Journal (October-December'13)

BSCCL is the wholesale provider of IPLC Bandwidth for the country and ready with Bandwidth resource of any magnitude for the clients (IGW, IIG and IPLC operators).

BSCCL has also started Supply of IP Transit through its IIG setup with effect from 1st July 2013. Please contact us for quality IP bandwidth with a competitive price.

Bangladesh Submarine Cable Company Ltd. (BSCCL) Rahmans' Regnum Centre (7th floor), 191/B, Tejgaon-Gulshan Link Road, Dhaka-1208. Phone : 8879194-95, Fax : 8879193, Web : www.bsccl.com.bd

Volume : XV

Issue : 4

October-December 2013

Corporate Social Responsibility Institute of Chartered Secretaries of Bangladesh A Statutory Body Under an Act of Parliament

CONTENTS Institute of Chartered Secretaries of Bangladesh (ICSB) Institute of Chartered Secretaries of Bangladesh (ICSB), established under an Act of Parliament i.e.

Chartered Secretaries Act 2010, is the only recognized professional body in Bangladesh to develop, promote and regulate the profession of Chartered / Company Secretaries in Bangladesh.

The affairs of the Institute of Chartered Secretaries of Bangladesh (ICSB) are managed by a Council consisting of thirteen elected members and five nominees of the Government.

The major contribution of a Chartered Secretary is in the corporate sector. Chartered Secretary is a requisite qualification to become a Company Secretary. Company Secretary is an important professional, aiding the efficient management of the corporate sector. Company Secretary is a Statutory Officer under the Companies Act 1994. According to Bangladesh Securities and Exchange Commission (BSEC) all the listed companies should have a Company Secretary. Company Secretary is the compliance officer of the company, who has to interact, coordinate, integrate and cooperate with various other functional heads in a company.

THE COUNCIL : 2013-2016 Mohammad Asad Ullah FCS

: President

M. Naseemul Hye FCS

: Senior Vice President

Md. Monirul Alam FCS

: Vice President

Mohammad Bul Hasan FCS

: Treasurer

Mohammad Sanaullah FCS Itrat Husain FCS N.G.Chakraborty FCS

: Councilor : Councilor

2

THE COUNCIL 2013-2016

3

EDITORIAL

5

FROM THE PRESIDENT

7

INSTITUTE NEWS

ARTICLES 15

Dimension of Corporate Social Responsibility (CSR) Prof Feroz I Faruque PhD FCS

19

Company Secretary And Corporate Social Responsibility Bipul Kumar Bhowmik FCS

24

Corporate Social Responsibility In Bangladesh Mohammad Nurul Alam FCS

28

26000: New Standards for Social Responsibility Kazi Ashiqur Rahman FCS

31

Csr Is The Strength Of The Nation Tauhidul Islam ACS

35

Widening Csr Through Corporate Governance Across Banking Sector Mokammel Hoque ACS

Office: National Scout Bhaban (2nd floor), 60 Anjuman Mufidul Islam Road, Kakrail, Dhaka-1000, Bangladesh

40

Corporate Social Responsibility (An Overview) Rahat Mahmud

Phone : 880 2 933 4878 & 933 9957 Fax : 880 2 933 9957 E-mail : secretary@icsb.edu.bd icsb@icsb.edu.bd Web : http://www.icsb.edu.bd

43

CSR in Bangladesh Lubna

46

The Rationale For Gender Diversity On Boards Md. Shahid Farooqui FCS

49

Government Funds & And Public Enterprises: Accounting For Transparency & Accountability Md Shahadat Hossain FCA

: Councilor

Md. Shahid Farooqui FCS

: Councilor

Md. Azizur Rahman FCS Md. Selim Reza FCS

: Councilor : Councilor

M. Nurul Alam FCS

: Councilor

Hossain Sadat FCS

: Councilor

A.T.M. Tahmiduzzaman FCS : Md. Shawkat Ali Waresi Joint Secretary, GoB : Md. Ekhlasur Rahman Joint Secretary, GoB : Nasreen Begum Additional Secretary, GoB : Prof. Md. Helal Uddin Nizami Commissioner, BSEC: Bijon Kumar Baishya Registrar, RJSC, GoB :

EDITORIAL BOARD Editor Itrat Husain FCS Members Mohammad Sanaullah FCS Md. Shahid Farooqui FCS Hossain Sadat FCS Kazi Ashiqur Rahman FCS

Design & Production

(A Concern of Tradex BD)

Councilor Councilor Councilor Councilor Councilor Councilor

53

Notifications

The views and opinions expressed in the articles published in this Journal are those of the writers only Published by the Institute of Chartered Secretaries of Bangladesh (ICSB)

Campus: 107 Kakrail(Ground & 1st Floor), Dhaka-1000, Bangladesh.

Phone : 880 2 934 9578 & 933 6910

Subscription Rate For Students : per copy Tk. 100; per year Tk. 350 Others : per copy Tk. 150; per year Tk. 560

From The President

THE COUNCIL : 2013 - 2016

Mohammad Bul Hassan FCS

Councilor Md. Azizur Rahman

02

FCS

Councilor M. Nurul Alam

FCS

Mustafa Mohiuddin

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Councilor Hossain Sadat

FCS

Councilor A.T.M Tahmiduzzaman

ACS

EDITORIAL THE NEW COUNCIL CSR Corporate Social Responsibility – CSR as we all call it is a fairly old concept in the developed world although the concept is just more than a decade old in Bangladesh.

We are all familiar with the various definitions of CSR. But basically it is the discharge of the responsibility of the Corporate World towards the society in which it operates.

In Bangladesh we are familiar with some of CSR activities of the organizations, both local and multinationals. These include financial assistance to tree plantation programmes, clinics and hospital, maternity homes, mosques, orphanages, set up road signs, needy students, distribution of clothes and blankets to the distressed, disabled citizens, provide assistance in development of livestock and fisheries, sports and cultural activities and many more. Some manufacturing companies have set up waste treatment plants to ensure that the environment is not polluted. But there is much more to be desired. Then there are those companies who are providing large umbrellas to the on duty policemen to give them some comfort during the scorching summer sun or the monsoon rains; some have set up benches at the bus stops for the benefit of the passengers. The list is by no means exhaustive.

All these are positive signs; but more and more organizations should realize their responsibility and come forward to play their part in society as the government alone cannot handle all these matters. In the process the companies also get publicity and get recognized as “responsible and philanthropic organizations”. There is nothing wrong with it. In fact the corporate world can do much more. It will not be

possible to list every possible activity which should be undertaken; but some which come to the mind right away are: setting up public toilets in all major cities in the country, setting up “burn units” in hospitals, educating the citizens on health, sanitation, discipline and respect for law; setting up old people’s homes, youth unemployment, acid victims, adult literacy, rural water treatment plants, alternative power generation, more work on eradicating drug use, rehabilitation of beggars, training and providing jobs to the blind and disabled, creating awareness for roof top gardening, rain water harvesting, reduce wastage of water at homes and mosques, providing dustbins all over the cities, providing assistance to freedom fighters, etc. We can stretch our imagination and list many more.

I would like to add that we, as individuals, can also help in discharging our social responsibility. Recently I saw a group of children being taught by a young man and a young lady on the footpath. I was simply impressed! Individual initiatives should also be taken by us on many fronts. Let us all extend our imagination and hands and be part of a social movement to create a new Bangladesh by changing the lives of the underprivilaged.

In this issue of the journal there are many informative and interesting articles which I am sure the readers will appreciate. Happy reading to all of you.

Itrat Husain FCMA, FCS Editor

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

03

www.ulc.com.bd

ties i n u t r o Opp t i s o p e D

Working Capital Solutions

Asset Financing Options

To contact, please visit our website or dial +880-2-9669006

FROM THE PRESIDENT Dear Members and Colleagues, Assalamualaikum-aRahmatullahe-waBarkatuhu It has been a very short period since I took over the responsibility as the President of the 2nd Council of the Institute.

However, even within this short period we have continued to follow up the activities initiated by the previous council along with the new promises and challenges. The council reviewed the financial position during the 4th quarter (Oct-Dec’13) and discussed various issues to set the future course of action for the interest of the Institute and to speed up the matters.

Following major issues were discussed at the last council meeting: • The Strategic Plan for the year 2014 was formulated; • Approved the Budget for the year 2014; • Agreed to apply to RAJUK for allotment of government plot at Uttara; • Acquisition of private land for the Institute’s campus and offices at Aftabnagar; and • Discussion on the report of the Standing committees.

New campus and public relations The foremost pending task is now acquiring a piece of land and construction thereon for its own campus. With that aim in mind and to improve our public relation with concerned ministries, meetings were held with the Honorable Finance Minister, Honorable Commerce Minister as well as with the Additional Finance Secretary and Commerce Secretary.

Meetings were also held with the Honorable Law Minister and with the Chairman and Commissioners of Bangladesh Securities and Exchange Commission (BSEC) to introduce the new Council and to follow up the pending issues.

I am pleased to inform you that the meetings were very successful and we are optimistic about receiving more co-operations in future.

Attracting Government Funding We are contributing our efforts to attract government funding for the expected capital expenditure to ensure student’s accommodation with other logistic support.

We therefore expect that this may be possible during the fiscal year 2014-2015.

Digitalization of the Institute Another priority for us, I feel, is the digitization of the activities of the Institute.

Meanwhile, we have already adopted the task of upgrading our website and also installing comprehensive software that will include the Members’ full information as well as Accounting System. Also the academic functions, including the Examination and Library related activities, would be brought under automation. In the meantime we have appointed two IT experts to do this job precisely.

Satisfactory Student Enrollment I am very happy to announce that the number of students enrolled in each session is continuously increasing which indicates the steady growth and recognition of the Institute. The enrollment was processed through a well conducted competitive examination and the standard of the syllabus is maintained as per United

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

05

Kingdom and India, so that, students who pass from here can also get overseas employment. Of course it is a matter of hard reality that the Institute with its limited logistic support and ancillary facilities cannot accommodate the increasing number of students. We are therefore seriously looking for a new campus till our own complex is constructed.

Responsibility towards ICSB employees As a part of responsibilities for our employees, the Institute also approved the dearness allowance to the officers and staff of ICSB in pursuant to Ministry of Finance’s circular and subsequently endorsed by Ministry of Commerce. I believe this will motivate the productivity of the employees and improve their morale to bestow their finest service to the institute.

Workshop held with World Bank/IFC Let me also reiterate our pledge to update the knowledge and skills of our Members by organizing Continuing Professional Development Program(CPD) regularly.

Recently the Institute organized a day long Workshop on ‘Corporate Governance Dispute Resolution and Mediation’ on October 26, 2013 at Hotel Sonargaon, Dhaka in collaboration with World Bank and IFC. This was attended by a large member of our Members who also represent various reputed listed and non-listed Companies of the country. Another day long Workshop was also held on ‘Audit Committee: Roles, Responsibility, Structure and Function’ on November 01, 2013 at Hotel Sonargaon, Dhaka which was attended by 33 Members of ICSB. This was also arranged in collaboration with the World Bank and IFC. Both the Workshops, it is expected, would help to enhance capacity build up of ICSB’s

06

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Members as professional workforce in the corporate world.

Challenges Ahead As I also indicated earlier, the new Council is promise bound to face challenges of coming days to shape the Institute having a professional outlook. Further to the above, the new Council is dedicated to take all necessary measures to effect the following tasks on a priority basis for the sake of its Members’ value creation and the profession as well: • Ensure the Inclusion of the Chartered Secretaries in the New Companies Act; • Discussion with NBR to entitle the Chartered Secretaries as ITP; and • Organize CPD programs.

Conclusion In fine, I would like to make a clarion call to my professional colleagues to come forward with an open and frank mind to contribute for the development of this Institute by getting sincerely involved with all the academic as well as non-academic activities of the Institute. Our combined efforts I am sure will help to transform the Institute into a globally accepted professional body with the assets of its Members’ potential.

May Allah bless us all in our path to the cherished goal.

Kind Regards,

MOHAMMAD ASAD ULLAH FCS PRESIDENT

Institute News

INSTITUTE ACTIVITIES October - December 2013

The 4th quarter (October - December) of the year 2013 was fairly significant for the Institute.

MEETINGS INTERNAL Council Meeting The Council met on December 07, 2013 where followingmajor decisions were taken: • Approved the Action Plan for the year 2014.

• Approved the expenditure incurred for purchasing furniture at the new premises.

• Approved the Budget of the Institute for 2014.

• Approved the submission of application to RAJUK for allotment of the plot at Uttara as a government statutory organization.

• Approved the recruitment process of Officers for the Institute.

• Approved the participation of ICSB Council Members at 41st Convention of ICSI held at Chennai, India from November 07-09, 2013.

• Reviewed the financial statements for quarter ended on September 30, 2013 .

• Ratified the revised list of Members of some Sub Committees under different Standing Committees.

• Approved the decision on proposal for purchasing 10 katha lands at Aftab nagor.

• Authorized the President of the Institute to sign and execute Member Country Undertaking (MCU) as per proforma given by CSIA, Geneva.

• Approved the rate of subscription for Annual Picnic to be held on February 07, 2014.

• Approved payment of dearness allowance to the officers and staff of ICSB in pursuant to Ministry of Finance’s circular and subsequently endorsed by Ministry of Commerce.

• Approved the recommendation of the Education Committee regarding new admission for January-June, 2014 session and Orientation program for the newly admitted students at BIAM Auditorium by January, 2014.

• Approved the recommendations of the Examination Committee such as fixation of date for July-December Session Examination including Foundation Course, re-fixation of honorarium for moderators.

Standing Committee Meetings The following Standing Committee meetings were held during the quarter: • The Executive Committee met on November 02, November 16, and December 25, 2013. Besides CS Regulation Sub Committee, Journal and Publication Sub Committee, International Relation Sub Committee and Dhaka Regional Chapter Sub Committee under the Executive Committee also held several meetings during the period to carry forward the various activities of the Institute.

• The Education Committee held two meetings on November 23 and December 06, 2013.

• Examination Committee also held two meetings on November 02 and December 06, 2013.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

07

Institute News

MEETING EXTERNAL Meeting Minister

with

Honorable

Law

The newly elected Council Members headed by its President, Mohammad Asad Ullah FCS called on Barrister Shafique Ahmed, Honorable Minister for Law, Justice and Parliamentary Affairs at his office chamber at the Secretariat on October 01, 2013. While introducing the newly elected Council members, the President apprised the Minister of the recent activities and development of the Institute as well as its future plans.

President along with Council Members & Secretary of ICSB met the Honorable Law Minister

Honorable Law Minister, while appreciating the role of ICSB in promoting professionalism and development of the Company Secretaries profession underscored the need to engage more professional Chartered/Company Secretaries in the corporate sector of the country for economic development of the nation. The President was accompanied by M. Naseemul Hye FCS, Senior Vice President, Md. Monirul Alam FCS, Vice President, Md. Bul Hasan FCS, Treasurer, M. Nurul Alam FCS, Council Member, Md. Selim Reza FCS, Council Member, Mustafa Mohiuddin, Secretary of the Institute.

Meeting with Honorable Commerce Minister The President, Mohammad Asad Ullah FCS along with the Secretary of the Institute and

08

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

President along with Council Members & Secretary of ICSB met the Honorable Commerce Minister

Council Members called on Ghulam Muhammed Quader, MP Honorable Commerce Minister, Government of the People’s Republic of Bangladesh at his office chamber at the Secretariat on October 03, 2013. At the outset, the President introduced the newly elected Council Members to the Honorable Commerce Minister and apprised him about the recent activities and development of the Institute. Honorable Commerce Minister appreciated the role of ICSB in promoting professionalism and development of the Company Secretaries profession in the country.

He also appreciated that the ICSB has been providing international standard professional education in the country in line with UK, India and other developed countries of the world so that its Members can compete with other profession and get employment at home and abroad. He assured that the Ministry of Commerce will do everything possible for further development of the profession in the country. Upon query, Honorable Minister apprised the delegates that the draft of new Companies Act is now at the final stage and the Government is actively considering finalizing it soon. The President was accompanied by M. Naseemul Hye FCS, Senior Vice President, Md. Monirul Alam FCS, Vice President, M. Nurul Alam FCS, Council Member, Md. Selim Reza FCS, Council Member. Mustafa Mohiuddin, Secretary of the Institute,

Institute News

Newly elected Council Members and the President of ICSB with the Chairman BSEC.

Meeting with BSEC Chairman and Commissioners A delegate of the newly elected Council of the Institute led by its President Mohammad Asad Ullah FCS met the Chairman, Prof. Dr. M. Khairul Hossain and other Commissioners of Bangladesh Securities and Exchange Commission (BSEC) in a formal call on October 7, 2013. Initially, the President introduced the new Council of ICSB to the Chairman, BSEC and highlighted on various activities that the Institute has undertaken for professional development of its Members as well as its future plans. Prof. Dr. M. Khairul Hossain underscored the need for professional development of the Company Secretaries in ensuring corporate culture and strict compliance of securities laws and corporate governance in all listed Companies of the country. Terming the Company Secretaries as the bridge between Directors and the general shareholders of a company, he urged upon the professional Members of ICSB to maintain honesty, dignity and integrity in looking after Management and shareholder’s interest as well as the compliance of rules and regulations of the regulatory bodies for the greater interest of

the Capital Market. The BSEC Chairman also briefed about the major reforms made by the Authority during last two years and expressed that general Shareholders and all the stake holders of the Capital Market will get benefits of those reforms very soon.

Terming the Demutualization of Stock Exchanges as a milestone in the Capital Market, the Chairman hoped that when demutualization will start functioning in both DSE and CSE, the capital market would play an effective role in development of our national economy. The ICSB President then apprised that ICSB is the Member of Corporate Secretaries International Association (CSIA) based in Geneva, Switzerland and the Professional Courses the Institute is providing is of international standard education in line with UK, India and other developed countries of the world. The activities of the Institute match with the objectives of BSEC and the Members of ICSB have been working to materialize the same in practical field, the President added. Later Mohammad Asad Ullah FCS handed over to the BSEC Chairman a set of books published by the Institute on Secretarial Standards on

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

09

Institute News

Board Meeting and Annual General Meeting and also on Private Practice Guide Lines and requested the Chairman of BSEC to include those standards and guidelines in the Securities Law and Corporate Governance guidelines. M.Helal Uddin Nizami, Arif Khan, and Md. Abdus Salam Commissioners of BSEC also spoke on the occasion and highlighted the importance of Company Secretaries profession in corporate sector development of the country.

Meeting Minister

with

Honorable

Finance

The President of Institute of Chartered Secretaries of Bangladesh (ICSB) Mohammad Asad Ullah, FCS along with the new Council Members met with Honorable Finance Minister A.M.A Muhith on December 18, 2013 at his chamber in the Bangladesh Secretariat. The President introduced the new Council to the Honorable Finance Minister and highlighted on various activities pursued by ICSB since its establishment. He also gave a brief background of ICSB stressing the need for ensuring Corporate Governance and

compliance of Bangladesh Securities and Exchange Commission’s (BSEC) directives in the listed companies. Professional Degree offered by ICSB is creating ample job opportunities for Company Secretaries in listed companies, he added. Honorable Finance Minister gave a patient hearing and appreciated the activities of ICSB and role of Company Secretaries in a Company and hoped that the Company Secretaries with the Professional Degree of ICSB will play a pivotal role in fair functioning of Capital Market as well as ensuring corporate governance, and compliance issues of securities laws in the listed companies. The President of ICSB appealed to Honorable Finance Minister for Government patronage in building ICSB’s own campus and administrative complex by Government grant so that more students can be accommodated in the Institute with a view to provide adequate Chartered Secretaries to meet the crying demand for about 1,30,000 companies registered with the Registrar of Joint Stock Companies(RJSC) of Bangladesh of which more than 300 companies are listed with the Stock Exchanges of Bangladesh. The

President along with Council Members & Secretary of ICSB met the Honorable Finance Minister

10

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Institute News

Council Members thanked the honorable Minister for giving his valuable time and hoped that his continued support and guidance will help the Institute to move forward to achieve its objectives.The President was accompanied by M. Naseemul Hye FCS, Senior Vice President, Md. Monirul Alam FCS, Vice President, Itrat Husain FCS, N.G.Chakraborti FCS, Md. Shahid Farooqui FCS, Md. Selim Reza FCS, A.T.M. Tahmiduzzaman ACS Council Members and Mustafa Mohiuddin, Secretary of the Institute.

Meeting with Commerce Secretary and Additional Finance Secretary The President along with the Council Members of the Institute also met the Commerce Secretary on December 19, 2013 and discussed various plans and objectives to develop the Institute.

President along with Council Members & Secretary of ICSB met with Honorable Additional Finance Secretary

M. Naseemul Hye FCS, Senior Vice President, Md. Selim Reza FCS, M. Nurul Alam FCS, Hossain Sadat FCS, Council Members and Mustafa Mohiuddin, Secretary of the Institute.

Mr. Shawkat Ali Waresi, Joint Secretary, Ministry of Commerce & Council Member of the Institute & Md. Ekhlasur Rahman, Joint Secretary, Finance Division and Council Member of the Institute. were also present.

WORKSHOPS Workshop on Corporate Governance Dispute Resolution and Mediation

President along with Council Members & Secretary of ICSB met with Honorable Commerce Secretary

The Commerce Secretary was convinced that as a Statutory Body under Ministry of Commerce, ICSB deserves to be given more money for its routine work as well as construction of new campus. He assured to do the needful within his capacity as a Commerce Secretary to promote ICSB. The Council also met Additional Finance Secretary to impress upon him to help ICSB with a onetime Budget allocation for purchasing land/constructing ICSB own campus. The President was accompanied by

The Institute in collaboration with the International Finance Corporation (IFC) organized a day long workshop onCorporate Governance Dispute Resolution and Mediation on October 26, 2013 at Hotel Sonargaon, Dhaka. It was attended by 37 Members of ICSB. The Workshop was inaugurated by Mohammad Sanaullah FCS, Immediate Past President and Chairman, Professional Development Committee of the Institute. Ms. LopaRahman, Corporate Governance Specialist, Advisory Service in South Asia also spoke at the inaugural session. The Resource Persons of the workshop, Ms. Mary Jo Larson, Ph.D. Corporate Governance Dispute Resolution Specialist and Barrister Sheela R. Rahman, Legal Specialist discussed various tools and

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

11

Institute News

under the Corporate Governance Guidelines issued by the Securities and Exchange Commission (SEC).

MohammadSnaullah FCS, immediate past President of ICSB and Chairman, Professional Development Committee along with the Resource Persons and the participants of the workshop

techniques and methodology that can be used to mitigate and resolve disputes that may arise in companies between its Board, Management and Shareholders.

Workshop on Audit Committee: Roles, Responsibility, Structure and Function Institute of ICSB in collaboration with the International Finance Corporation (IFC) organized a day long workshop on Audit Committee: Roles, Responsibility, Structure and Function on November 01, 2013 at Hotel Sonargaon, Dhaka. It was attended by 33 Members of ICSB Welcome address was delivered by Mohammad Sanaullah FCS, Immediate Past President and Chairman, Professional Development Committee, ICSB. Lopa Rahman, Corporate Governance Specialist, Advisory Service in South Asia and Mohammad Asad Ullah, President ICSB also spoke on the occasion. Speakers stressed the importance of Audit Committee which is now a mandatory requirement for listed companies

Mohammad Asad Ullah FCS, President of ICSB and Mohammad Sanaullah FCS immediate past President of ICSB and Chairman, Professional Development Committee along with the keynote speakers and participants of workshop

12

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Audit Committee is a prerequisite to establish good governance practices in an organization as it plays a key role in ensuring the accuracy and integrity of the financial statements of the organization. This workshop also emphasized the role and selection process of Independent Directors in establishing effective audit committee and the importance of internal audit functions. The Resource Persons of the workshop were Ms. Lopa Rahman on IFC Standards for Audit Committee, Barrister Sheela Rahman, on the Bangladesh Legal Requirements of Audit Committee, Emadul Hannan, Head of Internal Audit, Grameenphone Ltd on the Importance of Internal Control to Audit Committee and Sarwar Azam Khan FCA, FCS, Finance Director, GlaxoSmithKline Bangladesh Ltd. on Financial Reporting Standards.

RESULT OF THE CHARTERED SECRETARY FOUNDATION LEVEL EXAMINATION The Examination Committee of the Institute of Chartered Secretaries of Bangladesh (ICSB) has announced the results of the Chartered Secretary Foundation Level Examination held in December 2013. The list of the Successful Candidates are as follows: ROLL NO FL-01 FL-02 FL-04 FL-05 FL-11 FL-12 FL-13 FL-14 FL-15 FL-18 FL-19 FL-20

NAME OF THE STUDENTS Muhammad Mushfiqul Wara Tafsira Khatun Md. Anowarul Islam Md.Enamul Haq Shaila Parvin A.K.M.Atikur Rahman Abul Hasan Md. Anisuzzaman Muhammed Efthekhar Hossain M.M. Munir Ahmed Muhammad Abdur Rahman Tasnima Tarannum Archi Sharmili Akter

Institute News

FL-21 FL-22 FL-23 FL-25 FL-26 FL-29

Ismail Hossain Tanzina Mahmud Md. Ariful Alam Mohammed Salim Mohammad Shafatul Islam Dilruba Hasin

Total: 18 (Eighteen)

SUCCESS GREETINGS FHossain Sadat FCS

Has recently been made responsible to lead the Regulatory Affairs of Grameenphone. With the above, Mr. Sadat will now play two roles – one as “Company Secretary” and the other as “Head of Regulatory Affairs”.

Successful candidates would automatically be enrolled in the Executive Level-I.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

13

Article

Dimensions of Corporate Social Responsibility (CSR) Prof Feroz I Faruque PhD FCS FCCE(US)CPA MCISI(UK) What does it mean?

One of the most frequently asked questions and probably for all those individuals and organisations dealing with CSR issues is the obvious - just what does 'Corporate Social Responsibility' mean anyway? Is it a stalking horse for an anti-corporate agenda?

Something which, like original sin, you can never escape?

Or what?

Different organisations have framed different definitions - although there is considerable common ground between them. My own definition is that CSR is about how companies manage the business processes to produce an overall positive impact on society. Take the following illustration to make the matter better understandable: Companies need to answer two aspects of their operations

1. The quality of their management - both in terms of people and processes (the inner circle).

2. The nature of, and quantity of their impact on society in various areas. Outside stakeholders are taking an increasing interest in the activities of companies. Most look to the outer circle - what the company has actually done, good or bad, in terms of its products and services, in terms of its impact on the environment and on local communities, or in how it treats and develops its workforce. Out of the various stakeholders, it is financial analysts who are predominantly focused - as well as past financial performance - on quality of management as an indicator of likely future performance.

Other definitions: The World Business Council for Sustainable Development in its publication Making Good Business Sense by Lord Holme and Richard Watts, used the following definition: Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.

The same report gave some evidence of the different perceptions of what this should mean from a number of different societies across the world. Definitions as different as CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

15

Article

community and the government, through CSR, giving back to society. Traditionally in the United States, CSR has been defined much more in terms of a philanthropic model.

Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving. The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons. Personally, I believe this model is more sustainable because: 1. Social responsibility becomes an integral part of the wealth creation process - which if managed properly should enhance the competitiveness of business and maximise the value of wealth creation to society.

2. When times get hard, there is the incentive to practice CSR more and better - if it is a philanthropic exercise which is peripheral to the main business, it will always be the first thing to go when push comes to shove.

But as with any process based on the collective activities of communities of human beings (as companies are) there is no 'one size fits all'. In different countries, there will be different priorities, and values that will shape how business acts. The US has growing numbers of people looking towards core business issues. For instance, the CSR definition used by Business for Social Responsibility is: Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business. On the other hand, the European Commission hedges its bets with two definitions wrapped into one: A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and

16

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.

When you review each of these, they broadly agree that the definition now focuses on the impact of how you manage your core business. Some go further than others in prescribing how far companies go beyond managing their own impact into the terrain of acting specifically outside of that focus to make a contribution to the achievement of broader societal goals. It is a key difference, when many business leaders feel that their companies are ill equipped to pursue broader societal goals, and activists argue that companies have no democratic legitimacy to take such roles. That particular debate will continue. Fair trade bananas are an example of the social dimension of corporate social responsibility.

Traditionally, companies have had one responsibility: to make a profit. But the concept of corporate social responsibility holds that companies should be responsible to more than just their owners. Corporate social responsibility holds that there are multiple dimensions that should affect a company's actions. Understand these dimensions when planning your own company's corporate social responsibility efforts.

Environmental The environmental dimension of corporate social responsibility refers to your business's impact on the environment. The goal, as a socially responsible company, is to engage in business practices that benefit the environment. For example, you might choose to use recycled materials in your packaging or ad renewable energy sources like solar power to your factory.

Social The social dimension of corporate

Article

responsibility involves the relationship between your business and society as a whole. When addressing the social dimension, you should aim to use your business to benefit society as a whole. This could involve sourcing fair trade products, for example, or agreeing to pay your employees a livable wage. It could also involve taking on endeavors that benefit society, for instance using your resources to organize charitable fundraisers.

Economic The economic dimension refers to the effect that corporate social responsibility has on the finances of your company. In an ideal world, where corporate social responsibility had no costs, there would be no reason to limit it.

But in the real world it is important to recognize the financial impact that these actions have and to balance being a good corporate citizen with making a profit.

Stakeholder The stakeholders are all of the people affected by your company's actions. These include employees, regulators, suppliers and members of the public. When considering the stakeholder dimension of corporate social responsibility, consider how your business decisions affect these groups. For example, you might be able to increase your output by having employees work more, but you should consider the impact it will have on them, not just your bottom line.

Voluntariness Actions that fall into the voluntariness dimension are those that you are not required to do. These actions are based in what your company believes is the correct thing to do.

They may be based in specific ethical values that your company holds. For example, you may believe that using organic products is the right thing to do even if you are not required to do so.

What are the significant differences between CSR and corporate philanthropy from a company’s point of view?

Anthony Liew of Capital Motors Inc said CSR is more of a compliance with baseline social norms (meaning not to do unpopular or unethical activities). Philanthropy, on the other hand, takes 'Love' and 'Gratitude' from the hearts of leaders and their followers alike. It is more than just donation. For the true at heart, it takes time, energy, creativity, and even applied knowledge,(Sounds like running a business isn't it?)

For CSR, the baseline goal is obviously alignment with social norms in order to gain favor in their normal course of business. For corporate philanthropy (assuming true at heart), the goal is just altruism because they possess love and gratitude for all.

Patric Low of University of South Pacific said briefly and simply, ‘CSR is broader including society and the larger aspects of human living and its settings including nature and environmental care; it applies to the society as a whole while corporate philanthropy is more specific-love and/or care of humanity’.

Jharkanti Dattagupta of Nobel Group of Institutes said ‘Philanthropy is purely voluntary act by an individual or organization, whereas, Corporate Social Responsibility (CSR) may now become mandatory in some countries, as in India. Philanthropy is an expression of deep human urge of fellow-feeling whereas, CSR has now become a part of corporate strategy of creating competitive advantage through creation of goodwill & image which help in sustainable growth & development . CSR takes care of all the stakeholders’.

Sangeeta Pawar of the University of Mumbai said ‘CSR responsibility is morally an act, gesture of the company to hold its credit

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

17

Article standing in the society and bears benefits in the form of tax evasion! from the government. It is a compulsory requirement and in India it is through legal provision that all corporate entities have to shell out 2 percent of their net profit. Philanthropy is a gesture of human kind and social obligation. It is not compulsory but can be promulgated as a part of their social contribution’.

Let me confuse you with two different quotes/arguments: “The social responsibility of business is to increase its profits” (Friedman 1970). “Can social responsibility work? Does it work?

Should it work? This article summarizes some of the overwhelming evidence that it can’t, doesn’t, and shouldn’t, and then concludes that it must” (Mintzberg 1983). CSR has something to do with corporate strategy, analogous to it, philanthropy has to do with people; summarizing, CSR=Corporate Philanthropy=People.

I believe that (agree with Natasha) it goes with the company's goals, intentions, and values. It should translate them into really caring for people. Yes, companies can indeed increase their profits but still be definitely caring for their employees, people's employment, work-life balance, wellbeing and welfare.

For philanthropy to really happen, we need leaders who really care and act in it, not just strategize (as in CSR or just like a policy statement). In both terms: CSR and philanthropy there are action elements, but I

18

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

would take that in Philanthropy, there is more of or "a stronger loving feeling/action element.

The company is banking or working hard on profits (Felippe's “The social responsibility of business is to increase its profits”; Friedman 1970), it is actually doing something good for the employees. The Company is ensuring employment, livelihood and well-being for them. Making profit is a good thing, it makes this world go round...! This world is also about balance, give and take. We are at peace (mostly), we are pretty well to do compared to years before... Cherish what we have (gratitude) and spare some love for others (altruism). There must be balance and when the Company does for people - it must have sincerity and it must come from the heart.

Otherwise, it is just EMPTY. CSR or corporate philanthropy- the phenomenon lies in the socially committed human attitude and approach of a business man. Today's business strategies are fundamentally guided with the principle of money and only money…….profit and… profit beyond the roof.

The writer is a Fellow Member of the Institute and Visiting Professor of International Finance & Business, American University, Tajikstan.

Article

COMPANY SECRETARY AND CORPORATE SOCIAL RESPONSIBILITY BIPUL KUMAR BHOWMIK FCS COMPANY SECRETARY – WHAT IS AHEAD Company Secretaries by virtue of their knowledge and training, have come to occupy pivotal positions in the corporate sector and are now key managerial personnel. How they can help the corporates to fulfill their social responsibilities is what has been probed here.

We know that the role and importance of Company Secretary in the corporate world and Corporate Governance is very well established. We are aware about the hierarchy of human needs and different layers and levels of needs. Satisfaction of one causes the awakening of the second one of higher level. The same applies to the organization, the Institute and the profession at large. Now, what is next for the Company Secretary as a professional, as an individual and what is next for the Institute? As said the invaluable contribution to the corporate segment is well established now. What is left is the contribution to the society. Of course, service to the corporate sector by a professional is also indirect contribution to the society.

CORPORATE SOCIAL RESPONSIBILITY The concept of Corporate Social Responsibility can be explained as: Corporate-means organized business, Social-means everything dealing with the people, and Responsibilitymeans accountability between the two. Corporate Social Responsibility has been defined as "the integration of business operations and values whereby the interests of all stakeholders, including customers, employees, investors and the environment are reflected in the organization’s policies and actions" and "the obligation of the firm to use its resources in ways to benefit society at large and improving

welfare of society at large independently of direct gains of the company". The notion that corporations need to attend to social, environmental and economic demand imposed by stakeholders, as well as financial demands coming from shareholders, is commonly referred to as "Corporate Social Responsibility". While most corporate directors are, at the very least, familiar with this concept, many are still seeking clarity about their role in relation to it.

It is important to remember that all organizations exist in complex relationship with elements in their external environmental.

In this context, corporate social responsibility is defined as an obligation of the organization to act in ways that serve both its own interest and interest of society at large.

There are different ways by which a corporate can contribute/fulfill its CSR:

• Best quality products to consumers.

• Timely discharge of Tax liability.

• Implementation of Laws, Rules & Regulations in letter and spirit.

• In house welfare activities, best treatment to the manpower.

• Providing adequate, inputs for the education

of underprivileged section of the society.

• Conducting night schools.

• Programmes for health awareness to different section, class of people.

• Conducting adoption campaign for orphan children.

• Education and welfare activities for street children.

• Sponsoring medical check-ups, treatment for poor people.

• Running schools and participating in building infrastructure for the villages.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

19

Article

• Rural development programmes.

• Planting trees, keeping areas greener.

• Protecting the abused.

• Designing products and services and

Innovative ways to contribute socially for the poor artisans who are at the bottom of the economic pyramid.

CORPORATE WORLD TOWARDS CSR A corporate earns profits, makes money by operating and utilizing resources, infrastructure, environment belonging to the society; so it becomes a moral duty, responsibility of a corporate to give back something to the society, nurturing, preserving resources of the planet earth, being sensitive and participate in solving problems of the society. Corporate should operate and conduct their business operations in a socially responsible manner because the activities, roles and functions inevitably have impact on the society at large as no organ in a system network functions in isolation. This has evolved the concept of Corporate Social Responsibility (CSR).

BOARDS FACE RESPONSIBILITY

NEW

SOCIAL

The international newsweekly The Economist concluded that a corporate director in today’s environment has "the job from the hell". And indeed, a string of corporate scandals over the past few years has caused investors and regulators to ratchet up their security of board members and elevated the pressure on directors to perform well.

Boards’ continuing commitment to the society at large: Now, the director's job promises to become even more demanding.

To date, the spotlight on directors has highlighted their traditional role of ensuring that corporate executives run their companies in a manner aligned with the interests of

20

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

shareholders. The Government sees CSR as the business contribution to its sustainable development goals. Essentially it is about how business takes account of its economic, social and environmental impacts in the way it operates - maximizing the benefits and minimizing the downsides. However, CSR is still considered as the voluntarily actions that business can make, over and above the compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society. Key CSR issues face by Boards is governance, responsible sourcing, employee and community relations, social equity and human rights. It is not only about fulfilling a duty to society; it can also bring competitive advantage.

New rules of the game: The new "Rules of the Game" that are behind the convergence of CSR and corporate governance are requiring corporate directors to reassess their responsibilities. The 'New Rules' have two key features. The first is the entry of new players – stakeholders - into the governance system that affects the exercise of corporate power. The second is that stakeholders are using growing influence and sophistication as a way to increase pressure on corporate to take responsibility and be accountable, for the social, environmental, and economic impact of their decisions.

Pressure to give stakeholders a role in governance: With growing number of stakeholder groups demanding influence over corporate decision making, corporations will have to become more sophisticated in making choices about the parties with whom they will engage in civil society. And once partners are selected, corporate will have to become more adept in terms of how they interact with influential interest groups.

NEED FOR REGULATORY

Article

PRESCRIPTION MANDATORILY Unfortunately, unless and until compulsorily imposed by a law/Government, there seems to be reluctance in implementing and initiating any newer thing by many of the entities.

Some people/entities will always be there to break, not to follow such legal compulsion and at the same time, some people/entities will always be there to voluntarily put into operation world class practices for the betterment at the macro level. There is an urgent need to frame a legal frame work for implementation of CSR programme. A comprehensive manual should be framed which contains the applicability of CSR, fulfillment based on the well set criteria on the basis of Turnover, nature of business operations, span of impact of business operations, consumption of natural resources and impact on environment, profitability etc. A disclosure in the Annual Report about the fulfillment of CSR should be mandate. CSR clause could also be included in the Listing Rules/Agreement of the stock exchanges.

There cannot be a universal CSR plan or framework to be adhered by corporates.

There must be different set of guidelines, rules for different industries and co-relate the various parameters having impact at the macro level in the economy and society at large. There should also be some incentives/award for the level of achievement of CSR and of course penalty for non-fulfillment of CSR.

COMPANY SECRETARY AND THE INSTITUTE (ICSB) COMBINED EFFORT TOWARDS CSR Company Secretary can play the most important role in CSR – formulation and implementation. For this first of all a Company Secretary must have a feeling, a desire from the bottom of the heart to do something good for the society, to participate in the welfare of the underprivileged section of the society, to be a reason of smile on the face of poor

people, orphan children, underprivileged section of the society. Then only one can cultivate such feeling and effectively lead others for CSR. A Company Secretary should inculcate the sense of and influence CSR since they have the direct nexus to the Board of Directors. Once CSR is desired and initiated at the top level of the pyramid it will be automatically followed down the line in the hierarchy. This depends upon the leadership quality, organizational culture, vision and mission, dynamics of the entity, quality and effectiveness of corporate governance practices, etc.

For transforming the CSR policies into action one must have a clear structure of organization, clear vision and mission, optimum manpower, financial resources etc.

The Company Secretary can, right from conceptualization, deciding the legal form, structure of organization, compliances with the statutory requirements to doing overall management of the affairs of the entity, providing leadership can contribute a lot to the noble cause of serving the society at large through the tool of CSR. The ICSB can also play a major role by framing a module, Guidance Note and later Secretarial Standard on CSR and by conducting Study Circles, Seminars can enlighten members, students and promoters, Directors, CEOs from the corporate sector.

Students undergoing CS course as well as members may be made to voluntarily, involve for few days as a part of training, in social welfare activities. Visit to NGOs, working sites for CSR projects can prove very useful.

CONCLUSION CSR should not be mistaken as socialism but, should perceive as an effective tool for the well balanced growth and development of a nation. As observed by Peter Drucker – “Profitability is crucial – for the society even

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

21

Article

more than the business. But it is not the purpose of business, but a limiting factor. It is not the explanation, cause or rationale of business behavior or decisions but the test of its validity”. Milton Friedman’s famous formulation that “The business of business is business” has outlived its utility, and social responsibility and being a good corporate citizen are the buzzword today. In the long run, those organization or group of persons who do not exercise power in a way which society considers responsible will tend to lose it. Since the Companies Act through the instrumentally of directors, the social responsibilities of the directors assume crucial dimension.

They have to be fully alive to their social responsibilities while taking policy decisions, whether they relate to fixation of prices for the company's products or fixation of wages for employees of the company or regarding corporate functioning, the overall social interest should not be ignored. The managerial powers should, therefore, be exercised by the directors (i.e., the Board) not merely keeping in view the interest of the shareholders but they should also safeguard the interests of the creditors, the customers, employees, the Government and the public at large for the overall growth of the company about the need for regulating their social behavior. Leading companies undertake various studies to control pollution, improve the environment and also to help their employees and consumers in various spheres. Shareholders' interest is only one of a number of interests served by companies

and according to modern view; it should not automatically take precedence over other interests such as those of employees, customers, creditors, and the general public.

The balance of interest concept of Board's responsibilities has been more and more accepted generally by many company boards themselves. However, company secretary by virtue of their expertise, knowledge and training can play a pivotal role to the Board as a dynamic professional extensively. Together, we can achieve results!

Admas, C. and Zutshi, A. 2004, "Corporate Social Responsibility: Why Business Should Act Responsibly and Be Accountable", The Australian Accounting Review, November 2013.

Kinkhabwala, Bhavesh A. 2009, “Company Secretary and Corporate Social Responsibility [CSR]”, ICSI. Kok, P., T. Wiele, R Mckenna and A. Brown, 2001, "A Corporate Social Responsibility Audit Within a Quality Management Framework", Journal of Business Ethics 31, 4:285-97.

Simms, J., 2002, "Business: Corporate Social Responsibility- You Know It Makes Sense".

Accountancy 130, 1311:48-50.

The writer is a Fellow Member of the Institute

22

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Article

CORPORATE SOCIAL RESPONSIBILITY IN BANGLADESH Mohammad Nurul Alam FCS CSR is frequently confused with charitable activities of business houses e.g. donation by corporate to deprived and under-privileged.

The activities are more appropriately termed

by Social Responsibilities (SR) which shall include governance, environment, human rights, ethics and welfare.

International Organization for Standardization (ISO) head quartered at Geneva, Switzerland coordinating and networking with 157 countries’ Standard Institutes. Bangladesh (BSTI) is a member of ISO. ISO 26000 is a guideline issued by ISO for voluntary compliance by the members to ensure SR. it is may also be a guidance to follow voluntarily by an organization for SR.

Current scenario Corporate Social Responsibility (CSR) is the initiative which allows an organization to integrate social and environmental concerns in their business operations. Some key CSR activities include environmental management, eco-efficiency, responsible sourcing, stakeholder engagement, labour standards and working conditions, employee and community relations, social equity, gender balance, human rights, good governance, and anti-corruption measures.

A properly implemented CSR concept can bring along a variety of competitive advantages, such as enhanced access to capital and markets, increased sales and profits, operational cost savings, improved productivity and quality, efficient human resource base, improved brand image and reputation, enhanced customer loyalty, better decision making and risk management processes.

CSR in Bangladesh Although CSR is a new concept in Bangladesh,

24

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

however, philanthropic and social welfare activities in the form of charity, and donations, disaster relief, etc. have long been prevalent in our country. As the CSR initiatives gather pace, the multi-national companies stands in the forefront in promoting CSR. Meanwhile the local business conglomerates are gradually gearing up their CSR agenda.

Some of the most visible CSR activates include Cox’s bazar sea beach cleaning project and international coastal cleanup day Since 2005, Banglalink has been cleaning world’s longest sea beach, Cox’s Bazar. Under this project, 26 female workers clean the 3 km long beach 363 days a year in 2 shifts. In addition to that there is another team of 7 male workers who support to move all heavy dirt and rubbish from the beach.

National Immunization DAY(NID)Campaign Grameenphone partnering with Bangladesh Government and WHO has been conducting polio vaccination awareness raising campaign since 2007 in order to eradicate the re-emergence of polio from Bangladesh.

Campaign activities include: SMS reminder, RJ endorsement (FM radio), awareness through folk songs, mobile vaccination centers, press ads and so forth.

Community Information Center Grameenphone Community Information Center is a shared premise where rural people may access a wide-range of state of art services such as Internet, voice communications, video conferencing and other information services. This initiative by Grameenphone is in line with the company's objective to serve local community needs by:

Article Bridging the "digital divide" by providing information access to rural people -Alleviating poverty Educating the underserved and underprivileged on information-based services -Building local entrepreneurships and improving capacity -Creating employment opportunities for the unemployed youth CICs are a unique business model that has won appreciation from the International community, such as from the Washington Post, from UNDP, as well as the blessings of several International bodies like Katalyst and the GSMA. The pilot project started in February 2006 with 16 CICs; today the project has become a massive operation with over 500 CICs operational in nearly 450 Upzilla's.

The short-term plan of this initiative is to establish at least one CIC in each of the 462 Upazilla's. In the long-run Grameenphone plans to increase the number of CICs substantially so that very CIC can support the information needs of four adjacent villages.

Donating blankets at orphanages To help underprivileged children, Banglalink has taken this special initiative to distribute blankets among the orphan children of many orphanages around the country- which are in great need for it during winter season.

Green banking An international conference held in Dhaka in early December 2013, underscored the urgency with which all the stakeholders view the emerging situation. It is against this backdrop that the country's banking sector, which has substantial investible funds at its disposal to support industrial and development projects, has come up with strategies to handle the climate change issues. The Bangladesh Bank (BB) remains at the core of the leadership in this regard.The two-day

conference,organised by the SR Asia, urged the government to formulate environment-friendly policies to ensure responsible and green business.

Experts also called upon the financial institutions to frame lending policies to pursue 'green banking' in a more effective manner.

Such banking has been identified as one of the major drivers of sustainable economic growth in developing countries.The banking system can turn green, going online. Paying bills online, remote deposit, online fund transfers, and online statements are just a few of the ways through which online banking can help create savings. These are savings in terms of the use of less paper, less energy, and less expenditure of natural resources in banking activities. Similarly, green loans can promote eco-friendly house-building by patronizing projects which use energy-saving devices.

SQUARE Kindergarten & SQUARE High School SQUARE Kindergarten is constructed primarily to facilitate quality education to the children of the employees of Square Pharmaceuticals plant in Pabna. This is a 100% “not- for-profit” initiative where the students receive quality education at a very subsidized fee. Other than its own employees’ children, it also provides this education facility for the children of local community. SQUARE Kindergarten extended its facility from Primary Level (Grade I – Grade V) to Secondary Level (Grade VI and upwards) by establishing SQUARE High School.

Digitalize primary education Banglalink sponsored laptop with data connectivity to 250 government primary school in the rural area under access to information (A2I) project initiated by government.

Government initiative to encourage corporate house for SR activities Social Obligation Fund by BTRC An average of Taka 500 million is deposited in

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

25

Article the Social Obligation Fund of BTRC every quarter as a mandatory contribution of 1% of revenue of the telecom operators. Since 2012 the total accumulation of the fund has raised so far Taka 4 Billion. This fund is entirely unused due to absence of fund utilization policy since last two years. This fund can be utilized for infrastructure development to expand mobile network in the underprivileged rural area of the country.

As per S.R.O. 08-Act/2009 dated 15th January, 2009, tax exemption facility at the rate of 10 percent on a part of the corporate income to be spent on complying with corporate social responsibility (CSR)have been introduced.

According to the tax exemption plan, economic, environmental and social, development activities will be brought within CSR purview.

Agricultural production and processing, crop diversification, employment generation, education and training will be considered as CSR areas under economic sector, while global warming, ecological balance, pure water management, carbon emission, sea water level, forestry, city beautification and waste management will be environmental activities.

Under social development, companies investing for women rights issues, extending donations to HIV-AIDS campaign agencies, welfare activities for disabled, donations for public universities, relief activities after natural calamities, welfare activities for grassroots children and acid victims will get the tax waiver facility.

In order to enjoy the facility, companies will have to follow labour compliant issues and be environmentally conscious.

In 2007, the government raised tax exemption limit for donation to charity to Taka 5 lakh from Taka 2.5 lakh in an attempt to encourage welfare activities.

Leading companies for CSR initiatives in Bangladesh (Source- Company web sites)

26

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

The following renowned Corporate Houses are noticeable for their investment in CSR activities in Bangladesh • Banglalink – Investment in promoting local culture and heritage, Cox’s Bazar beach cleaning project since 2005, special arrangements for hajj pilgrims at the hajj camp, blankets distribution among the underprivileged, ICT support for underprivileged children i.e. computer lab set up etc.

• Dutch Bangla Bank Limited – Apart from various other philanthropic actions , donation of Taka 112 million for the Savar factory collapse tragedy and Taka 1 Billion for scholarship in 2011.

• Grameenphone Ltd. Among other Philanthropic activities GP investment was noticeable in the following areas: - Safe Motherhood & Infant Care Project:More than 1.7 million free primary healthcare services to underprivileged pregnant mothers & their infants until 2009.

- Free eye care support for around 28,780 people - 3,458 eye sights restored so far • Robi – Mentionable CSR activities of Robi include water treatment plant, medical treatment for club feet, Basic computer training, etc.

• British American Tobacco – Contributes in the projects for tree plantation, safe drinking water and soil fertility.

The writer is a Council Member of the Institute and Company Secretary of Banglalink Digital Communications Limited.

Article

26000: New Standards for Social Responsibility Kazi Ashiqur Rahman FCS

CSR is a contemporary issue and is an increasingly important part of modern business. Traditionally Corporate Social Responsibility (CSR) refers to the role of a business in contributing positively to the larger community in which it operates. CSR is considered as good way of doing business strategically and profitably.

Traditional mode of CSR CSR has largely been based on western orientation giving rise to similar notions in practicing worldwide without consideration of socio economic and cultural context. Which are more of promotional activities of the business than that of doing good to the society. In many cases, companies’ CSR advertisement costs go higher than actual CSR costs. CSR grows like “Angelina Jolie passes her birth day at an orphanage”, “Tom Cruise passes an hour with the cancer patients”, “Elizabeth Tailor takes part in a rally protesting inhuman behavior with pets,” etc. These are happening in the name of CSR. Perhaps that doesn’t make any sense but these are very common CSR scenario.

CSR: Is that all we got?

Various latest reports of UN bodies (World Health Statistics 2013 by WHO, World Bank Report 2012) reveal vulnerable pictures of two billion populations. Organizations are mostly responsible for destructions of humanity irrespective of their size. They are making higher profit unethically at a cost of humanity, economic, social, cultural and natural damage.

Few of many are: • 6.6 million children under five died in 2012, nearly 18,000 every day; • 37% population has no access to improved water; • 75% population of least-advantaged

28

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

countries has no access to improved sanitation; • 24% population is underweight; • 1 out of 5 adults is illiterate; • 1.6 billion people are living on less than $1 per day; • 1% of the population owns 57% of the world's capital; • Primary forest area (as opposed to plantations) was reduced globally by 60,000 square kilometers per year (about the size of Ireland).

Few pictures out of millions can help us in understanding the grey areas of our modern and civilized world. These pictures are real but obviously vulnerable.

It has been thoroughly clarified nowadays that the carelessness of the rich towards the difficulties of the poor is the greatest danger that can destroy a society and that the rich will be the first victim of this danger.

What does society actually expect?

Social responsibility involves an understanding of the broader expectations of society. Simply pay back the dues to the society for bringing the company closer to the people and community. A fundamental principle of social responsibility is respect for the rule of law and compliance with legally binding obligations.

Social responsibility, however, also requires actions beyond legal compliance and the recognition of obligations to others that are not legally binding. These obligations arise out of widely shared ethical and other values.

Organizations have to have the spirit of social responsibility.

Society expects socially responsible behavior from the organizations.

Article

What is ISO 26000?

ISO (the International Organization for Standardization) is a worldwide federation of national standards bodies (ISO member bodies). In September 2010, ISO adopted an ambitious International Guidance Standard on Organizational Social Responsibility, ISO 26000.

This International Standard was developed using a multi-stakeholder approach involving experts from more than 90 countries and 40 international or broadly-based regional organizations involved in different aspects of social responsibility. These experts were from different stakeholder groups: consumers; government; industry; labour; non-governmental organizations (NGOs); and service, support, research, academics and others. In addition, specific provision was made to achieve a balance between developing and developed countries as well as a gender balance in drafting groups.

ISO 26000 and social responsibility For many successful business people being socially responsible is a part of who they are and why they are in business: to provide useful products and services, to provide jobs and development opportunities for their communities, and to gain satisfaction through meaningful work. In many countries, these “socially responsible entrepreneurs” have been quietly making a difference by acting on their values and principles, and inspiring others.

Besides, in many sectors and many parts of the world, people and businesses still lack the spirit or understanding of being responsible.

They may lack the knowledge or incentive to realize that their actions are important for the well-being of other people and the environment.

ISO 26000 is intended to encourage them to go beyond legal compliance, recognizing that compliance with law is a fundamental duty of

any organization and an essential part of their social responsibility. It is also intended to promote common understanding in the field of social responsibility, and to complement other instruments and initiatives for social responsibility, not to replace them. It is a response to the urgent need for all people, from all parts of the world, to have a positive impact on those around them, through the way they do business and live their lives.

ISO 26000 & principles of social responsibility ISO 26000 defines seven principles of social responsibility: • Being answerable for decisions and activities and their impacts on society, the economy and the environment; • Openness about decisions and activities that impact on society and the environment; • In accordance with accepted principles of right or good conduct in the context of a particular situation, and consistent with international norms and behavior; • Respect, consider and respond to the interests of its stakeholders; • Respect for rule of law of the country is mandatory where the organization operates in; • Respect for international norms of behavior even if thay are not binding to the organization; • Respect for human rights.

ISO 26000: Obligatory or self declaration?

The guidance offered in the ISO 26000 expressly is not intended for certification purposes. Nevertheless, many organizations have an increasing desire to draw up a self declaration. In this way, an organization can voluntarily account for the way in which it takes social responsibility, how ISO 26000 is applied within that context and what the results are.

ISO 26000 provides broad guidance, but does not offer specific instructions or require specific outcomes. Businesses that implement ISO 26000 have opportunities to identify and

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

29

Article

act on their own priorities, and to build stronger business models in the spirit of “continuous improvement.”

The self declaration is based on self-assessment and evaluation of the results thereof within the framework of ISO 26000. An organization can draw up, sign and publish the self declaration, with reference to supporting information.

CSR in Bangladesh: More work pending Organizations of Bangladesh and their stakeholders are becoming increasingly aware of the need for and benefits of socially responsible behavior. There are many successful businesspeople who are socially responsible.

However, there is good news for them. Lately, added to the ethical responsibility, ISO 26000 is going to be introduced in Bangladesh shortly.

The Government of Canada through their Trade Commissioner Service in Dhaka supported a bi-lingual Guide Book on social responsibility by a consulting firm. An impact survey on "Implementing ISO 26000 in Bangladesh" is under process to have ideas about acceptance of ISO 26000 in Bangladesh.

It will be the main port of call for many companies in Bangladesh seeking to address their wider responsibilities for the first time.

The standard will directly address human rights amongst other issues, including corruption, fair competition and consumer concerns.

CSR: New terminology!

ISO 26000, the new global guidance document for Social Responsibility (SR) has developed a new terminology to settle: SR or CSR? ISO took the decision that its guidance should be appropriate for all organizations (not just big businesses as the ‘C’ in CSR implies), including governments, NGOs and businesses of all sizes. This is an important distinction.

30

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Conclusion Traditional conception of CSR needs to be changed. Society expects responsible behavior from the organizations. Organizations should not confine themselves within the limit of donating lump-sum amount to any charitable organization; rather it requires ethical practice in all operational perspective. Organizations need to practice ethical governance and good labour relations.

If a company complies with all the laws voluntarily that also can be considered as SR. So, ISO 26000 is being, and should be, taken seriously. Whatever its shortcomings it is a powerful statement of the moral and practical issues facing companies and other organizations. Yes, respect to others’ right and compliance with own obligation can only be the SR guideline instead of imposition.

The writer is a Fellow Member of the Institute and Corporate Affairs Manager of Singer Bangladesh Limited

Article

CSR IS THE STRENGTH OF THE NATION Tauhidul Islam ACS Recently 27,117 volunteers, from the Bangladesh Army, educational institutions and the general public, stood up with red and green placards to form the national flag in Dhaka's National Parade Ground and to break the Guinness World Records' record for the biggest national flag. The participants stood there for 6 minutes 16 seconds for setting the new world record for the largest human national flag, according to the World Record Academy. Robi Axiata Limited, in partnership with the Bangladesh Army, successfully concluded the episode.

The main objective of this event was not only to celebrate the Victory Day, but also to show the world the inner strength and unity of the people of Bangladesh and this will be recorded in the Guinness Book of World Records.

Companies have a lot of responsibility to the community and in the national economy in our country for promoting positive social and environmental changes because the Company has the opportunity to control a lot of assets, and may have billions in cash at their disposal for socially conscious investments and programs.

Corporate Social Responsibility (CSR) is the commitment of a business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve the quality of life, in ways that are both good for business and good for development.

Government and businesses should consider the following when forming CSR policies: • History, Culture, Norms, Values; • Business Climate; • Public Awareness;

• Government Policies; • Constraints and Responsibilities of each stakeholder; and • the potential actions each one can carry out in the context of these components; The term Corporate Social Responsibility became popular in the 1960s. Corporate Social Responsibility (CSR) also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business is a form of corporate self-regulation integrated into a business model. Now, ISO 26000 is the recognized international standard for CSR. CSR policy functions as a built-in, self-regulating mechanism of the business monitors and ensures its active compliance with the spirit of the law, ethical standards and international norms. The goal of CSR is to encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.

Furthermore, CSR-focused businesses would proactively promote the public interest (PI) by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. In essence, CSR is a positive rapport with the society and spirit of the good governance, laws, ethical standards and the international norms.

The following are the top ten motivators of CSR: i. Economic considerations; ii. Ethical considerations; iii. Innovation and learning;

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

31

Article

iv. Employee motivation; v. Risk management or risk reduction; vi. Access to capital or increased shareholder value; vii. Reputation or brand; viii. Market position or share; ix. Strengthened supplier relationships and x. Cost savings.

There are other benefits of CSR. They arei. A good reputation makes it easier to recruit employees; ii. Employees may stay longer, reducing the costs and disruption of recruitment and retraining; iii. CSR helps ensure you comply with regulatory requirements; iv. Activities such as involvement with the local community are ideal opportunities to generate positive press coverage; v. Good relationships with local authorities make doing business easier; vi. Understanding the wider impact of your business can help you develop new products and services; and vii.CSR can make you more competitive and reduces the risk of sudden damage to your reputation (and sales). Investors recognize this and are more willing to finance you.

Corporate Social Responsibility and your business: CSR has a synergistic effect on the business.

CSR may be the doctrine that the person will work together to bring about spiritual regeneration. It can able to cut across almost everything you do and everyone you deal with.

You need to think about the following: • How and what you do affects the environment and what you can do to use resources more efficiently and reduce pollution and waste.

32

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

• How you treat your employees. For the responsible business, this means doing more than simply complying with legal requirements.

• The suppliers you choose and the way you deal with them. For example, trading with suppliers who pollute the environment could be as irresponsible as doing so yourself.

• How your business affects your local community and whether you should be actively involved.

This doesn't mean that you can't run a profitable business. In fact, CSR can help you to improve your business performance. By looking ahead, you are ready to cope with new laws and restrictions. You can avoid costs such as wasted energy or paying unnecessary waste fees. Perhaps most importantly, you can keep winning business from increased demand of the customers.

Potential business benefits of CSR The scale and nature of the benefits of CSR for an organization will differ depending on the nature of the business, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones. The business case for CSR within a company will likely rest on one or more of these advices: Human resources A CSR program can be an aid to recruitment and retention, particularly within the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an interview, and having a comprehensive policy can give an advantage.

CSR can also help improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering. CSR has been founded to encourage customer orientation among frontline employees.

Article

Risk management Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture for doing the right thing within a corporation can offset these risks.

Brand differentiation In crowded marketplaces, companies strive for a Unique Selling Propositions (USPs) that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values and norms. Business service organizations can benefit too from building a reputation for integrity and best practice.

License to operate Corporations are keen to avoid interference in their business through taxation or regulations.

By taking substantive voluntary steps, they can persuade the government and the wider public that they are taking issues such as health and safety, diversity, or the environment seriously as good corporate citizens with respect to labour standards and impacts on the environment CSR Approaches A more common approach to CSR is corporate philanthropy. This includes monetary donations

and aid as given to the nonprofit organizations and communities, such as education, shelter, health, social-welfare, skill-development, old people’s homes, orphanage and the environment, among others. Some of the organizations do not like a charity-based approach as it might not help to build on the skills of local populations, but community-based development generally leads to more sustainable development.

Another approach of CSR is to incorporate the CSR strategy directly into the business strategy of an organization.

Creating Shared Value (CSV) is an additional approach of CSR to collect, increasing corporate responsibility interest. The shared value model is based on the idea that corporate success and social welfare are interdependent.

A business needs a healthy, educated workforce, sustainable resources and adept government to compete effectively. For society to thrive, profitable and competitive businesses must be developed and supported to create income, wealth, tax revenues, and opportunities for philanthropy.

Many companies use the strategy of benchmarking to compete within their respective industries in CSR policy, implementation, and effectiveness.

Benchmarking involves reviewing competitor CSR initiatives, as well as measuring and evaluating the impact that those policies have on society and the environment, and how customers perceive competitor CSR strategy.

Social Accounting on CSR Social accounting emphasizes the perception of corporate accountability. Because Social accounting, a concept, describing the communication of social and environmental effects of a company's economic measures and to particular interest to the groups within the society and to society at large, is thus an important element of CSR.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

33

Article

In some countries, legal requirements for social accounting, auditing and reporting may exist. Many companies in our country is now produce externally as audited annual reports that cover merely in CSR issues, but the reports differ widely in format, style, and evaluation methodology even within the same industry. However, this requirement was implemented in the absence of any formal or legal standards for an integrated report.

CSR in Bangladesh All incidents of 2013 including Savar building collapse with more than 1,100 victims have led to a shift in the policy of companies. Garments sectors are reluctant to maintain or disclose their CSR policy. Some sectors have shown their interest to disclose their policy regarding CSR. Banking sector is one of them. We have the opportunity to achieve corporate and social objectives by focusing on five strategic areas:

iii. Workplace – addressing the needs and aspirations of the staff through the continuing development of diversity, work-life balance and health and well-being policies and initiatives. iv. Community Impact – encouraging and assisting staff for greater involvement in team/individual projects in support of the wider community. v. Environment – further developing environmental management practices that minimize waste and maximize efficiencies.

We can therefore conclude that the CSR is a wide area where various organizations can have different approaches towards fulfillment of their responsibilities towards the society.

More and more organizations should come forward with their own plans for implementing the concept of CSR.

i. Equal Opportunities - maintaining and the promotion of equal opportunities and to the philosophy of the Equality Scheme. ii. Good Employee Relations –developing and adopting a Good Relations Strategy. This can be reviewed annually and implemented and endorsed through a corporate action plan.

The writer is an Associate Member of the Institute and Deputy Manager-Corporate Affairs, of Impress-Newtex Composite Textiles Ltd.

34

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Article

WIDENING CSR THROUGH CORPORATE GOVERNANCE ACROSS BANKING SECTOR Mokammel Hoque ACS We know that the corporate governance indicates the policies and procedures applied by firms to attain certain sets of objectives, corporate missions and visions with regard to stockholders, employees, customers, suppliers and different regulatory agencies and the community at large. The role of governance is to maximize shareholder's wealth. Corporate governance depends on managerial performance as well as a consideration of social responsibility, the sociocultural-environmental dimension of business procedure, legal and ethical practices with a focus on customers and other stakeholders of an organization. Corporate governance is gaining importance among policy makers, entrepreneurs, business personnel, stakeholders and related organizations.

The Central Bank has specified the terms of reference and responsibilities of the committees to ensure accountability and transparency of the banks' management.

In order to establish good corporate governance in banking, Bangladesh Bank has issued several prudential regulations specifying qualification of a Bank Director and a Chief Executive Officer.

Bangladesh Bank issued three Circular/Circular Letters recently in connection with responsibilities and formation of banks' Boards of Directors and asked Chairmen and Chief Executive Officers of all the banks to comply with the existing rules and regulations in line with the Bank Company Act (Amended) 2013.

Any type of businesses shall not exist unless customers exist. Businesses run as long as the customers are satisfied. Gaining satisfaction of the customers in the long run does not end in ensuring quality products and services itself.

Today’s society expects more from a business.

Since businesses can earn profit only if society consumes its products, society expects that a part of the profit should be spent for the betterment of the society at large. A business of today must run its activities in a socially acceptable way if it desires to sustain in the long run. Businesses should operate without jeopardizing the fate of the future generation.

And for that, business needs to think for the society, environment, and stakeholders of it.

Long run relationship with the stakeholders can ensure long run sustainability of a business.

This is the reason why corporate social responsibility currently has gained so much importance.

Through above mentioned Circular/Circular Letters, issued on 27.10.2013, Bangladesh Bank wants to ensure good governance in the country's banking sector through updating responsibilities and formation of banks' Boards of Directors.

The banks have also been asked to form Risk Management Committee along with the existing Executive and Audit ones to minimize fraud and forgeries in the banking sector.

Although primarily the answer of existence of the businesses may be to earn profit, by going deeper, we feel the real reasons that in a company a group of people get together so that they are able to accomplish something collectively that they could not get separately and they contribute to the society. Corporate social responsibly is the continuing commitment by business to behave according to business ethics and contribute to economic development while improving the quality of the life of the workforce and their families as well as the local community and society at large.

If we simply discern the entirety of CSR, we shall get three words: ‘corporate,’ ‘social,’ and THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

35

Article

‘responsibility.’ Therefore, in broad terms, CSR covers the responsibilities corporations (or other for-profit organizations) have to the societies within which they are based and operate.

of business towards "environmentally sustainable and socially equitable development". They mentioned the three dimensions of CSR which are as follows: (a) Taking stock of the economic, social and environmental impacts of a business, (b) Instigating the negative impacts and bolstering the benign impacts, (c) Taking up action programmes and community investments to reduce social inequality and to address the key sustainable development challenges.

More specifically, CSR involves a business identifying its stakeholder groups and incorporating their needs and values within the strategic and day-to-day decision-making process.

Therefore, a ‘business’ ‘Society’ within which it operates, which defines the number of stakeholders to which the organization has a ‘responsibility’, may be broad or narrow depending on the industry in which the firm operates and its perspective where we understand, Corporate Governance is the vital issue.

To maintain corporate governance, the Central Bank also mentioned that CSR operations will go beyond mandatory compliances by law (e.g.

ETI in primary health, compulsory primary education in public education) into voluntary engagements to promote equitable and sustainable development.

Significance of CSR For the betterment of the society, Bangladesh Bank did not leave the CSR to the scheduled Banks. They have issued guidance Circular Letter in 2008 to all the scheduled banks and financial institutions with an aim to mainstreaming Corporate Social Responsibility (CSR) in their businesses. The Circular Letter noted the importance of voluntary contribution

Banks and Financial Institutions are also advised to adopt CSR practices in formal, structured manner in line with global norms.

The Circular identified the height - CSR "seen as benefiting a business by: building reputation, brand value, customer loyalty,

Commitment Environment & Ecology

Partnership

Shareholder

Contributor

Corporate Governance:

People Behind Religion, Gender

Customer

Bank

Economy

Employee Respect

36

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Society

Belief

Article

employee motivation and retention initiating risks in own operation and in assessing supplier and clients gaining new markets for products and services, in the communities/social groups benefited by the CSR actions", after that, the guidance Circular Letter suggested embracing of CSR with decisions taken at the highest corporate level (Board of Directors of the bank) and to choose action programs and performance targets through a consultative processes involving the internal and external stakeholders concerned.

The BB Circular then encouraged all Chief Executive Officers of the Banks to embrace CSR in their management approaches, with initiatives chosen in broad-based extensive stakeholder engagements. The delineated areas of operation were encouraging, to say the least. These were: Small and medium enterprises (SMFs), biomass processing plants (bio-gas), solar home solutions, effluent treatment plants (ETPs), credit programmes for crop production like oil seed, spices, vegetables, fruits, fish and duck production with deepwater ‘aman’ in low-lying areas, mobile phone-based micro-finance institution (MFI) programmes, support to fake business (crafts, mosaic, performing arts with domestic tourism and cultural products).

Proactive initiative of the Bangladesh Bank was followed up by Circulars of 2010 and 2011 asking for half-yearly statements in given formats, establishing CSR desks in banks for maintaining proper communication and liaison with all concerned and reporting on gender quality performance. Banks and non-banking Financial Institutions responded positively to this CSR initiative in varying measures.

G.S. Batra, Narinder Kaur and R.C. Dangwal in 2007 argue that in order to achieve high standards of corporate governance, internal pressures such as peers and market competition should be more effective than

enforcement by regulating agencies. It is also imperative that the regulators should expand their role and take effective measures to propagate the concepts of best practices in ushering an era of good corporate governance.

Corporate Social Responsibility disclosures can be an attempt by a firm to legitimize corporate actions.

W. Michael Hoffman, Robert E. Frederick and Mark Schwartz make an effort to address whether a corporation has a conscience and how ethical governance and managed care can coexist. They stressed the need for corporate morality. Bangladesh Bank gives importance with a view to understanding whether the scheduled Bank or Financial Institute is attempting to convey a sense of corporate conscience and ethical behavior.

It will have to also point out that Bangladesh Bank through issuance of its circular has clearly mentioned that the chairman of the Board of Directors (or Chairman of any Committee formed by the Board or any Director) does not personally possess the jurisdiction to apply policymaking or executive authority, (s)he shall not participate in or interfere into the administrative or operational and routine affairs of the bank. Whereas the CEO will be responsible to implement the policies taken by the Board and look after administrative works as per rules & regulations.

Hackston and Milne in 1996 used six categories to explain social responsibilities: environment, energy, human resources, product and safety, community involvement, and other.

In the other hand, examples of ethical practices such as protection of consumers, protection of creditors, establishment of rights of shareholders and enforcement of law and order situation are important indicators of corporate governance of any country,

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

37

Article

particularly in developing countries such as Bangladesh.

We know through Integrity publication that any involvement of corporations in tackling corruption requires a vision-driven strategic framework allowing them to see the problem as a system-perspective, and put stress on supply, demand and social sides equally. The corporations need to set forums and enhance understanding and consensus among themselves so that they can work more strategically and coherently and integrate activities for combatting corruption and promoting Corporate Social Responsibility (CSR). In addition, it gives emphasis on enhancing collaboration across private and public sectors and civil society for combatting corruption generating more effective and durable results.

In this line, as guided, it is observed that every Bank has given commitment to publish information on sustainability matters every year. The Sustainability Report consists of only the GRI technical section to meet the requirements of the Global Reporting Initiative.

Every Bank’s strategic program for climate changes has to stress in its Green Banking Policy and to design to help reduce Bank’s environmental impact in a scenario of sustainable development while endeavoring to instill good practices in its stakeholders.

Various aspects of Green Banking and Environmental Risk Management, highlighting the importance of the subject matter - climate change, social impacts, sustainable development, the information society and sustainable financing have been mentioned.

Loan & advance as per sector, mandatory sectoral allocation, agricultural banking, rural/krishi/SME banking are now the obligatory part of banking. Inclusion of women within the banking is also as an indicator of a Bank’s attitude towards corporate social responsibility

38

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

to women.

The CSR guidelines issued by Bangladesh Bank put special emphasis on reaching out with financial services to the less well-off population segments of the community in order to speed up financial inclusion of the large socially disadvantaged rural and urban population segments; drawing them in with appropriate financial service packages and with financing programs innovatively designed to generate new employment, output and income.

Quoted that like the iceberg, most CSR activity is invisible. It is often an active attempt to increase corporate domination rather than simply a defensive 'image management' operation. CSR is supposed to be win-win. The companies make profits and society benefits.

But can we imagine who really wins? CSR has ulterior motives. One study showed that over 80% of corporate CSR decision-makers were very confident in the ability of good CSR practice to deliver branding and employee benefits. To take the example of simple corporate philanthropy, when corporations make donations to charity they are giving away their shareholders’ money, which they can only do if they see potential profit in it. This may be because they want to improve their image by associating themselves with a cause, to exploit a cheap vehicle for advertising, or to counter the claims of pressure groups, but there is always an underlying financial motive, so the company benefits more than the charity.

Out of that argument, we have to feel that maintaining the ‘Right way’ and applying the correct stance and motion to walk is most important pillar of the CSR. So why, we really have to understand how, why, and when community-based strategies are effective in promoting Corporate Accountability to the poor. It argues that

Article

mainstream approaches to Corporate Social Responsibility underestimate the importance of power in the relationship between corporations and the communities in which they invest, which limits their applicability to many developing-country contexts in particular.

In addressing this neglect, we can draws on literature on power, accountability, and citizen participation in order to analyze cases where communities have attempted to hold corporations to account for their social and environmental responsibilities.

References 1.Sustainability Reporting Guidelines 2.Sustainable Development Networking Program (SDNP) Bangladesh

3.eBook: Business Ethics by W. Michael Hoffman, Robert E. Frederick and Mark Schwartz 4.eBook: Liberalisation Globalisation and International Business by G.S. Batra, Narinder Kaur and R.C. Dangwal 5.Bangladesh Bank’s guidelines & various circulars.

The writer is an Associate Member of the Institute and Deputy Manager-Corporate Affairs, of Impress-Newtex Composite Textiles Ltd.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

39

Article

CORPORATE SOCIAL RESPONSIBILITY (AN OVERVIEW) Rahat Mahmud Corporate Social Responsibility (CSR) is a concept of business that concerns the important relationship between companies and society. CSR is broadly defined as the role that a company takes to integrate responsible business practices and policies intoits business modelto promotehigher standards of living in society, for employees, and the environment while preserving profitability.

Academic literature and research on the practices of CSR began in the 1950s, and its definition has evolved over this time. Archie B. Carroll, a business managementprofessor at the University of Georgia, has written extensively on the management of business ethics, and corporate social performance.As he explains, corporations are expected to fulfill certain responsibilities just as private citizens are. He distinguishes theseresponsibilities into four faces:economic, legal, ethical, and philanthropic. CSR is based on the idea that corporations are more than just profit‐seeking entities, and that theymust be responsible for the societal and environmentaleffects of their business activities. It is difficult to define CSR, since it is technically voluntary, in the sense that it is not legally required, so companies are free to interpret its purpose andextent to which it is included in their business practices.

The two main ways that companies engage in CSR are through implementation of ethical business practices and engaging in philanthropic activities. Ethical CSR entails incorporating responsible practices that minimize the societal harms of business operations.

There are manyways for companies to implement ethical business practices; these include minimizing environmental pollution from manufacturing facilities and providing healthcare benefits to employees. Philanthropic CSR describes a company's support for a causeor activity that

40

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

occurs outside of their business operations but provides benefit to society . Companies will usually choose a cause or organizationon which to focus their contributions, which can include donation of equipment or technology, employee time (volunteerism), or money.

For example, Cisco Systems focuses its philanthropic CSR objectives on access to education, human needs, and responsible citizenship.

Under the umbrella of philanthropic CSR, there are distinguishing elements thatdrive motivation for a company's involvement and actions; these differences are represented by ltruistic (intrinsic) and strategic (extrinsic) motivations. Altruistic motives are woven into the corporation's character as part of its intrinsic institutional values and environment.

Strategic motives, however, are considered more of a business investment, where company contributions are expected to yield a profitable return (Lantos, 2001). Whatever the motives, it iscertain that CSR has becomean important tool for measuring a company's reputation and public image.

Cause‐related marketing (or cause marketing) is a type of CSR activity that involves a company's promise to donate a certain amount of money to a nonprofit organization or a social cause when customers purchase its products/services. In this form, CSR has a positive impacton society and provides direct benefit to the company through increased sales revenue. One study reports that 81 percent of American consumers want companies to give them the opportunity to purchase a cause‐related product. Through their purchasing power, they are investing in the company’s CSR initiative and feel like they are contributing to the ause. However,other

Article

studies caution that "cause‐related marketing campaigns are more likely to be viewed with suspicion," because they "often explicitly link support of a charity to a firm's profit‐generating activities".

CSR IN BANGLADESH Some CSR activities are being carried out in Bangladesh, many of them by companies that are members of textile associations such as the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). The Dhaka Chamber of Commerce and Industry (DDCI), think tanks like the Bangladesh Enterprise Institute (BEI) and banks (Standard Chartered Bank, Duch-Bangla Bank Ltd etc) are involved in other initiatives.

The government has no explicit policy on CSR, but some of the ministries, such as the Ministry of Commerce and the Ministry of Information, are encouraging private industry to engage in CSR activities, which are also tax deductible, for example donations.

The United Nations Global Compact brings together representatives of private industry, UN agencies, employee associations and civil-society organizations to promote social and environmental initiatives.

Companies also enjoy the support of two private institutions with CSR expertise: the Bangladesh Enterprise Institute (BEI) and the CSR Center Bangladesh. The BEI facilitates partnerships and programs in the private sector that are working to achieve Bangladesh’s development goals, and it also organizes the local Global Compact network. The CSR Center Bangladesh identifies cases in which companies are not adequately implementing social and environmental standards and provides tools to help them improve their performance. It also serves as a network for the exchange of views and experiences. Both

institutions provide a good contact point for companies seeking to become involved in CSR activities in Bangladesh.

RELATED PARTIES: It is important for companies to continue investing into their CSR because “the CSR concept will remain as an essential part of business language and practice, because it is a vital underpinning to many of the other theories and is continually consistent with what the public expectsof the business community today”.

CONSUMERS & THE PUBLIC A recent study showed that 85 percent of consumers say supporting a cause they care about enhances their perception of a product or company. Being viewed as good corporate citizens can foster long‐term, loyal relationships with consumers, who see themselves as investors in thecompany or brand with their purchasing power. Consumers may also be willing to pay a premium price for products or services offered by a company engaged in CSR. CSR programs can also help to establish a positive corporate reputation that makes consumers resilient to negative company news. Consumers can become promotional mechanisms for a company or brand through positive word‐of‐mouth communication. The internet has offered a magnified platform for this, as consumers are using social networking sites to communicate their enthusiasm for a company or brand because of its socially responsible practices or projects.

However, this powerful voice can have an adverse effect for a company that is not meeting consumer expectations. Consumers have been known to 'punish' companies they believe are behaving socially irresponsibly through product boycotts and encouraging others to do the same. A study by Sen and Bhattacharya (2001) found a positive relationship between the CSR actionsof a

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

41

Article

company and “consumers' attitudes toward that company and its products”(p.

225).Resultsshowed that information about a company's CSR initiatives enhanced consumers' evaluations of the company. In a situation where consumers have a choice between two products or services that are relatively the same, the character or attributes they have associated with those companies would be an influencing factor in their decision of which product or service to purchase (Sen & Bhattacharya, 2001).

BENEFITS TO THE COMPANY Companies engage in CSR activities to influence and improve stakeholders' perception of the ompany's image. Company or brand image is important because it ultimately provides the company a competitive advantage for their business. CSR is being monitored more closely now than ever before because consumers are very concerned with responsible business practices.This is evident by the increase in the number of yearlycompany CSR rankings, such as Forbes Magazine's 100 Best Corporate Citizens,Ethisphere'sWorld's Most Ethical Companies, the Global ESG 100 by RiskMetrics Group, and the disclosure of activities in the annual report. Companies have increasingly adopted socially responsible practices because the public,employee,and shareholders have high expectations for the values and conduct of business.These stakeholder groups can have tremendous influence on profitability, so it is in the best interest of the company’s bottom line to meet the expectations of these groups.

EMPLOYEES Companies can also realize benefits of socially responsible business practices internally, among its employees.

When employees are aware of the responsible practices and philanthropic activities of their employer it can generate feelings of pride in the company and lead to increased employee dedication to the company employees. CSR

42

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

can also lead to employees’ increased willingness to offer more time and energy to their companies. Some studies have foundthatjob applicants are more attracted to companies with high CSR ratings. When mployees feel this sense of pride for their company, this follows them outside of the office nd they can becomea promotional asset to the company, serving as ambassadors for the brand.

SHAREHOLDERS Shareholders are mainly concerned with the company’s financial bottom line. Their interest in SR relates to how it can differentiate the company in the market to increase company profit.A company's CSR activities can improve its reputation because it establishes a social valueof the company, which can be a distinguishable quality that helps set it apart from competitors. Thus, shareholders benefit from CSR programs because of their influence on consumer urchasing behavior and potential to increase employee productivity.

The company annual report provides an outlet for a company to share information with shareholders about the business operations and financial success of the company in the previous year. CSR activities are often communicated to shareholders through the annual report or a separate corporate sesponsibility report.

The writer is the Senior Executive. AFC Capital Ltd. and Foundation Level Student of ICSB.

Article

SCOPE OF CSR IN BANGLADESH Razia Sultana Lubna Commonly, CSR (Corporate Social Responsibility) is a form of corporate self-regulation integrated into a business model which can also be termed as corporate conscience, corporate citizenship, and social performance. In other word, CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders. Furthermore, development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. Industrial region of the world, CSR became popular in the 1960s and has remained a term used indiscriminately by many to cover legal and moral responsibility more narrowly construed.

Considering these issues, this paper has portrayed the journey and present circumstances of CRS in Bangladesh.

The Independent BD (2013) argued that, CSR is viewed as responsible corporate philanthropy that includes monetary donations and aid given to local and non-local non-profit organizations and communities, including donations in areas such as the arts, education, housing, health, social welfare, and the environment, among others, but excluding political contributions and commercial sponsorship of events. This philanthropy-based approach is encouraged to help build the skills of local populations, out of the belief that this will encourage community-based development and subsequently lead to more sustainable development. Various manners are followed by business organizations to achieve their targets of CSR; for instance, the Creating Shared Value (CSV) grounded on the idea that corporate

success and social welfare are interdependent.

CSR has inspired national governments to include CSR issues into their national public policy agendas. Increasingly, corporations are being motivated to become more socially responsible because their most important stakeholderscustomers, consumers, investors (particularly institutional investors), and communities in the areas where the corporation operates its facilities, regulators, academics, and the media expect them to be so and address the social and community issues that are relevant to them.

Recently, Governor of Bangladesh Bank has recognized that poverty-related deprivations in health, education and asset ownership are major causes of financial and social exclusion.

It has also been identified that physical and mental disabilities, discrimination by gender, social disruptions from prolonged conflicts (the Chittagong Hill Tracts) are among other causes of financial and social exclusion. Regarding this, financial inclusion of the different sections of the population enhances growth potential and subsequently, contributes towards the growth of the Gross Domestic Product (GDP).

It is now widely acknowledged that CSR expenditures by banks and financial institutions and other important players from the corporate industrial sector through passive donations to

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

43

Article

voluntary or civil society organizations can reduce these poverty related deprivations. In particular, some organizations are already receiving funds through CSR to assist in vocational training among the rural youth and enabling them to get employment in urban areas as well as benefit from skilled expatriate employment. This, in turn, is proving to be an effective tool for development and is resulting in inclusive growth.

Social economists in Bangladesh along with South Asia have fairly pointed out that CSR resources need to be particularly focused on techniques and technologies that will help to reduce environmental degradation. For instance, community education towards this end will also eventually assure a better and sustained response to the effects of climate variability. Meanwhile, CSR in Bangladesh should also give attention towards improving in our rural hinterland and in our urban slums aspects related to basic hygiene, nutrition and sanitation. Additionally, the CSR participation should also be in program that will enhance female leadership within the community and in the female population being able to move forward as small entrepreneurs.

BASIS (2014) reported that, globally, CSR practices are gradually being integrated into international business practices and hence, determining factors for market access. They are also equally instrumental for better local acceptability on the part of businesses. A focus on CSR in Bangladesh would be useful, not only for improving corporate governance, labor rights, work place safety, and fair treatment of workers, community development and environment management, but also for industrialization along with ensuring global market access. Since, CSR entails working with stakeholders, it is important to work from within and diagnose the stakeholders' concerns so that CSR is truly embedded in the companies. By now, many CSR dimensions are practiced in Bangladesh.

44

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

The SMEs largely depend upon export and the US (United States) and EU (European Union) buyers set guidelines to RMG (Ready Made Garment) industry to ensure the standards. The 1992 Harkins Bill and subsequent consumer and industry boycott of RMG products by the USA and the consequent remedial moves by local RMG sector are examples here.

In addition, some buyers from the EU visited the sites of recently collapsed garments factories. A temporary ban was also imposed on shrimp export to the EU on grounds of health and hygienic standards; appropriate remedial action followed in that instance, too.

But, some of the exporters found difficulty in convincing the US/EU buyers to have positive attitude towards Bangladesh due to inadequate CSR practices. Businessmen need to recognize the implications of CSR for business activities. Companies are facing the challenges of adapting effectively to the changing environment in the context of globalization and in particular, in the export sector.

Though consumer rights movement, enforcement of government regulations and a structured view regarding the economic importance of CSR are not yet so widespread in in the country; companies have gradually been attaching more importance to CSR in the local market as well. They are increasingly aware that CSR can be of direct economic value. Companies can contribute to social and

Article

environmental objectives, through integrating CSR as a strategic investment into their core business strategy, management instruments and operations. This is an investment, not a cost, much like quality management. So, business organizations can thereby have an inclusive financial, commercial and social approach, leading to a long term strategy minimizing risks linked to uncertainty. CSR in Bangladesh can also contribute a lot to community development.

The corporate house can develop the community by creating employment, providing primary education, contribution to infrastructure development like roads and highways and addressing environmental concerns. This is more relevant to a country like Bangladesh where the government interventions in these fields augmented by corporate alliance can go a long way in developing the economy, society and environment.

There are many challenges that still exist regarding the proper functioning of CSR in Bangladesh within her paradigm. A focus on CSR in Bangladesh would be useful, not only for improving corporate governance, labor rights, work place safety, fair treatment of workers, community development and

environment management, but also for industrialization and ensuring global market access. For that reason, this will need careful planning as well as the qualified leadership from the financial and trading community. The different Chambers of Commerce, both at the central as well as the District levels needs to be associated with this process in an integrated manner.

Reference: 1. The Independent BD (August 2013) “CSR and Bangladesh” available at: http://www.theindependentbd.com 2. CPD (January 2003) “Report No. 54 Corporate Responsibility in Bangladesh: Where Do We Stand?” available at: http://www.cpd.org.bd/pub_attach/DR-54.pdf 3. Bangladesh Association of Software and Information Services (BASIS) 2014 “Bangladesh & CSR” available at: http://www.basis.org.bd/index.php/csr/csr_ban gladesh

The writer is a Foundation Level Student of the Institute.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

45

Article

THE RATIONALE FOR GENDER DIVERSITY ON BOARDS Md. Shahid Farooqui FCS Gender Diversity in Boardrooms “Diversity in leadership and openness to new perspectives is crucial for charting the course in business. Without more than symbolic representation, we risk going backward instead of forward.”

- Dina Dublon Member on the Boards Accenture and Pepsi Co.

of

Diversity on Corporate Boards In today’s corporate world, Board diversity is a much talkedabout topic. It is about combining alternative and complementary views that in the end, lead to better board decisions.

Diversity in Board rooms in terms of age, gender, race, religion, national or ethnic origin, language, physical ability etc. assists companies to enhance their growth, profitability and social responsibility.

The issue of diversity on corporate boards and especially the issue of gender diversity have garnered much importance lately in both corporate and academic circles. The studies reveal that developed markets as a group fare better than emerging markets as a group in the appointment of women directors on to corporate boards.

The Rationale For Gender Diversity on Boards The desirability of having more women in the boardroom is agreed upon by both proponents of better corporate governance and champions of women’s rights.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

• Diverse boards tend to be more independent and, with fewer ties to management, can have a greater ability to monitor managers objectively.

Microsoft,

Gender Diversity- what it means?

Gender diversity is an important aspect of Board diversity. Gender diversity refers to the presence of women on corporate boards of directors. It means to consider and to promote different skills, different resources and potentials of women and men as equivalent.

46

A number of propositions exist for the business case for diversity on boards:

• Diversity improves board decision making as a result of unique perspectives, increased creativity, and non traditional innovative approaches.

• Diversity improves information provided by the board to managers due to special skill sets, experience and complementary knowledge held by diverse directors.

• Diverse Directors provide access to important constituencies and resources in the external environment.

• Board Diversity sends important positive signals to the labor, product and financial markets.

The Board of Directors’ primary responsibilities include effective governance of the company leading to its long-term success.

Research conducted mainly in developed economies suggests evidence of benefits of gender diversity on boards, including the positive contributions to good corporate governance practices linked to have a diversity of opinions, experiences, competences and skills on boards, which in turn promotes balanced decisions, efficient oversight of financial management, enhanced accountability to shareholders and prudent risk management.

Article Is It Financially Beneficial?

Companies with more women in executive positions tend to have higher profits. A study

by Roy Adler, a professor at Pepperdine University in Malibu, California, tracked 215 Fortune 500 companies, through an extensive 19 year study of these firms which shows a strong correlation between a strong record of promoting women into the executive suite and high profitability.

The Companies with highest percentages of female executives delivered earnings far in excess of the median for other large firms in their Industries, according to Prof. Alder.

Various study reports on Gender Diversity on Board: The Canadian Conference Board findings support those of Prof. Adler. It tracked the financial well being of firms with two or more women on their boards in 1995 to see where they stood six years later. It found that firms with women board members were much more likely than companies with all-male boards to be leaders when ranked by revenue or profit.

While these two studies do not make a theory, they suggest there is a relationship between the presence of women on boards and financial performance.

Several other studies have also shown that gender diversity pays off and that there is a positive correlation between the share of women in senior positions and with company performance. For example, a study conducted in Finland found that firms with a gender-balanced board are, on average, 10% more profitable than those with an all-male board.

Women Matter: Gender diversity, a corporate performance driver- A McKinsey & Company study (2007) suggests that the companies where women are most strongly represented at board or top-management level are also the companies that perform best. It shows that companies with the most gender diverse

management teams had 17% higher stock price growth between 2005-2007 as compared to the industry average and their average operating profit was almost double the industry average between 2003-2005.

Catalyst study on corporate performance and women’s representation on boards (2007) found that companies with more women on their boards were found to outperform their rivals with a 42% higher return on sales, 66% higher return on invested capital and 53% higher return on equity. Studies have shown that the where governance is weak, female directors can exercise strong oversight and have a positive value relevant impact on the company. The study further shows that stronger-than-average results prevail at the companies where at least three women serve i.e. financial performance at the companies with 3 or more women board directors was better than average of others.

Greater gender diversity in boards is associated with better indicators of organizational excellence (McKinsey & Company Inc., 2007).

There is a positive association between board diversity and firms’ financial returns (Pande & Ford, 2011). But none of these studies employs methods that can accurately identify the impact of board diversity on firm outcomes.

While these studies do not demonstrate a causal link, they do, however, give us a factual snapshot that can only argue in favour of greater gender diversity.

Global Board Seats held by Women Recently many countries have introduced corporate guidelines on Gender Diversity on Board.

Norway has introduced a quota system, which requires the boards of public companies to have at least 40% women directors.

France has introduced legislation in parliament requiring that women constitute 50% of the boards of directors of publicly listed companies by 2015.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

47

Article Spain has also introduced a regulatory requirement that any private company that is awarded a public contract must have a board of directors of women at least 40% are women.

In Iceland, the parliament has adopted a legislative reform requiring publicly owned companies and public limited companies that have at least 50 employees and boards with more than three persons to have at least 40% of each gender by 1 September 2013.

In Australia, the Australian Capital Territory (ACT) and South Australian governments have set themselves the target of achieving and maintaining 50% representation of women on government boards and committees.

The United States Securities & Exchange Commission requires disclosure of whether and, if so, how a nomination committee considers diversity in identifying nominees for directorship.

48

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Bangladesh as a least developed country to achieve expected development growth should consider Gender Diversity issues as an important agenda. Relevant legislative bodies and law making agencies of Bangladesh may introduce a corporate governance guideline on the subject in view of the global perspective.

The writer is a Council Member of the Institute and General Manager & Company Secretary of The Ibn Sina Pharmaceutical Industry Ltd.

Article

GOVERNMENT FUNDS & AND PUBLIC ENTERPRISES: ACCOUNTING FOR TRANSPARENCY & ACCOUNTABILITY Md Shahadat Hossain FCA The main characteristics of the democratic government of a country are “Transparency” and “Accountability”. Every democratic government should be accountable to the people of the country for its activities.

Transparency of government activities includes openness to the public at large about public sector accounts and projections so that the people and financial markets can accurately assess the government’s financial position, the real costs and benefits of the government activities including their present and future economic and social implications.

Accountability is a concept in ethics and governance with several meanings. It is often used synonymously with such concepts as responsibility, answerability, blameworthiness, liability, and other terms associated with the expectation of account-giving. Accountability cannot exist without proper accounting practice. In other words, an absence of accounting means an absence of accountability. So to ensure the transparency and accountability, the government should prepare the accounts of collection of tax and its utilization, and present the same to general people of the country. As for example, one of the government accounting areas is described hereunder.

One of the economic theories is that on a particular date accumulated balance of deficit finance of a country will be equal to accumulated debt balance. The accumulated deficit finance may be calculated by subtracting total revenue from total expenditure. Since the date of independence of Bangladesh to 30th June 2012, according to previous budget records, total revenue collected by the different governments of the country is Tk 889,987 crore. During the same period, total

non-development expenditure incurred Tk 803,043 crore, and development expenditure incurred Tk 386,745 crore i.e. total expenditure (development & non-development) incurred was Tk 1,189,788 crore. So, the accumulated balance of deficit finance as on 30th June 2012 is Tk 299,801 crore. According to economic theory, total debt balance of the country as on 30th June 2012 should be Tk 299,801 crore.

Taking information from different sources, it is seen that as on 30th June 2012, balance of foreign loan is Tk 174,765 crore, balance of loan from bank is Tk 92,028 crore and loan by selling savings certificates is Tk 63,994 crore.

Total debt balance as on 30th June 2012 is Tk 330,787 crore. From the above calculation, it may be observed that there remains a difference between accumulated deficit balance and total debt balance as on 30th June 2012.

Again, since the central bank acts as banker of the government, the balance of loan which has been taken by the government should be presented in the balance sheet of the central bank. As per annual report of central bank of the country, balance under the heading ‘Loan to the government’ as on 30th June 2012 is Tk 37,307 crore. So, there remains another huge difference of Tk 54,721 crore between the amount of ‘loan taken from the bank by the government’ and ‘loan to government by the central bank’. There may be a lot of reasons for such difference but that should be identified through reconciliation and presented in both the accounts of government financial activities and the accounts of central bank. It may be mentioned here that reconciliation of this difference is very important. Lots of frauds and errors may remain undiscovered due to non reconciliation of such differences!

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

49

Article Another important issue of government accounts is utilization of fund. A major part of the funds of the government i.e. more than 70 percent is being collected from the people in the form of tax. One of the principles of tax is that taxes paid by the people have a link with the benefit that the person paying the tax actually receives from government spending.

So, it is the right of the people to know whether the fund is being utilized for the benefit of the general people or not. From the news published in the daily news papers on different occasions , it can be seen that a large number of bridges and culverts remain incomplete for long period of time, and they are not being used for the benefit of the general people but lot of money has been spent for related construction.

Similarly, many other infrastructures which have been constructed utilizing government fund are not being used for the benefit of the general people of the country. So, to make all the financial activities of the government transparent, accounts showing revenue collection, utilization of fund , accumulated balance of debt and accumulated balance of deficit finance need to be prepared and this may be presented as integral part of the national budget. In this regard, there is an International Accounting Standard, which is known as International Public Sector Accounting Standards (IPSAS), as issued by the International Public Sector Accounting Standards Board (IPSASB) may be followed at the time of preparation of government accounts.

It is pertinent to mention that there are many other public enterprises running with the objective of making profit as well as providing social service under the ownership of government of Bangladesh. Due to loss incurred by these public enterprises, a substantial amount is spent as subsidy every year from the government fund which is being collected from the people of the country in the

50

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

form of tax. Bangladesh Railway (BR) is one of them. In one hand, there remains scarcity of railway tickets; on the other hand, every year huge amount of loss is being incurred by the entity. Apart from this, a substantial amount of land owned by BR remains under the possession of influential people of the country.

So, it is relevant to raise a question as to why the entity is incurring loss, how the lands are being utilized, how much revenue is being collected from the land, etc.

In addition to the above, another example of public enterprises is mentionable here, the agricultural loan is disbursed by the six state-owned commercial and specialized banks and also by the private commercial banks and foreign commercial banks. At the end of year 2012, default agricultural loan at state owned commercial and specialized banks arrived at 27 percent as against amount of default agricultural loan at private and foreign commercial bank less than one percent. So, the amount of default agricultural loan of state owned banks is abnormally higher than that of the private and foreign banks.

In this connection it may be mentioned here that the questions of why the entity is incurring loss or what is the reason behind abnormal rate of default loan, can be answered if the financial statements are prepared in accordance with the International Financial Reporting Standards.

Because, as per the contents of International Financial Reporting Standards, every entity needs to present in its financial statements an analysis of expenses with sub classification highlighting components of financial performance and to disclose the details of default loan.

Finally, the most important role of the government should be to act as the trustee of the nation and to properly administer and account for the money whether it is received & spent effectively. On the basis of present accounting system of government funds and

Article public enterprises as described above, it can be concluded that to bring the public confidence upon the performance of trustworthy function of the government through ensuring transparency and accountability, there is no other alternative but to prepare the financial

statements of all the public enterprises complying with Bangladesh Financial Reporting Standards.

The writer is a Ex-Vice President and Council Member of the Institute of Chartered Accountants of Bangladesh.

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

51

ICSB Circular

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

53

ICSB Circular

54

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Notification

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

55

Notification

56

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Notification

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

57

Notification

58

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

Notification

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013

59

Notification

60

THE CHARTERED SECRETARY OCTOBER-DECEMBER 2013