Profit E-magazine Issue 65

welcome

For the love of all that is holy, leave the rupee alone!

We were almost there. After letting the rupee lose about a third of its value, albeit begrudgingly, there was hope that the Imran Khan Administration would finally realise the wisdom of letting the rupee find its own level, and not waste government resources in trying to artificially inflate its value. But then came the news this week that the prime minister has set up a committee whose job it will be to “control the rupee’s devaluation”.

The committee – headed by Finance Advisor Hafeez Sheikh – will effectively be introducing artificial capital controls in the country in a bid to try to control the uncontrollable. Among the measures being considered are reducing the amount of cash Pakistani travelers can carry abroad from $10,000 to $3,000. It would be laughable if it were not so infuriating.

The Prime Minister’s task force stems from his absurd ideas that a lower exchange rate is somehow a bad thing (it is not, so long as it remains predictable) and that all bad things in Pakistan are the result of malfeasance and corruption (his own incompetence is evidence to the contrary). Hence the need to control the currency exchange rate must somehow be linked with “corruption”.

It could not possibly be a large number of citizens recognizing that the country has been living large for too long on an artificially strong rupee, who can see the crash coming, and decide to protect the value of their cash by converting it into US dollars. No, in the mind of the prime minister, rational economic decisions

with unfortunate consequences simply do not exist.

Need we remind the prime minister, his predecessors in the Nawaz Administration wasted the opportunity for structural reform afforded to them by lower global oil prices and crashed the entire economy precisely because they became irrationally obsessed with the exchange rate. Let us spell this out in a way that we hope the prime minister will understand: you are repeating exactly the same mistakes you yelled at Nawaz for and that got you elected!

Unfortunately, we wish we could say that we have hope for better, but we really do not. We have written off the prospects of any sanity prevailing on matters of economic policy so long as Imran Khan continues to hold the office of Prime Minister.

Farooq Tirmizi Managing Editor

Executive Editor: Babar Nizami l Managing Editor: Farooq Tirmizi l Joint Editor: Yousaf Nizami Reporters: Arshad Hussain l Muhammad Faran Bukhari l Taimoor Hassan l Ghulam Abbass l Ahmad Ahmadani Shehzad Paracha l Haniya Javed l Director Marketing: Zahid Ali l Regional Heads of Marketing: Muddasir Alam (Khi) l Zulfiqar Butt (Lhr) l Mudassir Iqbal (Isl) l Layout: Rizwan Ahmad l Illustrator: ZEB l Photographers: Zubair Mehfooz & Imran Gillani l Publishing Editor: Arif Nizami l Business, Economic & Financial news by 'Pakistan Today' Contact: profit@pakistantoday.com.pk

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FROM THE MANAGING EDITOR

What it takes to build a world-class corporate culture: Lessons from a

By Muhammad Faran Bukhari

seasoned HR F professional

atima Asad Said comes from a family having a total of four chartered accountants including her father. Before her MBA she worked with Citibank and the International Finance Corporation (IFC) and it was almost a given that she would follow in her father’s footsteps and continue her career in finance. However, fate had something else planned out. In 1997, while in the last semester of her MBA at the Lahore University of Management Sciences, she found her true calling: human resources (HR).

“During the last semester of my MBA, I realised that no matter what the area was – whether it was marketing, finance, supply chain, or sales – it all came down to the people at the end. And by people I mean the chief executive officer (CEO), the general

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“Whether it was marketing, finance, supply chain, or sales – it all came down to the people at the end. It is the human element that really defines how an organisation does in terms of integrity and in terms of values.

No matter how world-class your systems, structures, or processes get, if you have the wrong person in the wrong seat, everything collapses” Fatima Asad Said, CEO of AbacusELS, a human resource outsourcing firm

manager, or even the sales officer. It was the human element that really defined how an organisation did in terms of integrity and in terms of values,” she said, in an interview with Profit.

“No matter how world-class your systems, structures, or processes get, if you have the wrong person in the wrong seat, everything collapses. So that got me thinking and got me interested (in HR).”

However, in the late 1990s, HR was still an upcoming profession in Pakistan and most of the companies had their head offices and their HR departments in Karachi. Since Fatima’s parents were opposed to her moving to a different city, she took up a job in Lahore with Abacus Consulting, a leading consulting and technology firm working in the business transformation industry in Pakistan since 1987.

Today after spending almost 22 years as an HR professional she is the Regional Director

at Abacus Consulting and the CEO for AbacusELS, a subsidiary company of Abacus that works as an HR outsourcing entity, providing services to clients like Motorola, Siemens and Habib Bank. She also sits on the boards of various different organisations like her alma mater, Lahore University of Management Sciences and Kashf Foundation, a non-profit microfinance organisation.

third tier, not because of the quality of education but because of they have the hunger to make it in this world and they are eager to learn.

As opposed to a LUMS graduate; over there, there’s a certain sense of entitlement. They need to develop the habit of rolling up their sleeves and putting their hands in the dirt,” she says.

Fresh out of college

C

F

atima recalls that her first year at Abacus was a tough one where she and her colleagues practically had to do everything themselves. “I had to do everything. At that time computer networking had just been introduced and we had just one computer which used a dial-up internet connection. The printer used to fail most of the time.

We did the printing, we did the photocopying, we worked nights and worked just like we did in universities without having any attitude,” she says.

As most HR professionals do, Fatima regularly deals with young college graduates working their very first jobs and believes that there are gaps in the quality of the graduates being churned out by universities and that the linkages between academia and industry could be stronger.

“Lots of times, our team had screaming feedback from our bosses in front of clients.

However, if you say anything to young graduates now, they just walk out. The attitude has changed,” she says.

“Academia needs to understand the demands of the employers and match its supply (of graduates) with it. That is not being worked out fast enough. In this age of technology, where we need a completely different skill set, academic excellence and good education are important, but skills like critical reasoning, problem solving, analytical skills and on the softer side, mindfulness, emotional intelligence and empathy are also important,” says Fatima.

“How do you deal with bad bosses? How do you deal with a team member who is just trying to pull you down? These are realities of life. And good universities invest in developing these social skills.”

“I have seen careers of class toppers tank, and average students going right to the top of the organisation. Not because they were excellent, but because they knew how to build relationships,” she says.

However, contrary to what most people would expect, Fatima believes that among the graduates of top tier universities, including her own alma mater LUMS, there is a certain sense of entitlement.

“I have had great experiences with graduates of universities which are second tier or

Creating leaders out of people

urrently, Fatima is leading a partnership between Abacus and the Center for Creative Leadership (CCL), a US-based organisation working on leadership development and executive education. CCL is the only non-academic organisation working in this domain and in 2018, it was ranked number 10 in the Financial Times worldwide survey of executive education. “What CCL does it that it harnesses its experience of the industry. It is more practical rather than being academic and that is why it’s models are so successful,” says Fatima Asad.

“So what they say is that the leadership journey is not created with a two day workshop in an organisation. It is when you identify someone as an emerging leader and then take certain steps to build their career and potentially take them to the CEO level.”

Take, for example, an employee working as an assistant manager with exceptional performance in that position. For most organisation it would be a simple decision to promote that person to the manager level. However, that is where the problem arises. “Promoting a person from an assistant manager to manager position would mean that he would now require a different set of competencies,” says Fatima.

“Maybe they are now managing more people or they are managing managers which requires a different skill set. Maybe they are now more into tactical planning but are unaware of the competency behavioural shift required to do well in that position.”

“The leadership journey says that every time you get promoted you need to get assessed, and the gaps [in your skillset] identified, and then the training happens on the behavioural side to facilitate the transition into the new position. You constantly learn and that is how you go up the ladder. Imagine if you were to cascade to all the way to the CEO level.”

However, not everyone makes it to the CEO or the C-level positions and most organisations have a pyramid structure with the majority of employees somewhere in the middle or lower tiers.

“It’s a pyramid structure. How many people are you taking up to C-level and then

MANAGEMENT TOOLS

“I have had great experiences with graduates of universities which are second tier or third tier, not because of the quality of education but because of they have the hunger to make it in this world and they are eager to learn. As opposed to a LUMS graduate; over there, there’s a certain sense of entitlement. They need to develop the habit of rolling up their sleeves and putting their hands in the dirt” Fatima Asad Said, CEO of AbacusELS, a human resource outsourcing firm to CEO level? Not everyone can get there. So, what do you do with this middle management? They either leave or they stay there and become a weight for the organisation and they keep the organisation down,” she says.

The tip here – and one of the major frameworks of CCL – is to ensure that this middle level of the organisation is kept productive in a way that it adds value to the organisation. Sounds simple enough? But why then do HR professionals so often fail to effectively deal with such situations? Fatima believes that it might have to do something with a lack of knowledge regarding their own organisation and the people working within them.

“HR is challenging and a lot of the time it gets a bad name because some HR professionals don’t understand the business they are in.

If you don’t understand why certain functions exist in the organisation you cannot be a good HR professional. You cannot be an effective HR practitioner if you don’t know what a finance person does, what a marketing person does or what a supply chain professional does.

Whatever decisions and initiatives are undertaken at the end of the day the implementation has to involve everyone in the organisation,”

UNUTILISED TALENT

85,000

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says Fatima.

Abacus, under Fatima’s leadership has recently launched leadership courses and trainings in Pakistan in collaboration with CCL. The company plans to build a market for such courses in Pakistan first and then eventually offer them in other countries as well.

Women in workforce

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s a woman working in HR, Fatima Asad has worked extensively on issues pertaining to gender diversity and diversity in general in the organisations.

“Diversity is not just about gender, diversity is culture, demographics, age generations that exist within your organisation. Diversity is also about how you balance out in the age of technology and digitalisation and the advent of robotics and artificial intelligence coming into the organisation. It all has an impact on how do you manage the diversity conversation,” she says.

Over the years she has been one of the most vocal proponents of female education and making workplaces more inclusive for women. ”If you have a 40-60 gender split, just having that 40-60 ratio does not cut it. Do you have facilities for working mothers to bring their children into a daycare? Or do they have some flexible time off so that they can navigate between their personal life and their work life. That is what inclusion is,” she explains.

The number of However, while organisations female graduates have a responsibility to be supportof medical colleges ive to women, Fatima Asad believes in Pakistan who are that support coming from families unable to pursue of working women themselves is of equal importance. “If women are not careers as doctors supported from home then it becomes owing to family very challenging for them to continue pressures, according working or come to work with a certo a recent study tain peace of mind. It is our responsibility to advocate for this,” she says.

In Pakistan female literacy stands at just around 48% compared to

70% for males. Moreover, according to numbers published in a recent report, around 85,000 women in Pakistan who completed a medical degree have never worked as a doctor in their lives.

“There are a number of segments in our society where the mindsets are still driven by the fact that if they have a certain amount of money and if a choice arises in choosing between educating a boy or a girl, then they will prefer educating a boy,’ says Fatima.

“We need to send out a positive message portraying females as future mothers responsible for raising the next generation. An educated mother does not necessarily have to work. But if you don’t have an educated mother than you don’t have an educated next generation. It is a vicious cycle that exists.”

Fatima narrates an incident that occurred during a seminar she was invited to when a young woman, a recent graduate, told her that she had been recently married and despite her qualification her husband was not in favour of her taking up a job.

“So what does she do? I said, you know what, you have to balance it out. It is about priorities. It is about what you need to invest in.

Career is important, but family is much more important than a career. One day, 40 years or 50 years down the road, who do you want by your side and where have you invested in?” she says.

“In the initial years you invest in your family, create a bond and a relationship and afterwards you might be able to have a career as well.”

“Another thing which I told her was that I envy her generation, because they have the technology. You can go online and learn and certify yourself get a small job. Just focus on what you have achieved till now and keep on learning.

Do some online engagement. Get associated with someone on a part time or contractual basis. You don’t have to necessarily have a 9-to-5 job. This is also a message that we need to send out so that our society becomes comfortable with the idea of women going to work,” she says. n

MANAGEMENT TOOLS

The Pakistani motorcycle manufacturing industry has evolved to serve the needs of an almost entirely male clientele. They must now evolve to serve the women who increasingly want affordable modes of transportation

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By Bilal Hussain

O

n a warm, mid-March afternoon in Karachi, after Friday prayers, I slipped in between narrow spaces outside the mosque on my motorcycle to get onto the main road – Sharah-e-Quaideen which leads to Jinnah’s Mausoleum, if one is travelling on the road from the Shahra-e-Faisal side.

Just when I reached the road, I saw a University of Karachi bus, full of female students – sitting and standing – the latter collectively looked like as if it was not a university bus but a matchbox full of match-sticks.

For a moment, I felt blessed but the next thought was of shame. Why do I have the luxury and autonomy of being able to ride my own motorcycle, while these women are forced to use a bus as the only means of

acceptable transportation?

Motorcycles are a male-dominated form of transportation all over the world. According to the Motorcycle Industry Council in the United States, nearly one in five motorcycle owners is now female, compared with one in 10 less than a decade ago. The data suggests that women could soon make up one quarter of owners, which would be a major shift in motorcycling demographics in the US. In Pakistan, the ownership pattern is so skewed that nobody even bothers to keep track of just how many women own or ride motorcycles. Industry sources estimate the number to be so small as to be negligible. Of the estimated 15 million motorcycles in active use in Pakistan today, only a handful are primarily used by women.

This represents a major socioeconomic challenge in an environment where most of the population still cannot afford to buy cars

(a mode of transportation where it is considered somewhat more acceptable for women to drive on their own), and with a complete lack of public transportation in most cities.

Why women do not ride motorcycles (so far)

“T

ransport is a major issue for female students here at Karachi University,” said Nooreen Mujahid, an associate professor of economics at the University of Karachi, in an interview with Profit. Mujahid believes that owning a vehicle can save a lot of time for students and it is mostly female students who struggle to find a convenient, socially acceptable mode of transport.

“They have to wait for long hours for a university bus to return home and also have to come early to the university campus because

“People won’t let you do anything. They would ask you ‘what will people say?’ Intimidate you that you might break your hand or leg. But I decided that I have to ride a motorcycle and I did. Now I want to empower others like me. I want to make them self-dependent. Women should not be dependent that their brothers, fathers or husbands to drop her to her university or office” Marina Syed, Iqra University undergraduate student and Karachi-based motorcycle trainer

AUTOMOBILES

“It will take much time [for scooters to become common] even if they could choose this mode of transport because of our social and cultural issues.

The society also has to evolve [to think] that women riding is acceptable” Nooreen Mujahid, associate professor of economics at the University of Karachi they won’t be having any transport available if they want to reach on time for a class,” she added.

She further said that there are handful of female students who use cars to come to the university. “It’s most probably because the rest can’t afford cars.” Professor Mujahid estimates that only about 40% of female students at the University of Karachi would be able to afford a scooter, even if it was priced as low as Rs70,000.

According to Madiha Hassan, founder of Pankh – a motorcycle training facilitation center for women in Karachi which has taught over 500 women how to ride bikes – women worldwide prefer scooters because they are lighter and more comfortable to ride.

“However, it will take much time [for scooters to become common] even if they could choose this mode of transport because of our social and cultural issues,” Mujahid said. But she added she has recently seen a few women who ride scooters to the main campus of the University of Karachi.

For that relatively small number of women using scooters to turn into something bigger, however, would require several factors to move in the same direction. For instance, Mujahid said that many women are a bit fearful of even driving cars let alone motorcycles or scooters, so there should be training opportunities for them before they ride on busy roads, since two-wheelers are prone to accidents.

“The society also has to evolve [to think] that women riding is acceptable,” she said.

She thinks only a small part of the even the 40% of female students who can afford scooters would adopt riding a motorcycle as their mode of transport due to social taboos.

Breaking social taboos

H

owever, Zahid Farooq, joint director at the Urban Resource Center (URC), a Karachi-based think tank, says this taboo will soon break. He said that women have been struggling for quality transport and riding motorcycles would be helpful. He is confident of this because women on motorcycles is something that Pakistani society has seen before.

“There used to be a lot of women that would ride their cycles to universities and colleges before 1977. I believe in two years or in five years, this taboo of women riding motorcycles will break,” he said. He also cited the example of some female lawyers who commute on motorcycles and could be seen near the City Court house in Karachi.

He said that women have to wait for hours for their husbands or other male members of the family to come to pick them up from universities or from their workplaces.

Children are dependent on their fathers and housewives have to wait for their husbands to bring groceries home. These issues can be resolved by improving the mobility of women.

“I have seen women in India, Sri Lanka

“There used to be a lot of women that would ride their cycles to universities and colleges before 1977. I believe in two years or in five years, this taboo of women riding motorcycles will break. I have seen women in India, Sri Lanka and even Indonesia, which is an Islamic country, riding scooters. So why could not our women have that ‘luxury’ too out of necessity?”

Zahid Farooq, joint director at the Urban Resource Center

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and even Indonesia, which is an Islamic country, riding scooters. So why could not our women have that ‘luxury’ too out of necessity?”

Farooq says that while there is also an urgent need for improving the condition of public transport for women yet facilitating the use of motorcycles for women would also be helpful in alleviating the problem.

There is no data available to ascertain the percentage of motorcycles bought by female customers. However, the industry estimates are that the women using bikes are infinitesimally less than 1% of the total riders of two-wheelers.

The women leading the charge

M

arina Syed, a Karachi-based motorcycle trainer, is on a mission to empower women. She has started training women to ride two-wheelers. “I have a car too, but I prefer using motorcycle as it is economical and, in

“Being a working woman and also a housewife and mother of four children, it is most beneficial tool for me helping me in my daily routine tasks. I use it to drop and pick my kids from school and go to work or go for shopping. It’s actually making me feel that I am independent and don’t have to bother about public transportation or be beholden to my husband for anything for drop off or pick-up.”

Sakina Ashfaq Hussain, schoolteacher

Karachi’s traffic, it is very time saving. For instance, in a car, if I have to leave one hour prior to be on time, on a motorcycle, it would take me some odd 15 minutes. Moreover, parking a car is also becoming a great issue too,” she said.

An undergraduate business student at Iqra University, Marina faced immense resistance from family and friends before she took the great leap forward – buying a scooter from her own savings without telling her family in 2017. At the moment, she has traditional 70CC bike, but she encourages her students to opt for scooters as they are lighter in weight and in case of an accident, the rider is likely to be less severely injured.

“People won’t let you do anything.

They would ask you ‘what will people say?’

Intimidate you that you might break your hand or leg. But I decided that I have to ride a motorcycle and I did. Now I want to empower others like me. I want to make them self-dependent. Women should not be dependent that their brothers, fathers or husbands to

drop her to her university or office,” she said.

Marina has started training recently and has so far had some 13 students. “Girls generally do it but [older] women get afraid quickly. When they roll the accelerator and the motorcycle produces sound, they get frightened and some have didn’t try motorcycles even after successfully balancing themselves on bicycles.”

All of Marina students are solidly middle-class, and she feels that it was this income segment which needs to be empowered.

Women from richer families generally do not face the same kind of transport problems.

“There is one student, who comes with her mother to get trained to ride motorcycles after changing two buses and traveling for over an hour. Her mother had asked me to train her daughter directly on a motorcycle instead of the prerequisite bicycle since it is difficult for them to travel often. It was painful, but I have to follow [standard operating procedures] SOPs so I had to turn down her request.”

UNFAVOURABLE ECONOMICS

Rs 48,000

Rs 110,000

Price of a typical motorcycle designed for and used by men

Price of a typical scooter designed for and used by women

The cultural baggage

F

eryal Ali Gauhar, an actress and activist, says that the notion of gender segregation is very strong in a society such as Pakistan. Women are rendered almost invisible due to cultural restrictions, and their mobility is curtailed due to such cultural values.

Gauhar added that promoting customized scooters may encourage the use of two-wheeler transport by women. Bicycles used to be designed without a bar across the seat to the handle to make it easier for women to mount. “But that was according to Victorian values. There may be no need to modify motorbikes now. However, it may be considered a good idea for traditional societies,” she added.

Scooters, in short, may be the gateway that allows more traditional societies to accept the idea of women on two-wheeler transportation of their own.

“I don’t think there should be an issue for women to use smaller bikes with less horsepower if they are comfortable handling such a machine. Scooters are already in use by a few women in Lahore. In Delhi and Mumbai there are many more women who use two-wheelers.”

She said that social taboos need to change, and are changing, to be more inclusive and just.

Sakina Ashfaq Hussain, a teacher by profession, is very fond of her scooter and loves this mode of transport. “Being a working woman and also a housewife and mother of four children, it is most beneficial tool for me helping me in my daily routine tasks.”

“I use it to drop and pick my kids from school and go to work or go for shopping. It’s actually making me feel that I am independent and don’t have to bother about public transportation or be beholden to my husband for anything for drop off or pick-up,” she said.

The biggest benefit Sakina derives from

AUTOMOBILES

“Scooters are expensive because they are imported in CBU form (Completely Built Units) and therefore there’s a 50% custom duty on them.

I think the government should reduce the duty to 25% and allow only CKD’s import (Completely Knocked Down) if it wants to give an option of two-wheeler to women” Muhammad Sabir Sheikh, chairman of the Association of Motorcycle Assemblers her scooter is she doesn’t have to bother about parking, and “it’s beautiful, economical and bearable tool for daily life expenses.”

“Using public transport gives you a headache so I decided to go for personal transport. I decided to go for something convenient and went to Akbar market searched for a motorcycle, which I can ride in my rida (burqa). I bought a 70cc scooter.”

Sakina’s husband supported her in her decision to opt for motorcycle. She was later called ‘pilot’ in the neighborhood as she can ride her bike with all four of her kids mounted.

Like many others, Sakina was also discouraged by the neighborhood, but she said was encouraged too. While she was riding in the vicinity of the Quaid’s mausoleum, one person gifted her his helmet in appreciation for her social courage.

Madiha Hassan of Punkh said that one of the main reasons women in Pakistan do not use motorcycle as their regular mode of transport was the mindset of our society. “As a society we are very sexist. Motorcycles are dangerous for women but they are completely fine for men. If a male is riding a bike, no one

looks at him even once, but if a female is riding it, everyone will leave whatever they are doing and stare at her as if she is doing something extraordinary. We, as a whole nation, need to be more acceptable towards women in public life.”

Madiha thinks the best way to combat those taboos is to organize small training camps in lower middle-income neighbourhoods. Once they come out of their houses, even just for training, women would gain confidence and that will eventually lead them to choose motorcycles as their mode of transport.

“We can also have a great impact of it digitally, by involving men who support this idea. When people will see the other gender applauding this cause, it will make things ordinary and will also change the mindset of a lot of people.”

“I can definitely say that the trend is changing, even though it is changing very slowly, but it is, which is still a big thing.

You used to not be able to point to a single lady riding a bike, but now you can see some of them. This trend will increase with the passage of time.”

“The Nawaz government was planning with us – after we won a tender – to replace the Prime Minister’s laptop scheme [for students] with one providing scooters to all kinds of women: students, lawyers, working women or anyone who needed a bike. A total 10,000 units were planned for Lahore only while a total of 50,000 units for Punjab and may be later for the whole country. But the government then went into crisis post Panama [Papers] and the plan was shelved with the government change” Salamullah, head of marketing at United Motors

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The market for motorcycles

O

f the nearly 2.3 million motorcycles sold in Pakistan last year, almost none were bought by women for their own personal use, and a trip to a motorcycle dealership in Karachi tells you exactly why.

The manager of the dealership said that in the three years he has been working there, he has never seen a woman buy a motorcycle for herself, though he could think of a couple of examples of women claiming they were buying the bikes for male relatives.

Another employee at the dealership was clearly extremely hesitant about the idea of letting a women buy a motorcycle on an installment plan, commonly availed by their male customers. He made excuses for his reluctance, saying they might not have licences, which would get him in trouble with the police and insurance companies. However, the dealership evidently has no problem selling motorcycles to men without a valid drivers’ licence.

According to Muhammad Sabir Sheikh, chairman of the Association of Motorcycle Assemblers (APMA), a respectable scooter costs Rs 110,000, sold by United Motors. Super Power, another company, also sells scooters

“Bicycles used to be designed without a bar across the seat to the handle to make it easier for women to mount. But that was according to Victorian values. There may be no need to modify motorbikes now. However, it may be considered a good idea for traditional societies” Feryal Ali Gauhar, actress and activist

in Pakistan priced at around Rs70,000 but according to market sources, it is not considered a good vehicle. Sheikh added that the cost of documentation (licences and registration) is roughly Rs5,000.

“Scooters are expensive because they are imported in CBU form (Completely Built Units) and therefore there’s a 50% custom duty on them. I think the government should reduce the duty to 25% and allow only CKD’s import (Completely Knocked Down) if it wants to give an option of two-wheeler to women,” Sheikh said.

He said that bikes most commonly used by men cost as low as Rs45,000 while a comparable substitute for women is much more expensive.

United Motors Marketing Head Salamullah confessed that there is a huge cost difference for a man to get on two wheels as compared to a woman. However, he said the only reason for the big price difference is lack of volume production for scooters.

“The Nawaz government was planning with us – after we won a tender – to replace the Prime Minister’s laptop scheme [for students] with one providing scooters to all kinds of women: students, lawyers, working women or anyone who needed a bike. A total 10,000 units were planned for Lahore only while a total of 50,000 units for Punjab and may be later for the whole country. But the government then went into crisis post Panama [Papers] and the plan was shelved with the government change.”

“That tender was supposed to give us impetus to embark on scale production and therefore for the price to come down. That was

unfortunate.” Salamullah added that there was no collaboration for a similar project with the present government, which is struggling to tame the rising dollar.

Salamaullah said that United Motors previously launched an 80cc scooter along with a 100cc scooter but the small engine scooter generated little demand and therefore United Motors was forced to quit the model. Now the company is assembling only 100cc scooters.

Salamullah claimed that United Motors was the only company that has been selling scooters exclusively designed keeping in view the needs of women – clutchless, tubeless tyres and auto-start bikes.

According to Salam, bikes or scooters with an engine size below 70cc are not considered bikes and cannot be registered. They are not supposed to hit roads. That regulatory hurdles makes it difficult to consider a smaller two-wheeler for Pakistani manufacturers and assemblers. That does not, however, mean that there is no demand for such motorcycles.

Waqas Malik, who claims to be the biggest importer used Japanese scooters in Pakistan, says last year he sold some 300 units in different parts of Pakistan. All his units have a 49cc engine with a maximum speed of 60 kilometers per hour and are smuggled in containers via the Chaman and Torkham borders.

He sells them at under Rs 50,000. Since these are under 50cc, these vehicles as per Pakistani law can’t be registered. Legally, they are like bicycles that don’t require registration or customs papers, etc. Not even a driving license.

He says almost 80% of his end customers are women from all over the country. He knows of

women in smaller towns like Chiniot, Jhang, etc working as medical representatives and students using those scooters.

Why scooters have not taken off yet

I

ndia has already had gearless scooters making their presence felt four decades ago in the 1980s, according to an article in The Hindu Business Line. At that point in time, it was not considered macho to be seen riding on this product, which was then part of the Kinetic Honda brand.

Yet, it was the first big mobility alternative for women in cities even while the smaller moped was an earlier entrant. It was only when Honda came in on its own with the Activa did the gearless scooter revolution take off in earnest.

What was also interesting in the process was that while women welcomed it with open arms, men did not feel too squeamish about being seen on a scooter too. The realities of traffic and comfort of riding more than made up for any perception issues. The Activa empowered women in cities along with the TVS Scooter and it was only a matter of time before other companies joined the scooter bandwagon.

Pakistan had a thriving scooter market

“We are charged with 48% duties for the vehicle. If government removes the duty for our eco-friendly vehicles, we can sell it below Rs70,000. Moreover, Sunra has promised us that it will install a plant here in Pakistan if sales reach 5,000 units.”

Adeel Gohar, a partner at Jawad Corporation

MANAGEMENT TOOLS

a few decades ago, but it died out. Vespa, the Italian brand of scooters manufactured by the company Piaggio, used to manufacture scooters in Pakistan but stopped due to sales decline about 20 years ago. It continued production for over four decades with its plant in Azad Kashmir but, according to Sabir Sheikh, it was a vehicle for roads with low traffic. It was popular for decades in the country. But the increase in traffic was the main reason for sales decline as it is a difficult vehicle to ride in traffic. Moreover, Vespa was designed more for men than for women. It was heavy and difficult to ride.

The electric scooter?

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eanwhile, Sabir Sheikh said that now the world is moving towards electric vehicles and the government should facilitate that transition, in part because Pakistan’s auto parts vendors can make everything except engines and electric cars do not require them.

In Pakistan’s auto industry, it is the three Japanese auto giants – Toyota, Honda, and Suzuki - that call the shots when it comes to the country’s auto industry policy, and according to Sheikh they will not let fossil fuel-engine vehicles turn obsolete, which runs the risk of leaving Pakistan behind the rest of the world.

“China is doing a lot of work on electric cars. Germany will be making fossil fuel vehicles completely obsolete by 2022. The (majority of) Europe will be doing it by 2025. So electric vehicles are the future of the auto industry,” he said.

He further said that government can promote electric scooters along with all kinds of vehicles. Electric vehicles can be made completely in Pakistan if there’s a will.

Adeel Gohar, a partner at Jawad Corporation, which sells Sunra electric bikes in Pakistan, said that governments around the world are encouraging electric vehicles while Pakistan has been putting huge barriers.

Jawad Corporation has been selling electric bikes that can reach a speed of 65 kilometers an hour and can run up to 60 kilometers after charging for six hours. The bike costs consumers a hefty Rs128,000 but nearly half of that price is government duties.

“We are charged with 48% duties for the vehicle. If government removes the duty for our eco-friendly vehicles, we can sell it below Rs70,000. Moreover, Sunra has promised us that it will install a plant here in Pakistan if sales reach 5,000 units,” he said.

The price factor can help increase sales to the threshold where the company’s foreign partner is enticed to start production in Pakistan. Adeel declined to share the total number of units sold so far but said that it was nowhere near to 5,000 units – not even 10% – yet the response is so far encouraging for the company

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and they want to stay in the run.

“Our buyers are happy. There is no cost of fuel or oil. Charging cost is also negligible,” he said.

The environmental impact

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he company has so far sold three containers full of electric eco-friendly bikes that has so far collectively been driven over 100,000 kilometres, sparing the duty of ‘100 trees’. One tree, on average, can absorb the carbon dioxide emissions produced by a petrol bike driven for 1,000 kms.

According to a report on electric vehicles, published by the United Nations, the carbon emission reduced by riding on an electric motorcycle instead of a gasoline motorcycle for one year equals the cleansing effect of approximately 10-12 trees.

Marketing to women

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awad Corporation will soon be importing electric scooters too soon and hopes that it becomes popular among women. However, Adeel was unable to give its price yet as it would be assessed after the consignment reaches and cost is assessed.

To encourage women riding motorcycles, some of industry players have done various campaigns including inviting international biker women for a motorcycle trip from Lahore to Khunjrab Pass. The industry is continuously working on such campaigns to encourage female riders to take up motorcycle riding.

A leading bike-maker has partnered with of Government of Punjab’s ‘Women on Wheels’ initiative. It has not only provided custom made motorcycles for women but has also trained

women for motorcycle riding through certified trainers.

However, according to what Profit has learnt from industry sources, there are no plans to launch scooters at the moment as the demand is too low to entice motorcycle makers to attempt it.

“Plans to make any particular product in the country are driven by demand. As soon as there is sizeable demand for such motorcycles, the industry will produce and market them. A few bike manufacturers have already test marketed scooters on a subsidized price to make the product affordable for female riders but the results have not been encouraging,” an industry official said on condition of anonymity.

“The industry has no reason to develop an affinity or hostility towards any particular segment of the market or society. It is purely business. The industry is doing its best to develop motorcycle riders in the female segment of the society but it’s more about changing the culture which is not an easy task. The process is slow but one can feel the progress being made.”

And while middle class women certainly have a great tale of misery to tell regarding Pakistan’s mode of transport available to them, working class women have stories of even greater miseries to share.

URC’s Farooq pointed out that working class women have to wait for hours just to get back to the RCD Highway, out of the city from the heart of Karachi. “At about 2:00 pm every day, you can notice a lot of women at Shaheed-e-Millat Road waiting for transportation.

Unfortunately, there is no proper transport available for them despite their large numbers.

They can only hope to get a lift to get back home and sometimes wait for many hours to get it.” n

AUTOMOBILES

Book Review

Nepotism got you a seat on the company’s board.

At least learn to do it well Safdar Butt examines what it takes to be an effective board member, and lays out a handy guide for those thrust into that position of responsibility

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By Abdullah Niazi

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bout 60-70% of the people appointed as directors to the vast array of publicly listed companies in Pakistan are family members of the companies’ majority shareholders, estimates Safdar A Butt, an academic with years of business experience who is currently a Professor Emeritus of Finance and Corporate Governance at the Capital University of Science and Technology in Islamabad.

Company directors, most of whom

are overwhelmingly nepotistic appointments in Pakistan, are the targeted audience of Mr Butt’s latest book titled A Handbook for Company Directors in Pakistan. A ponderous tome at first glance, the book actually is exactly what the title indicates – a handbook for people appointed to serve as the fiduciary custodians of corporate governance in the country.

Set out in seven basic parts with insight on things ranging from the ‘Strategic Direction of a Company’ to ‘Risk Management’ and ‘The Company and Society’, the book essentially aims to be a go-to guide that a company director can turn to in a moment of crisis.

Given the earlier estimate that more than two thirds of company directors in Pakistan are appointed simply because they are family, it may not necessarily be the worst thing to have on your bookshelf if you are the director of a publicly listed company, because chances are, you may need it.

Because as Butt explains, the gig is not easy and definitely not free of risk, since directors are legally responsible for a company’s conduct and misconduct.

“Most of the directors we have don’t know how to do the job” said Butt, in an interview with Profit. “For some reason there seems to be no realisation that as the director of a company, they have obligations towards all stakeholders, and not just their family or friends that gave them the position.”

There seems to be very little understanding among people who are actually offered the job of director that it is not just about attending a certain number of meetings and taking home a paycheck at the end of the day. Being a director means being responsible and being accountable. With the title comes the added pressure of having the company’s reputation tied to one’s person – something that works both ways.

“This is why this book is so necessary. People accept the position of director without knowing what the job entails and the risks it brings with it,” Butt points out. “This book is something that a person who may not have experience as a director, something that is more likely to be the case in Pakistan than not, can grab and easily navigate towards some semblance of an answer.”

To hear the writer speak of it, the book is a case of better late than never, because there hasn’t been one of its kind in Pakistan yet, despite the apparent need for it. “There are 40 such handbooks for directors in the United Kingdom. In Pakistan, this is the first,” he says.

One wonders at just how urgent the need for this book was in Pakistan. The book is available free of cost to anyone who may need it – it was funded by the publicly listed High-Tech Lubricants Ltd as a corporate social responsibility (CSR) project in the memory of their late director Mohammad Basit Hassan.

“Ethics and the law are not always on the same page” says Butt. “You,

as a director, may think you’re doing something moral or just, and in your own mind, you will be completely justified. “But it is entirely possible that you may just be breaking the law in the process. Say you are a director and you think three of your four managers deserve bigger bonuses than the fourth one. Now you may think this is fine, but unless there is some definable criteria for giving bonuses, this is criminal behaviour – no matter your intentions.”

“You see nobody here likes to admit they don’t know everything, and that pride causes them to do things that they will regret later. This book is something that can help avoid such unsavoury circumstances.”

With its origins in a CSR project, the handbook is clearly written in earnest. Quite diligently researched to reflect the latest Pakistani business laws and standards of the Stock Exchange and the Securities and Exchanges Commission of Pakistan (SECP), keeping a copy of the book around might actually be a good idea for directors.

And while it offers no great adventure for the casual reader, it does provide some interesting insights into how Pakistani business works.

Just on the issue of CSR, the very thing that this entire book is a result of, Butt writes with clear but passionate conviction. “I cannot stress this enough but CSR is an investment in and of itself,” he asserts.

“You see if a company takes care of its employees and gives back to

society, then it will have a good reputation. Its employees will be happy and productive, and people will prefer it over its competitors.”

But it is not as simple as that.

In Pakistan, Butt sees a number of failings in the idea of CSR. As the book explains, it is not the same thing as charity – as so many executives treat it to be. Rather, it is a structured and measured way of owning up to the responsibility any organisation owes to society when it is in a position to help it. “You should do well, but you should also do good,” the writer advocates.

There is other advice in the same vein that the book provides. On business ethics, for example, the writer argues the age old maxim “ethics is good business.” The book also looks into things such as corporate fraud and is a reliable reference point, given that it has outlined itself in accordance with standard national regulations.

It also gives insight on issues such as whistleblowing, saying that a company’s staff should be as good as its auditors, and explaining the whistleblowing structures that are now legal requirements.

While it may help company directors, the book also contains generally solid business advice. Not by any means groundbreaking, but definitely things that would not hurt a company, and might even go so far as to promoting good, ethical, business practices in companies desperately in need of transparency and professionalism. n

BOOK REVIEW

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I

By Taimoor Hassan

t is considered the gold standard in the investment management industry, the global elite profession that is responsible for managing the $46 trillion global pool of investible assets.

The CFA – short for chartered financial analyst – is the highly respected credential in the world of finance and one that is respected around the world. But does it make sense for students in Pakistan to pursue the path to becoming a CFA charter holder?

Profit’s conversations with qualified CFA charter holders, or those who have cleared certain levels of the certification, reveal that while the certification is perceived to be of immense educational value, it might not necessarily bear material benefits, at least in the short run, for those who hold the qualification.

For the most part, that is because of the small size of the investment industry in the country.

Obtaining the charter requires passing three academically rigorous levels, requiring a recommended collective time of at least 900 hours of self-study (300 hours of study for each level), and relevant work experience of 4 years in the investment industry. Put together, if you aspire to obtain the CFA charter, you have to prepare yourself for painful rounds of binge studying, especially if you do not really have an appetite for finance.

But is the reward of struggling to get the charter commensurate to the efforts an aspirant puts or the pain he goes through during the time he starts preparing for a charter to

“I would personally not rate CFA Level 3 practically doable in Pakistan anywhere.

For that, in our neighbourhood, the Middle East is a nice comprehensive market for CFAs. It is an American certification in finance, so Europe and America are ideal territories.”

Mobeen Ahmad Gilani, head of corporate and research at Harvest Group the time he gets it?

The Pakistani investment industry and CFA charter

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CFA’s professional role is concentrated in the investment management industry, which happens to be very small in Pakistan with respect to the size of the total economy. According to the Mutual Funds Association of Pakistan (MUFAP), as of the end of March 2019, the latest month for which complete figures

are available, the industry manages a total of Rs578 billion, equal to just 1.8% of gross domestic product (GDP).

By comparison, the US investment management industry’s assets under management (AUM) are greater than the US GDP. Even in neighbouring India, the asset management industry’s AUM exceed 12.6% of India’s GDP. “When you look at the developed markets, this number [assets under management] is very big. It is in multiples of 10 and 20. Even in India this industry is very big. In Pakistan, however, the conventional financial

BUSINESS EDUCATION

“I am in an asset management company and over there we had this skill gap. There was always a problem of finding good candidates in the market. Hiring a fresh analyst meant working hard on building his investment concepts and financial modelling concepts and after a lot of hard work, we were able to bring them at par. But now, a CFA student, who has passed certain CFA levels, we already know that his concepts would be clear because he has cleared these exams” Muhammad Asim, Chief Investment Officer at MCB-Arif Habib Savings & Investments

institutions commercial banks are the ones that proliferate more. Commercial banks are the biggest industry and this is where most of the financial markets move around,” said Muhammad Asim, president of the CFA Society Pakistan, in an interview with Profit.

In addition, Pakistanis have a relatively low propensity to save, a problem that is exacerbated by a lack of access to financial products and services that would allow most households to start saving and building wealth for themselves. This results in a vicious cycle: low assets means the industry does not develop, which in turn means that people have few avenues to invest, which in turn means low assets for the investment management industry.

“Our capital market has a market capitalisation in the range of $100 billion. That is about less than 30% of the GDP. However, in the developed markets, it goes beyond 100% of the GDP. So we are very small in relation to the overall financial markets. Similarly, with regard to the overall development of the financial market, we don’t have complex products. We have the same plain vanilla equity markets,” Asim says.

It is not surprising, then, that the number of people willing to put themselves

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through the grueling process of becoming CFA charter holders is very small in Pakistan.

The CFA Society’s data shows that there are just under 350 charter holders in the country, though the society estimates that there may be as many as 900 Pakistani CFA charter holders, but many of them may live and work outside the country. And some may have not paid their dues and allow their membership to lapse.

Regardless of what the actual number is, it is clear that the total number of Pakistanis with CFA charters is far less than even 1% of the more than 150,000 CFA charter-holders that CFA Institute – the global association of investment professionals and the organisation that offers the Chartered Financial Analyst designation – estimates the total number of charterholders worldwide to be.

So in such a small investment industry, is doing CFA really going to reap benefits for those are able to make it to the other end and is it really worthwhile?

Is the CFA worth it?

M

obeen Ahmad Gilani, head of corporate and research at Harvest Group, a capital markets firm, and a CFA Level 3 candidate,

LONG HOURS The number of hours of recommended study to pass all three levels of the CFA exams

believes that the work required professionally in the field of finance in Pakistan can easily be catered by the curriculum of BBA or MBA Finance.

“I would personally not rate CFA Level 3 practically doable in Pakistan anywhere. For that, in our neighbourhood, the Middle East is a nice comprehensive market for CFAs. It is an American certification in finance, so Europe and America are ideal territories,” he says.

However, a CFA charter-holder, speaking to Profit on condition of anonymity, while concurring that the investment industry in Pakistan is at its nascent stages and that the overall size of the industry is miniscule, ruled out that CFA is an overqualification in the context of Pakistan.

“It is true that the financial market in Pakistan is very nascent. That is the reason why you need CFA charter-holders who can incorporate scenarios to actually develop the market. You need CFA charter-holders to actually develop the market,” he said.

Muhammad Asim was of the view that when it comes to the utilization of the CFA charter, the importance of higher education or importance of excellence in education should never be the reason that you first calibrate the market and then decide what you should do, study or pursue.

“When you have a higher skill and a higher qualification, you push the standard up and that is what the CFA qualification is about. You push the standard of professionalism upwards to the global standards. The CFA qualification brings investment professionals to a global standard. This is a unique qualifi-

cation that is being followed in the developed markets like in the US. [Closer to our region], it is China. These are the markets that actually lead the profession and this is where it is considered the gold standard. So, CFA in Pakistan gives you an opportunity and it is actually a bridge that brings you at par with those standards being followed in leading markets,” he adds.

The picture is not all gloomy for the investment industry. There has been a significant increase in the total value of AUMs in Pakistan. From Rs375.15 billion in 2013, AUMs reached the value of Rs585.9 billion in 2017 and stood at Rs678 billion as of 2018.

“The industry is likely to show higher growth as we have seen in the last two, three years. There has been a significant growth by the asset management industry in terms of both number of investors and AUMs. But I would not say that this is exponential growth,” CFA Society Pakistan President Muhammas Asim said, stressing that there is a need to look at the overall participation of individuals, the general public, the investment scheme and overall savings.

“If you look at the overall statistics, Pakistan has one of the highest consumption ratios.

So as a society, we have not tuned our savings into investments at all and that is what needs to be encouraged,” he says.

A Boarding Pass

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o what does CFA entail for those who pursue it? Those who have obtained the qualification say that the qualification, regardless of the level one has cleared, will certainly propel their career path and a complete charter might give a steeper rise in career compared to an MBA in finance.

“It is a boarding pass which can help you elevate to certain heights but it is important to know how to use this boarding pass to actually navigate your career path,” the CFA charterholder says.

“If I am a fresh graduate in a pool of about 4,000 to 5,000 MBAs entering the market, having cleared CFA Level 1 or CFA Level 2 along with my degree will make me stand out and for any opportunity in finance, I will be looked upon more favourably. So CFA can certainly be seen as a door opener. If someone gets a job after four interviews, a CFA might get it after 2 interviews. If somebody gets a job with a 3.8 CGPA, a CFA might get it with a 3.2 CGPA,” he said.

But the monetary impact of the certification, according to him is not going to be much, at least in the short run, and suggests that if aspirants think they’ll get for instance Rs150,000/month salary because of a CFA for a job that would otherwise pay Rs100,000, they will be disappointed.

“Moreover, a challenge that I think with the CFAs in Pakistan is that they have locked themselves in the research area only. While brokerage and equity are the key places where there is a logical usage for a CFA, there are a lot of places in finance and corporates where CFAs can come in handy,” he says.

A certification of value

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rom an employer’s perspective, Asim, who also serves as chief investment officer at MCB Arif Habib Savings & Investments Limited, believes that there is a skill gap in Pakistani investment industry which the CFA bridges. Therefore, employers see value in the CFA qualification.

“I am in an asset management company and over there we had this skill gap.

There was always a problem of finding good candidates in the market. Hiring a fresh analyst meant working hard on building his investment concepts and financial modelling concepts and after a lot of hard work, we were able to bring them at par. But now, a CFA student, who has passed certain CFA levels, we already know that his concepts would be clear because he has cleared these exams,” he says.

Any asset manager or a brokerage firm that hires a research analyst, or a bank or securities firm that is hiring an investment banker, Asim explains, would prefer a CFA qualification because once you get CFA designation attached to your name, it proves that you have been through a process which everybody knows, which is the gold standard in education in terms of its curriculum and its rigorousness, and which is very deep in terms of technical and ethical dimensions.

“So the employer knows that the product that comes out of the whole process of CFA charter meets a particular threshold which is very important in the financial markets,” he says.

But he explains that the value of a CFA qualified applicant can be appreciated only by the right employer in the right industry.

“If I am working in a textile company and working on a machinery and I have done my CFA, my employer might not be able to appreciate it,” he added. n

BUSINESS EDUCATION

OPINION

Asif Saad

What’s the matter with board rooms in Pakistan?

In this piece, I will discuss why the listed companies’ governance structure in Pakistan is misplaced and needs a complete overhaul. It is my contention that the code of corporate governance propagated by the Securities and Exchanges Commission of Pakistan (SECP) is redundant, reads like a standard operating procedure (SOP) of an elementary school morning assembly and plays no role in the quality of decision making. It is also unfortunate that most companies themselves do not invest time and effort in making qualitative improvements to their governance.

There are three points which support my observations; first the selection of directors in a listed company cannot pass the test Why they matter, and what can of true independence; second, the recruitment process for direcinvestors, companies, and the tors in a listed company is weak; and last but not the least, the government do to fix them? quality of engagement of listed company directors remains shallow. We will discuss each, but first let us just remind ourselves about what a board is supposed to do. n my career in the corporate sector and now as a strategy Ideally, a board of directors of an organisation is responsible consultant I have often seen corporate boards of listed for creating the reason for existence for a company – spelling out companies fail to do the right thing for the company, its its mission and vision. It is also responsible for setting strategic customers, employees, and its wider stakeholders. Most direction and to ensure that the strategy is implemented via boards are driven by the profit motive and, while there is appropriate recruitment of top management. It is the board’s role nothing wrong with pursuing profitability, failure occurs to assure all stakeholders that appropriate governance structures when short term profits become the only objective. are in place and regulatory compliance is effective. It needs to take I am of the firm opinion that most corporate failures start ownership of company culture and ensure work practices are in and end in the board room. Whether public listed or privately line with moral and ethical standards. held, companies are most impacted by decisions taken right at the In his book Owning up, Ram Charan, a leading governance top, starting with the board and the leadership team. guru, talks about various ‘lenses’ which ought to be used by boards to visualise their responsibilities. He suggests that boards use the financial vulnerability lens, the strategy and operations lens, the political and geopolitical lens, the reputation lens, and the people and culture lens. Charan points out that “boards have Asif Saad to think broadly about risk and dig deep to understand its many sources.” is a strategy consultant who has Unfortunately, the Pakistani code of corporate governance covers few qualitative previously worked at various aspects. Instead, it focuses on reporting, the number of directors, the number of independent C-level positions for national and board members, the number of female board members, etc. These are all nice to have but, in multinational corporations my view, they should come after the basic purpose of regulation – to improve governance – has been covered. This is typical of our society I suppose – we always focus on the imagery but leave aside the real substance.

So how do Pakistani listed company boards stack up against all this? It is expected that listed company boards are staffed with qualified and experienced individuals who demonstrate a commitment to all stakeholders and not just the company shareholders. It is also expected that (for those who are declared as an independent) these highly qualified men and women will be truly independent and will exercise their own judgements in voting upon

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critical decisions.

However, this expectation is in complete contradiction to how board members are recruited which stems from the very shareholding structure itself. Almost all publicly listed companies in Pakistan have majority shareholders of some kind – be it the government, a Pakistani family-owned conglomerate, or a multinational.

Typically, the majority of shareholding means someone has over 50% of the total shares and thus controls all decisions made by the company. Many multinationals actually operate at over 75% shareholding in order to ensure they can mathematically carry any special resolutions. Many companies have offered only 10% of their total shares for public listing. (Surely these companies have no reason to be called ‘listed’ and would be better as fully private entities).

In any case, as a result of this shareholding pattern, all company directors are nominated and approved by the majority shareholders and cannot pass the true test of independence no matter what the code says. They would not be directors but for the backing of the majority shareholder. Even the directors nominated by the National Investment Trust (NIT) for company boards where it has a shareholding, cannot be approved without the blessings of the majority shareholders.

Therefore, the major criteria for qualifying as a director are the potential board member’s likelihood to remain in line with the controlling group. If he or she does not comply once elected, the best they will have is a single 3-year term (they cannot be asked to leave unless their term ends) and they will be ousted after that. This makes a mockery of the independence requirement so vigorously asserted in the code.

The second problem is the process of recruitment itself. Board members are recruited from a list of published potential Directors –

approved and listed by various organisations like the Pakistan Institute for Corporate Governance (PICG). If you have undertaken a directors’ certification program from PICG or any other certification body approved by Securities and Exchange Commissions (SECP), you enlist as a potential director. Companies will then peruse this list and contact anyone they feel would be a good match for their company.

While there is nothing wrong with this process as a bare minimum, I believe it is not at all sufficient for selection into such a key role.

Board members should be sought out for their core competencies, experience, and personal characteristics and the process should not be too different from what an organisation would use in selecting the CEO and the leadership team. I am not aware of many organisations in Pakistan who would follow a rigorous process for board selection.

The current process prescribed by SECP only ends up creating a market for professional board members – in fact for more compliant board members! In this aspect, companies are more to blame than the regulator. Don’t get me wrong: there are many competent people on listed company boards, but this is despite the process not because of it.

Finally, the quality of debate and discussion in the board room is a fallout from the first two problems. Board members consider code requirements and regulatory compliance to be much more important than discussions on strategy, customer service and culture. Hence they are happy to relegate these critical areas to ‘any other business’. Rarely do board members take the pains to obtain an in-depth understanding of the business and the industry.

The expectation is that the majority shareholder and the management will have all the knowledge required to run the business and

plan for the long term. Since the leadership team is also appointed by the majority shareholder, the board is mostly used to rubber stamp decisions which have already been taken. The net result is that board meetings do happen but mostly to comply with the code of governance while the agenda is set to suit the major shareholder and the management. Conversations about business-critical issues such as long-term strategy and sustainability take a back seat.

Furthermore, a bunch of strangers working together mostly for the first time hardly qualifies for good team spirit and this shows up in the quality of discussions frequently.

I hear another version of the code of corporate governance is about to be released by the current government. I hope when the SECP revisits the code of corporate governance this time, that they find ways of actually helping boards and companies improve the quality of discussions and participation by directors. If they cannot find a way to get truly independent board members and improve the quality of participation then I wonder about the utility of the code of corporate governance and in such a case, there should be an objective evaluation of the need to have a code.

The best protection for minority shareholders and other stakeholders is for companies to be better managed and if there is to be any regulation, it should focus on this instead of ticking the boxes for compliance to an arbitrary code. But companies themselves ought to take responsibility for improving their recruitment process and ensuring time is spent by boards in good quality discussions around critical areas.

Public listing is a good thing for everyone but only if done right. There are many examples of well managed and well governed privately held companies which can show the way. Something for all of us to think about. n

COMMENT