shows Mercantile Insurance Company Limited’s (Annual Report 2011) mandatory self-reported CG disclosure as per CG Guideline 2006 of the BSEC. An actual CG compliance disclosure score is the sum of all the items through a detailed investigation by the authors of a company divided by total disclosure score. The maximum score for both the initial and actual CG compliance disclosure score of a company is 1 (see Equations 1 and 2, the checklist is presented in Appendix 1). To ensure the content validity2 of the research instrument, our disclosure checklist was reviewed by two independent experts (an accountant from the multinational subsidiary in Bangladesh, and an auditor from the Rahman Rahman Huq audit firm, the member firm of KPMG International in Bangladesh; both of these experts had more than 25 years experiences).

Initial CGCompliance Disclosure Score jt=∑i=1

n jt

dijt

M…………… (1 )

ActualCG Compliance Disclosure Score jt=∑i=1

n jt

d ijt

M…………… (2 )

where: Initial CGCompliance Disclosure Score jt= The mandatory disclosure index for the j company in the yeart ;ActualCG Compliance Disclosure Score jt= The mandatory disclosure index for the j company in the yeart ;t = The year 2007 or 2011;n jt = The number of mandatory items that were relevant for the j company in the yeart ;d ijt = 1 if the ith (relevant) item is disclosed by the company j in the yeart ; d ijt = 0 if the ith (relevant) item is disclosed by the company j in the yeart ; and,M = The maximum possible number of disclosure items for the company.

Therefore, 0 ≤ Initial CG Compliance Disclosure Score jt ≤ 1; 0 ≤ ActualCG Compliance Disclosure Score jt ≤ 1

Based on the initial and actual disclosure scores, a falsification of a company’s score will arise if a company’s initial CG compliance disclosure score of a company [maximum 1] is greater than the actual CG compliance disclosure score [maximum 1] of a company.

Falsification=Initial CGCompliance Disclosure Score jt−Actual CGCompliance Disclosure Score jt …………………………(3)

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Regarding the Actual CG compliance disclosure score, a detailed investigation (also refers to reliability3 that is the degree of exactitude, stability and consistency of measurement irrespective of time and conditions) was carried out. Following prior studies (Cooke, 1992; Samaha et al., 2012; Al-Akra and Hutchinson, 2013; Sharma, 2014; Duff, 2014, forthcoming; Leung, Parker, and Courtis, 2015, forthcoming), the detail investigation involves:

To ensure reliability and consistency, the entire annual report was read twice. The information was extracted and tabulated according to the checklist given in the Appendix 1.

A scoring sheet was prepared for each company and each item was rated accordingly by two researchers (i.e. authors) and five research assistants (three of them were studying Bachelor of Business Administration - BBA, major in Accounting and two were studying Master of Business Administration - MBA at Private Universities in Bangladesh). Items were scored as 1 if disclosed, as 0 if undisclosed, and as ‘not applicable’, if they were not relevant to the circumstances of a company (Cooke, 1992). All of the sample companies were then scored against the disclosure checklist.

Each scoring sheet was later verified by two researchers to ensure a reliable rating for all of the sample companies in different periods. Any observed incongruity in the scores obtained by the two researchers and five research assistants were carefully analysed and then the score was finalized. Differences between the coding of the samples and the original were found to be immaterial.

Each scoring sheet also includes explanation and particular page number of annual report, for rating 1, 0 or not applicable’.

An example of detailed investigation of a scoring sheet is presented in Table 2.

[Insert Table 2]

Comparing initial CG compliance disclosure score and actual CG compliance disclosure score for two year period, the following three alternative hypotheses were proposed in view of objective 1:

H1: There is a difference between the mean initial and actual CG compliance disclosure under the military-backed government (for year 2007)H2: There is a difference between the mean initial and actual CG compliance disclosure under the democratic government (for year 2011)H3: There is a difference between the mean falsification under the military-backed government and under the democratic government (for year 2007 and 2011).

(b) Documentary analysisIn relation to research questions 1 and 2, a total of 1,194 enforcement documents from 2006 to 2010 were evaluated. Furthermore, the World Bank Report on the Observance of Standards and Codes (ROSC) 2003, 2009, and 2015, legal documents and official notifications from the BSEC, and newspaper articles were also evaluated.

(c) InterviewsWith regard to research question three, 20 semi-structured interviews were conducted between March and April 2013 after the completion of annual report survey data

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collection. The prime objective of the interviews was to complement annual report survey findings and to gain an in-depth analysis of the current state and effectiveness of Western model of CG practices under democratic and military-backed government in Bangladesh. The interview questions (see Appendix 2) were based on the prior research and the findings of annual report survey to gain a set of comparable responses drawn from real life business and personal experiences free from fear or bias (Sewell, 2008). In semi-structured interviews, the participants could elaborate and elucidate equivocal responses while maintaining the key attention of the discussion (Nachmias and Nachmias, 1996; Li et al., 2012; Adegbite, 2015). The interviewees were selected following convenience samples since most behavioural and social science studies use convenience samples, and this method is considered to be particularly apposite and expedient in the case of an explorative study and when it is impractical to obtain a random sample (Sewell, 2008; Li et al., 2012).

In this study, politics, economics, and accounting in Bangladesh are found to be inextricably linked. In particular, internal and external actors are both involved in CG practices in Bangladesh (see Figure 2). Figure 2 represents four actors namely donors, state and regulatory authorities, civil society, and business society. To address the question of how the interviewees were selected, we use the term ‘political economy’ to describe the relationship between economics and politics in nation states, encompassing internal actors (state/regulators, business society/pressure groups and civil society) and external actors (donors). Given the complex social relations in Bangladesh, prior research ignores the political, sociological and economic facts without grasping any of their antecedents. The key assumption is that the interactions within this nexus of actors and factors may shape CG in Bangladesh. A thorough examination of CG antecedents and outcome will yield sufficient understanding of the phenomenon. In this study, civil society refers to research institutions and university academics who are involved in the development of CG or researching CG in Bangladesh. Similarly, business groups represent the key business society in Bangladesh who are involved in CG development. The interviewees included local and international policy-makers, directors, preparers and professionals, and academics and researchers. The interviewees were grouped based on the political economy framework (various actors) that is used in this study (see Figure 2):

[Insert Figure 2]

Regulators 4 [11, 12, 13, 14] Donors 2 [15, 110] Civil Society 3 [113, 114, 115] Business Society 2 [17, 19] Account Preparer and Professionals 4 [16, 18, 111, 112] Directors 3 [116, 117, 118] Investors 2 [119, 120]

The interviewees were contacted to seek their participation. After they gave their approval for the appointment, the interview checklist and interview questions were sent to them prior to interview. An interview consent form, including assurances of

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confidentiality and anonymity, was signed by both the interviewee and interviewer. The duration of each interview was 60 to 90 minutes. Eight of 20 interviewees were reluctant to record the interviews. Therefore, extensive notes were taken. The interviewees’ profiles are presented in Table 3. The data collection techniques employed generated over 147 pages of transcribed texts which were qualitatively analysed in two phases. In the first phase, we constituted some familiarisation and random sense making of the data. This preliminary interpretation of the data suggested some patterns around the barriers of CG in Bangladesh as it relates to the objectives of the study. A coding scheme was then developed around these emergent themes. The data were analysed with Nvivo 10 (a software for qualitative data analysis, developed by QSR International Pty Ltd, Australia, http://www.qsrinternational.com/) and the intercoder reliability was well over 85%.

[Insert Table 3]

Using political economy theory framework, the overall multi-method helped to understand and contextualise the impediments of CG in Bangladesh, and thus formed the basis of the subsequent descriptions and discussions. There was a significant degree of agreement among the participants’ comments, which were also in alignment with the observations made. To minimise participants’ bias, the interviewees were selected based on at least 10 years work experience in practicing, researching, or policy-making accounting and auditing issues (Li et al., 2012).

5. Findings and Discussions

5.1 CG Compliance Under Military-backed and Democratic Government

This sub-section addresses RQ-1: What is the state of CG compliance in Bangladesh under the military-backed government and democratic government? This section also explores the extent to which the falsification of CG compliance differs between a military-backed government and a democratic government.

Table 4 reports the descriptive statistics. Under the military-backed government, the initial CG compliance disclosure score is 0.948 (self-reported disclosure by companies in the annual report) compared to actual CG compliance disclosure score 0.675 (see Table 4). Under the democratic government, the initial CG compliance disclosure score is 0.977 while the actual CG compliance disclosure score 0.725 (see Table 4). Importantly, falsification of CG compliance during the military period (0.274) was fractionally higher than the democratic period (0.254). This is because after the military regime, companies were more transparent to attract investors under the democratic government (Pagano and Volpin, 2005).

[Insert Table 4]

Table 5 reports that 97.5% sample companies provided falsification disclosure in the military period, and 95% sample companies in democratic period. In particular, non-financial companies’ were found to have provided more falsification under the

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democratic period. These companies are not limited to local companies only, three multinational companies had also provided false information under both political regimes but had higher under democratic period. Notably, some of the companies’ self-reported CG compliance show ticking all of the items in the annual report, even though this is not applicable, and also no explanation was provided (see for example, Appendix 3, Jamuna Oil Company Limited’s self-reported CG compliance 2011-2012). This practice raises a serious questions about the local and multinational companies’ actual CG practices.

[Insert Table 5]

With reference to RQ-1, three hypothesis were tested using paired-samples t-test (see Table 6). With sample sizes of 30+, any violation of this test is unlikely to cause any serious problems (Pallant, 2013). In the case of our study our sample size was 40 over a two year period. Under the military-backed government (hypothesis H1), we find that there is a significant difference between the mean initial and actual CG compliance disclosure at 1% level [M=0.273, SD=0.127, t(39)=13.588, p<.001]. This supports alternative hypothesis H1. To find out the magnitude of the size effect (how significant the difference is), eta squared4 is used. According to Cohen (1988), 0.01 = small effect, 0.06 = moderate effect, and 0.14 = large effect. The eta squared value of 0.83 indicates a large effect, with a substantial difference between initial and actual CG compliance disclosure (see Table 6).

[Insert Table 6]

Under the democratic government (hypothesis H2), we also find that there is a significant difference between the mean initial and actual CG compliance disclosure at 1% level [M=0.252, SD=0.145, t(39)=10.996, p<.001]. This supports alternative hypothesis H2. Furthermore, the eta squared value of 0.76 which indicate a large effect.

Comparing falsification between military-backed government and democratic government (hypothesis H3), we do not find a significant difference between the mean falsification under both political regimes at 1% level [M=-0.020, SD=0.126, t(39)= -0.988, p>.001]. This rejects alternative hypothesis H3. The eta squared value of 0.024 indicated a small effect, with an insignificant difference between falsifications under both political regimes. This finding rejects the proposition of Gomez and Korine (2005) who argued that democracy eventually prevails in all spheres of organised activity. Pagano and Volpin (2005) argued that younger democracies (like Spain, Portugal, and Greece, followed by Germany, Japan, and Italy) emerged from former military dictatorships are more pro-worker and strong investor protection to ensure their popular support. However, in the case of Bangladesh, the finding appears to be inversed. This may be due to the fact that the military-backed government’s agenda is reflected in the new democratic era (Haggard and Kaufman, 1997).

[Insert Table 7]

An additional nonparametric test was carried out (Wilcoxon’s signed ranks test) for three hypotheses (see Table 7). Consistent with the paired-samples t-test, the

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Wilcoxon’s signed ranks test supports hypothesis H1 (z = 5.395, p < 0.001) and hypothesis H2 (z = 5.459, p < 0.001) but rejects hypothesis H3 (z = 0.995, p > 0.001).

Under both political regimes, six problematic issues were identified based on the actual CG compliance, including, independent directors item was disclosed by 60% companies in democratic period vs. 37.5% companies in military period; an inclusion of one independent director in the audit committee (37.5% vs. 30%); audit committee chairman's professional qualification (12.5% vs. 15%); and reporting to the shareholders (52.5% vs. 40%). Importantly, all companies under both political regimes provided consistent application of accounting policies in the preparation of their financial statements, compliance with international accounting standards, and ability of company to continue as a growing concern.

5.2 Is the Western Model of CG Effective?

The interviewees were asked five interrelated questions after the findings from the annual report survey. The interview questions addressed both RQ-1 and RQ-2. Regarding RQ-1, the interviewees were asked about the current state of CG compliance under the democratic government in Bangladesh. In total, 95% (19 of 20) of the interviewees agreed that CG is not widely practiced by Bangladeshi companies. Only one interviewee, who was a regulator from the BSEC, denied the fact and was very positive about the current state of CG. One interviewee from the civil society group opined that:

“CG is only paper-based compliance in Bangladesh. Overall, the CG compliance is unsatisfactory indeed. For example, the directors are engaging their relatives to carry out transactions on their behalf. On paper, they are following the CG Code, but do you think that ‘it is the real CG compliance!’” [I15]

Furthermore, the majority interviewees (80%) were in agreement about the CG practice did not differ between military regime (2006-2008) and democratic regime (2009-2013). The interviewees expressed the view that development had not happened due to the failure of the regulator’s role. One interviewee from the donors group said that:

“In theory, everybody speaks about CG, but in practice, the majority of the companies are not complying the CG Code. Regulators under both military and democratic regimes do not do their work effectively. The companies are still in the ‘learning process’” [I5]

With respect to RQ-2, the interviewees were asked about the effectiveness of the Western model of CG (see Appendix 2). With the exception of four interviewees (two Regulators and two Donors), 80% of the interviewees argued that the Western model of CG is inappropriate because of several factors. They also emphasised that these factors had led to the falsification of CG compliance in Bangladesh.

5.2.1 Family ownership and the absence of an independent director

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90% interviewees agreed that family ownership and the absence of independent director is a contributing factor for noncompliance with the CG Code. Family businesses are common in Bangladesh (Gillibrand, 2004; IFC, 2009; World Bank, 2009, 2015; Siddiqui, 2010; Khan, Muttakin, and Siddiqui, 2013). For instance, top three, top five and top ten shareholders in Bangladesh own on average 32.33 per cent, 36.96 per cent and 41.06 per cent of shares in listed public limited companies, respectively (Imam and Malik, 2007). The boards of directors in companies play a substantial part in serving the interests of families. Uddin and Choudhury (2008, p. 1026), therefore, argued that “families have a dominant presence in all aspects of CG”. Meanwhile, Rajagopalan and Zhang (2008, p. 56) argued that

“Management, of course, does not have strong incentives to implement governance reforms unless they help them accomplish their immediate objectives; …. In emerging economies, outside directors are often political allies (in the case of privatized SOEs) or friends and relatives of the senior managers/owners (in the case of family controlled businesses). These directors may represent a dominant interest group but not all shareholders”.

According to the interviewees, investor protection is questionable because the top shareholders are mostly members of controlling families. The boards of directors are reluctant to follow CG. The following four comments from the interviewees are representative of this view:

“Companies are primarily family dominant. The board and management are fulfilling the owners’ wishes. The independent Director and Audit committee are shown pieces of the company’s structure. The majority independent director does not have any business knowledge at all.” [I3]

“How would you expect CG if the boards don’t wish to comply, and the non-executive director is mostly absent in the majority companies except multinationals.” [I19]

“To be honest, the directors are following the eye wash in the name of CG compliance. The management is very much influential. So, this culture does not permit CG Code compliance. I think [that] this is a more psychological and ethical issue than regulation to implement CG effectively.” [I13]

“I do not see any CG in my company at all. But the directors asked me to fill in the BSEC’s required checklist which I provided. The BSEC did not provide any enforcement notice, meaning that they are happy with our so called ‘CG compliance.” [I12]

5.2.2 Political businessman

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The majority of the interviewees (85%) were in agreement about the nature of the Members of Parliament (MP) in Bangladesh, describing them as: MP and then businessman, or businessman and then MP. The most of the MPs are businessmen. Accordingly, these MPs tend to avoid implementing a market law such as CG. Political interference had particularly contributed to the governance problems in the banks (Reaz and Arun, 2006, p. 94). Lassou et al. (2014, p. 13) also found similar findings in Ghana, in which the government is ineffective to restore good governance. In this view, “governments acquire control of enterprises and banks in order to provide employment, subsidies and other benefits to supporters, who in return provide votes, political contributions, and bribes” (Bushman and Piotroski, 2006, p. 115).

One interviewee said that:

“The government only protects its MPs and party supporters. The real compliance will be quite impossible if this political culture does not change.” [I15]

In a similar vein, interviewees questioned the government’s role (in particular, under democratic era) in engaging stakeholders in the development of CG. The civil society in Bangladesh is not similar to the Western model. Bangladeshi civil society is also party based and does not represent neutrality or independence of opinion. One interviewee from the account preparers said that:

“The government engage a group of people for developing CG in Bangladesh. The selection of these groups is primarily political. A wider community was completely missing in the discussion process.” [I8]

Regarding the democratic government’s role, two interviewees said that:

“I think [that] the government, ministerial bodies and parliamentary committee, is primarily responsible for noncompliance of CG.” [I19]

“The immature democracy and military intervention at a regular interval slower the pace of good governance and it also influences in CG practice in Bangladesh.” [I2]

One interviewee from the Business Society, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) said that:

“The government is making sure that CG is effectively implemented.” [I7]

This point of view is understandable because this interviewee has a political affiliation with the ruling party, the Awami League. It is worth noting that the business society leaders are mostly affiliated with the ruling party. For example, another interviewee from the Business Society, the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) who has an affiliation with the opposition party, BNP, said that:

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“The BSEC is a more political institution than an independent monitoring body. There are people who are employed in the BSEC who have qualifications other than accountancy or legal. This represents a clear picture of the BSEC’s capacity to identify corrupt companies.” [I9]

The blame culture among institutions is also not uncommon. According to Wehner and de Renzio (2013, p. 84), political institutions act out of their self-interest rather than acting for the cohesion of the common objective to develop good governance. Shen, Lin and Wang (2015) find that politically connected firms are likely to demonstrate poor governance practices and firms with strong CG focus less on building politically connections in Taiwan. For example, one interview from the professional body (ICAB) opined that:

“The SEC is interested to see the paper-based tick-box only. The SEC is blaming the ICAB. The problem is who is controlling who. There is no effective oversight board. There is a culture of violating rules and no punishment at all.” [I2]

5.2.3 Corruption and lack of enforcement

Many of the interviewees argued that corruption is widespread. Bangladesh ranked number one in a list of corrupt countries five times in a row 2001 to 2005 (Transparency International Bangladesh, 2005). One interviewee from the donor (World Bank) said that:

“The capital market of Bangladesh has a prospect to prosper. However, the major obstacle is to accelerate the economic growth of a country is off course ‘corruption’.” [I5]

One interviewee from the account preparers and professionals, who worked for one of the Big 4 accountancy firms, said that:

“The SEC is taking bribes from the companies. How can you expect CG compliance? There is a common practice that clerks are becoming officers and they do not have any knowledge on CG issues. There is no CA/FCA in the BSEC.” [I6]

One institutional investor said that:

“You see corruption is everywhere. So, if the whole sectors are corrupt, how will CG compliance bring about positive awareness? The investors are not protected at all.” [I19]

The interviewees (75%) also viewed that lack of enforcement is conducive for companies not to comply CG and stressed that investors are not protected. Regarding enforcement, interviewees mentioned that the extent to which the BSEC is responsible

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for enforcing the CG compliance in Bangladesh. With the exception of one regulator from the BSEC, 93% of the responses about the BSEC’s failure role in implementing CG.

[Insert Table 8]

During the period 2006 to 2010, the BSEC released 1,194 enforcement actions (see Table 8). After carefully reviewing the information twice, the violation related to CG Codes was found to be 48 (see Table 11). This was very low indeed, only 4% of total enforcement actions. During the military government (i.e. 2006, 2007, and 2008) there were 783 enforcement actions while under the democratic government (i.e. 2009, and 2010) there were 411 enforcement actions. The highest number of enforcement action including CG related violations was in 2006 (326), which happened because a lot of corrupt companies were under scrutiny after the military government took power in 2006. Importantly, there were only 24 CG related violations under the military government while under the democratic government there were also 24. Under the democratic era, the low number of enforcement action indicates the BSEC’s role in identifying and punishing corrupt companies. It was also found that the corrupt companies that were identified under the military government were not punished under the democratic era. Importantly, none of these companies were penalised.

It is true that BSEC is a legal institution that impacts financial development and that regulation is a more political outcome (Gourevitch and Shinn, 2005; Milhaupt and Pistor, 2007; Qi et al., 2010). This was also evidenced by Gillibrand (2004), who pointed out that Bangladesh has lagged behind some of its neighbours in CG development because of a number of specific factors, including the legal and regulatory environment. The World Bank (2003, p. 1) were particularly critical of the financial reporting environment in Bangladesh and mentioned that “The out-of-date legal requirements, widespread noncompliance with accounting and auditing standards, ... have contributed to the weakness of the financial reporting regime”. The problems of a weak regulatory regime have been further aggravated by poor enforcement of the law (World Bank, 2009; Mohiuddin, 2012). Nurunnabi (2014) recently also criticised the government’s effort toward the proposed Financial Reporting Act, including provision for an independent oversight body named the FRC. It is now more than six years after the proposal was made in 2007-2008 and the Act is still waiting to come into effect, principally because there has been disagreement among the professional institutions about who will oversee it. This view was also supported by Verschave (1999, p.73) who stated that “Weak and solid accounting systems maintain a system of corruption for which French cooperation has significant responsibility”. The only interviewee who denied that the BSEC’s responsibility is ineffective in CG compliance opined that:

“The BSEC is not the only institution responsible for enforcing the CG compliance. The BB is also overseeing banks. You can see all annual reports were providing tick-box on CG compliance. I believe that 100% companies were complying CG.” [I4]

The current regulatory framework in Bangladesh does not provide sufficient legal, institutional, or economic motivations for stakeholders to encourage and enforce CG

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practices. How will this practice guarantee investors protection? According to the World Bank (2009), the Companies Act 1994 of Bangladesh is silent about the provisions for an Audit Committee or an independent director. This is because the Companies Act 1994 has been outdated for more than two decades. The penalty provision is also limited in Section 332 of the Companies Act 1994:

“If any director, manager, officer or contributory of any company being wound up destroys, mutilates, alters of falsifies or fraudulently secrets any books papers or securities or makes or is privy to the making of any false or fraudulent entry in any register book of account or document belonging to the company with intent to defraud or deceive any person, he shall be liable to imprisonment for a term which may extend to seven years, and shall also be liable to fine”.

5.2.4 Donor’s continual intervention

Interestingly, only 55% agreed that donor’s like the World Bank and the IMF are putting pressure in emerging economies like Bangladesh to adopt the Western model of CG. These interviewees were also concerned about investor protection and the donors’ role in developing CG that is applicable and relevant for an emerging economy. The current donor’s role does not ensure or guarantee investor protection. An interviewee from the donors group (IMF) denied the negative role of the donors and reported that:

“Bangladesh has longstanding issue with the implementation of law effectively not only in financial and capital market sector but also in other sector. You can do wrong but you will not be punished if you know someone from the ruling political party.” [I10]

However, one interviewee argued that:

“The donor’s project related to develop CG is more politicised that the actual outcome of the project is missing in reality.” [I15]

Similar issues were reported by Haggard and Webb (1993), and Bräutigam and Knack (2004) who argue that external pressure (donors) are needed for transparency but the stated objective should be free from government intervention. The donor’s continual intervention of a government policy is well-known because they put the condition for a loan to adopt Western model of CG mandatorily. Siddiqui (2010) argued that the donor’s intention may be to build investor confidence, but the Western model may not be appropriate for emerging economies.

6. Conclusions

In international CG literature, CG Codes are inevitable to address systemic issues of corporate accountability, responsibility, corruption, and transparency (Li et al., 2012; Munisi and Randoy, 2013; Samaha et al., 2012; Adegbite et al., 2012, 2013; Al-Akra and Hutchinson, 2013; Adegbite, 2015; Sharma, 2014; Christensen et al., 2015; Ntim et al., 2015; Subramanian, 2015; Al-Bassam et al., 2015, forthcoming). Accordingly, this

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longitudinal study investigates paper-based self-reported disclosure score (initial CG compliance disclosure) by the company and the actual score through detailed investigation of annual reports made in Bangladesh from 2007 to 2011. Two research questions were investigated: (a) What is the state of CG compliance in Bangladesh under the military-backed government and democratic government?, and (b) To what extent is the Western model of CG (Anglo-Saxon) (in)effective in a developing country like Bangladesh? To address these research questions, multi-methods were adopted. A total of 80 firm-year observations for two years including 2007 and 2011 were conducted, 1,194 BSEC enforcement documents from 2006 to 2010 were evaluated, and 20 semi-structured interviews were conducted in 2013.

The political economy approach employed in this study takes a wider perspective of CG in Bangladesh. Drawing on prior research (Zald, 1970; Hoogvelt and Tinkler, 1978; Cooper, 1 980; Cooper and Sherer, 1984; Gomez and Korine, 2005; Arnold, 2009), it is possible to make sense of these apparent complex phenomena. This study contributes to the international CG literature in two ways. First, the actual CG compliance and falsification were stable over time, even if there were two different regimes. This means that, at least for what concerns CG and stock markets, the democratic and the military governments in Bangladesh were equal. The falsification under two regimes indicates that the political instability and immature democracy for the last 45 years, from the inception of the independence, also effectively prevented the rule of law. Haggard and Kaufman (1997) therefore argued that the prolonged failure of democracy may challenges the stability of good governance. The findings reported in this study, taken in conjunction with the political economy aspects of the field of accounting regulation as previously outlined, suggest there is some merit to Arnold’s (2009) analysis and, in particular, Lowe and Tinker’s (1977) pluralist conception of society. The falsification of CG information may present a negative image for local and international investors. This raises a serious question for both the local and international policy-makers as to how to stop such practices. A symbolic perspective on CG thus points our attention to the various ways in which companies aim to elude institutional demands by hiding noncompliance or aiming to affect the very definition of what constitutes acceptable conduct (Clift, 2007).

Second, political economy theory also informs that Anglo-Saxon model of CG is not effective in an emerging economy like Bangladesh because of the following four contextual factors: (a) family ownership and the absence of independent director, (b) political businessman, (c) corruption and lack of enforcement, and (d) donor’s continual intervention. The findings questioned the appropriateness or applicability of Anglo-Saxon model of CG models when transplanted into completely different institutional environments (Reed, 2002). Since most Bangladeshi firms are dominated by family ownership, the distribution of share ownership remains much more concentrated in Bangladesh than the Western countries (UK or US). This is also consistent with Uddin and Choudhury (2008), who point out that the traditional societies in emerging economies are dominated by family ownership.

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It is also documented that the political businessman are reluctant to follow CG law (Shen et al., 2015). Civil society has different meanings in Bangladesh. Traditional civil society in Bangladesh is divided into two political parties: the BNP and the Awami League. In other words, civil society in Bangladesh is weak in comparison with its neighbouring countries. In the case of Bangladesh, only a few members of society are engaged in CG development and, hence, the engagement of broader stakeholders is somewhat lacking. Likewise, business society or industry groups are also divided into two political parties. One group supports the government because it receives enormous support and has a free license to continue corrupt activities while the other group does not. This process is unavoidable, as pointed out by Stigler (1971), who mentioned that industry groups seek to expropriate the state’s wealth or income. The outcome of complex interactions exists among various internal political actors. Interestingly, conflict of interest among different political institutions also creates complexity in the effective implementation of CG. The government is more concerned about protecting its party supporters and leaders than in protecting the general investors (Gourevitch and Shinn, 2005; Lassou et al., 2014). The BSEC’s staff are recruited through a politicised process which causes a lack of qualified staff and, hence, there is a major problem in identifying corrupt firms.

The wide spread corruption and a lack of enforcement under both political regimes are contributing factors to the absence of CG in Bangladesh. This finding is in contrast to Siddiqui (2010, p. 271), who suggested that “an analysis of the behaviour 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”. However, this argument is irrelevant in the context of the findings of the present study because of a lack of enforcement of the law. The findings also reject the proposition of Shleifer and Vishny (1997), and La Porta et al. (1998 and 2006) who argue that shareholder protection and good governance is significantly higher in the common law countries. Bangladesh exhibits a common law country but shareholder protection and good governance are not visible due to lack enforcement.

Although there can be no doubt that the donors are engaged in various efforts to restore good governance in Bangladesh, the stated objective of these projects is questionable due to high government intervention (Lynch and Crawford, 2011). Our findings also demonstrate that, despite the various donor programmes, there has only been limited progress in implementing CG. The findings also suggest that donor’s continual intervention in government policy (adoption of Western model of CG) may limit good governance.

This study has several limitations. First, it considers political economy approach of two political regimes in single country. It is recommended that further study could be conducted on a group of emerging economies which exhibits two political regimes to

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understand the contextual issues of CG behaviour. Second, future research could also investigate the economic effect of a high falsification rate. For example various variables including size, profitability, leverage, ownership structure could also be further used in multivariate analysis to understand if there are any companies’ characteristics that drive low “actual” compliance. Finally, another limitation of this study is the small sample size of the interviews. It may be argued that conducting more interviews could have obtained a deeper insight into the issues at hand. Nevertheless, multi-methods were used in this study to ensure the validity of the findings in a unique institutional setting.

NOTES

1 The sample also includes 33 ‘A’ category, five ‘B’ category, and two ‘Z’ category companies. The BSEC has developed a unique system for classifying companies based on both their governance practices, and on the level of dividends paid to shareholders. ‘A’ category companies regularly hold their annual meetings of shareholders and have declared dividend at a rate of at least 10 percent in the previous year. ‘B’ category companies have also regularly held their annual meeting but have declared dividends of less than 10 percent. Companies which neither hold a meeting nor declare dividends are called ‘Z’ category companies.

2 Content validity refers to whether the research instruments ‘adequately measures the concept of interest’ (Sharma, 2014), and in the case of our research, whether it adequately measures mandatory CG compliance requirements.

3 According to Duff (2014, forthcoming), reliability is concerned with how well the concept under investigation is being measured in terms of accuracy.

4 Eta squared is used and this can be obtained using the following formula (Cohen, 1988):

Eta squared= t 2

t 2+ N−1

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Figure 1: Mercantile Insurance Company Limited’s Self-reported Disclosure as per CG Guideline 2006 of the BSEC, Annual Report 2011, pages 24-25 [Initial CG Compliance Disclosure]

32

33

34

Figure 2. Political Economy of CG in Bangladesh

35

Table 1.  Comparison of stock market performance in South Asia

Name of theCapital Market

Indices Listed Companies Market Capin US$ mn

Turnoverin US$ mn

% ofGDP

2000 2005 2007 2011 2012 2012 2012 2012

Bangladesh(Dhaka Stock Exchange)

DSE GEN 221 262 278 232 242 29,839.30 19,501.65 26.27

Sri Lanka (Colombo Stock Exchange)

CSE All Share 239 239 235 277 287 16,974.00 1,679.10 28.40

Pakistan (Karachi Stock Exchange)

KSE 100 762 661 654 613 573 43,443.71 11,251.77 18.85

India (Bombay Stock Exchange)

SENSEX 5,937 4,763 4,887 5,115 5191 1,263,335.50 110,345.90 64.89

Source: World Federation of Exchanges and http://econstats.com/

Table 2: An example of a scoring sheet (Initial CG compliance disclosure score vs. Actual CG compliance disclosure Score of Mercantile Insurance Company Limited in 2011)

Clause Checklist with explanation Initiala Actualb

    2011 20111 Board of Directors

1.1 1. Board's Size [10], Rule is not be less than 5 (five) and more than 20 (twenty) [The company has 12 board members, page 5, Annual Report 2011] 1 1

1.2 (i) 2. Independent Directors (10% of Board of Directors or at least 1)[The company has one Independent Directors, page 5, Annual Report 2011] 1 1

1.2 (ii) 3. Appointment of independent Non-shareholder Director [No information provided in the entire Annual Report on how the director is elected] 1 0

1.3

4. Chairman and Chief Executive[According to Clause 1.3 of CG Guideline 2006 (p. 2), “The positions of the Chairman of the Board and the Chief Executive Officer of the companies should preferably be filled by different individuals”The company’s Chairman and Chief Executive is the same person, Mr. Abdul Haque)page 5, Annual Report 2011]

1 0

1.4

The Directors Report to Shareholders According to Clause 1.4 of CG Guideline 2006 (p. 2), “The directors of the companies should include following additional statements in the Directors. Report prepared under section 184 of the Companies Act, 1994)”

1.4 (c)5.Consistent application of accounting policies in preparation of financial statements[No such statement is provided under The Directors Report to Shareholders, pages 20-23, The Directors Report to Shareholders, Annual Report 2011]

1 0

1.4 (d)6. Compliance with International Accounting Standards[No such statement is provided under The Directors Report to Shareholders, pages 20-23, The Directors Report to Shareholders, Annual Report 2011]

1 0

1.4 (f)7. Ability of Company to continue as a growing concern[No such statement is provided under The Directors Report to Shareholders, pages 20-23, The Directors Report to Shareholders, Annual Report 2011]

1 0

1.4 (h)8. Presentation of key operating and financial data for last three years[The company has presented operating and financial data for two year 2010 – 2011, page 20, Annual Report 2011]

1 0

1.4 (i) 9. Declared dividend[The company has declared 10% stock dividend, page 21, Annual Report 2011] 1 1

1.4 (j)10. Number of board meetings held during the year and attendance by each director[No such report is provided under The Directors Report to Shareholders, pages 20-23, The Directors Report to Shareholders, Annual Report 2011]

1 0

1.4 (k) 11. Shareholding Pattern[No such report is provided under The Directors Report to Shareholders, pages 20-23,

1 0

36

Clause Checklist with explanation Initiala Actualb

    2011 2011The Directors Report to Shareholders, Annual Report 2011]

2 Chief Financial Officer (CFO), Head of Internal Audit and Company Secretary

2.212. Attendance of CFO and Company Secretary in Board meeting[No such report is provided under The Directors Report to Shareholders, pages 20-23, The Directors Report to Shareholders, Annual Report 2011]

1 0

3  Audit Committee

3.1 (i)13. Composition of Audit Committee (at least three members)[No such report is provided in the entire Annual Report; Only the name of the chairman of the audit committee is provided, page 5, Annual Report 2011]

1 0

3.1 (ii)

14. Inclusion of one Independent Directors in the Audit Committee (No such report is provided in the entire annual report ) [No such report is provided in the entire Annual Report; Only the name of the chairman of the audit committee is provided but this chairman is not independent director (AI-Haj Dr. Md. Mizanur Rahman), page 5, Annual Report 2011]

1 0

3.2 (ii)

15. Audit Committee Chairman's Professional Qualification[No such report is provided in the entire Annual Report; Only the name of the chairman of the audit committee is provided, page 5, Annual Report 2011]In page 25, it is reported that the Chairman of the Audit Committee has PhD but no information about his background. According to Clause 3.2(ii) of CG Guideline 2006 (p. 4), “The Chairman of the audit committee should have a professional qualification or knowledge, understanding and experience in accounting or finance”.

1 0

3.416. Reporting to the Shareholders[No such report is provided in the entire Annual Report; Only the name of the chairman of the audit committee is provided, page 5, Annual Report 2011]

1 0

TOTAL CG COMPLIANCE DISCLOSURE SCORE 16/16= 1.00

3/16= 0.19

Falsificationc 1.00 – 0.19 = 0.81Notes: aInitial CG Compliance Disclosure: Self-reported CG compliance disclosure by the company; bActual Disclosure: Detailed investigation of CG compliance disclosure; cFalsification is the difference between the self-reported CG compliance disclosure score (initial CG compliance disclosure) and the actual CG compliance disclosure through detailed investigation (i.e. initial CG compliance disclosure score, maximum of 1 > actual CG compliance disclosure score, maximum of 1); and Red coloured indicates explanation of scoring of Mercantile Insurance Company Limited in 2011

Table 3. Summary of interviewees

Codea Company/OrganisationExp. (yrs.)

Recorded/ Not recordedb

I1 ICAB (The Institute of Chartered Accountants of Bangladesh ) 26 Not recordedI2 ICAB (The Institute of Chartered Accountants of Bangladesh ) 10 Not recordedI3 ICMAB (The Institute of Cost & Management Accountants of 30 Not recorded

Bangladesh) & Ministry of Commerce (MOC)I4 BSEC 11 Not recordedI5 World Bank 14 Not recordedI6 Big 4 Audit Firm in Bangladesh 40 Not recordedI7 Bangladesh Garment Manufactures & Exporters Association

(BGMEA)10 Recorded

I8 Company Accountant, Cement 11 Not recordedI9 FBCCI 10 RecordedI10 IMF 10 RecordedI11 Accountant, Credit Rating Agency of Bangladesh 12 Not recordedI12 Company Accountant, Pharmaceuticals 18 RecordedI13 A CPD fellow, Bangladesh 21 RecordedI14 A Public University, Bangladesh 14 RecordedI15 A Public University, Bangladesh 15 RecordedI16 A director of a Bank, Bangladesh 23 RecordedI17 A director of a Textile company, Bangladesh 17 Recorded

37

Codea Company/OrganisationExp. (yrs.)

Recorded/ Not recordedb

I18 A director of a Pharmaceutical company, Bangladesh 13 RecordedI19 A CEO of an institutional investment company, Bangladesh 28 RecordedI20 A private investor, Bangladesh 16 RecordedNotes: aCode: Interviewee (I); bItalics indicate that eight interviewees were reluctant to record interviews.

Table 4. Descriptive statistics

Mean Std. Deviation Std. Error MeanInitiala CG Compliance Disclosure_2007 .948 .078 .012Actualb CG Compliance Disclosure _2007 .675 .128 .020Initial CG Compliance Disclosure _2011 .977 .051 .008Actual CG Compliance Disclosure _2011 .725 .149 .023Falsificationc _2007 .274 .127 .020Falsification _2011 .254 .146 .023Notes: The description of aInitial CG Compliance Disclosure; bActual CG Compliance Disclosure; and cFalsification are reported in Table 2.

Table 5. Initial CG Compliance Disclosure Score vs. Actual CG Compliance Disclosure Score under military-backed and democratic government

2011 [Democratic government] 2007 [Military-backed government]

Company Initiala CG Compliance

Actualb CG Compliance Falsification Initial CG

ComplianceActual CG Compliance Falsification

Disclosure Disclosure Disclosure DisclosureACI Formulation 0.94 0.81 0.13 0.94 0.81 0.13Imam Button Industry 1.00 0.75 0.25 1.00 0.88 0.12AB Bank Limited 1.00 0.94 0.06 1.00 0.75 0.25Progressive Life Insurance 1.00 0.94 0.06 1.00 0.88 0.12Mercantile Insurance 1.00 0.19 0.81 0.94 0.44 0.50Bangladesh Lamps 0.94 0.81 0.13 0.94 0.81 0.13Pragoti Insurance Limited 0.88 0.81 0.07 0.88 0.63 0.25Power Grid Company 0.88 0.63 0.25 1.00 0.69 0.31Eastland Insurance 1.00 0.63 0.37 1.00 0.75 0.25Samorita Hospital 1.00 0.56 0.44 1.00 0.50 0.50NCC Bank 1.00 0.75 0.25 1.00 0.56 0.44National Poly 1.00 0.75 0.25 1.00 0.63 0.37EXIM Bank 1.00 0.75 0.25 1.00 0.63 0.37Apex Weaving & Finishing 1.00 0.75 0.25 1.00 0.75 0.25Trust Bank 1.00 0.88 0.12 0.88 0.63 0.25Global Insurance 0.94 0.56 0.38 0.81 0.50 0.31Beximco Pharma 0.94 0.75 0.19 0.94 0.94 0.00Pubali Bank 1.00 0.75 0.25 0.88 0.56 0.32Bata Shoe 1.00 0.94 0.06 0.75 0.75 0.00DESCO 1.00 0.69 0.31 1.00 0.75 0.25Summit Power Limited 0.94 0.75 0.19 0.94 0.63 0.31BRAC Bank Limited 1.00 0.81 0.19 1.00 0.69 0.31RFL 0.75 0.56 0.19 0.75 0.44 0.31Jamuna Oil Company 0.88 0.44 0.44 0.75 0.50 0.25Continental Insurance 1.00 0.63 0.37 0.88 0.63 0.25

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2011 [Democratic government] 2007 [Military-backed government]

Company Initiala CG Compliance

Actualb CG Compliance Falsification Initial CG

ComplianceActual CG Compliance Falsification

Disclosure Disclosure Disclosure DisclosureBank Asia Limited 1.00 0.75 0.25 0.81 0.69 0.12Green Delta Insurance 1.00 1.00 0.00 1.00 0.75 0.25BDCOM 1.00 0.69 0.31 1.00 0.69 0.31Aziz Pipes Ltd 1.00 0.69 0.31 1.00 0.50 0.50Standard Bank Limited 1.00 0.63 0.37 0.94 0.69 0.25Singer BD Ltd 1.00 0.63 0.37 1.00 0.56 0.44National Bank Ltd 1.00 0.69 0.31 1.00 0.69 0.31Standard Ceramic 1.00 0.69 0.31 1.00 0.56 0.44Mercantile Bank 1.00 0.75 0.25 1.00 0.69 0.31IFIC 1.00 0.88 0.12 0.94 0.63 0.31UCBL 1.00 0.63 0.37 1.00 0.63 0.37Lafarge Shurma Cement 1.00 0.88 0.12 0.94 0.81 0.13Eastern Housing Ltd 1.00 0.63 0.37 1.00 0.63 0.37Monno Fabrics Ltd 1.00 0.75 0.25 1.00 0.81 0.19Prime Bank Limited 1.00 0.88 0.12 1.00 0.94 0.06

Average falsification 0.254 0.274Notes: The description of aInitial CG Compliance Disclosure; bActual CG Compliance Disclosure; and cFalsification are reported in Table 2.

Table 6. Paired-samples t-test for three hypotheses

Hypotheses

Paired Differences

t-statistic df p-valueMeanStd. Deviation

Std. Error Mean

95% Confidence Interval of the

DifferenceLower Upper

H1

(Pair 1)[Military]

Initiala CG Compliance Disclosure _2007 – Actualb CG Compliance Disclosure _2007

.273 .127 .020 .232 .313 13.588 39 .000***

H2

(Pair 2)[Democratic]

Initial CG Compliance Disclosure _2011 - Actual CG Compliance Disclosure _2011

.252 .145 .023 .206 .299 10.996 39 .000***

H3

(Pair 3)[Military vs Democratic]

Falsificationc_ 2011 - Falsification_ 2007 -.020 .126 .020 -.060 .021 -.988 39 .329

Notes: The description of aInitial CG Compliance Disclosure; bActual CG Compliance Disclosure; and cFalsification are reported in Table 2. ***significant at the 1% level.

Table 7. Wilcoxon Signed Ranks Test (Nonparametric Test) for three hypotheses

H1

Actual CG Compliance Disclosure_2007 - Initial CG Compliance Disclosure_2007

H2

Actual CG Compliance Disclosure_2011 - Initial CG Compliance Disclosure_2011

H3

Falsification _2007 - Falsification _2011

Z -5.395a -5.459a -.995b

Asymp. Sig. .000*** .000*** .320

Notes: aBased on positive ranks; bBased on negative ranks; ***Asymptotic significant at the 1% level

Table 8. Enforcement actions in relation to CG violations from 2006 to 2010

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Military-backed government

Democratic government

Year 2006 2007 2008 2009 2010 TotalTotal enforcement actions 326 281 176 172 239 1194Violation related to CG guidelines 12 0 12 0 24 48CG violations to total enforcement actions (%) 4% 0% 7% 0% 10% 4%

Appendix 1. CG Compliance Disclosure Checklist

Clause CG Compliance Checklist1 Board of Directors1.1 1. Board's Size1.2 (i) 2. Independent Directors1.2 (ii) 3. Appointment of independent Non-shareholder Director1.3 4. Chairman and Chief Executive1.4 The Directors’ Report to Shareholders 1.4 (c) 5.Consistent application of accounting policies in preparation of financial statements1.4 (d) 6. Compliance with International Accounting Standards1.4 (f) 7. Ability of Company to continue as a growing concern1.4 (h) 8. Presentation of key operating and financial data for last three years1.4 (i) 9. Declared dividend1.4 (j) 10. Number of board meetings held during the year and attendance by each director1.4 (k) 11. Shareholding Pattern2 CFO, Head of Internal Audit and Company Secretary2.2 12. Attendance of CFO and Company Secretary in Board meeting3.  Audit Committee3.1 (a) 13. Composition of Audit Committee3.1 (b) 14. Inclusion of one Independent Directors in the Audit Committee 3.2 (ii) 15. Audit Committee Chairman's Professional Qualification3.4 16. Reporting to the Shareholders  TOTAL INITIAL/ACTUALCG COMPLIANCE DISCLOSURE POINTS ______________

Appendix 2. Interview Questions

1 How would you describe the current state [under this democratic government] of CG in Bangladesh?

2 To what extent CG practice differ between military regime (2006-2008) and democratic regime (2009-2013)? Is there any developments?

3 Why some companies are falsifying CG compliance?4 How Western model of CG are helpful/unhelpful in Bangladesh?5 How important is the internal and external actors’ donors’ (World Bank, IMF, ADB) influences

in terms of promoting CG in Bangladesh?

Appendix 3. Jamuna Oil Company Limited’s Self-Reported CG Compliance Disclosure as per CG Guideline 2006 of the BSEC, Annual Report 2011-2012, page 23

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