Corporate Governance

Corporate Governance Practices: A Study on Janata Bank Limited
Chapter One
Introduction
Department of Accounting & Information Systems, Comilla University. Page | 1
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1.1. Introduction
The need for corporate governance arises from the potential conflicts of interest among
stakeholders in the corporate structure. These conflicts of interest often arise from two main
reasons. Firstly, different stakeholders have different goals and preferences. Secondly, the
stakeholders have imperfect information as to each other’s actions, knowledge, and
preferences.
Corporate governance (CG) is an important effort to ensure accountability and responsibility
and is a set of principles, which should be incorporated into every part of the organization.
Corporate governance is the system of internal controls and procedures used to define and
protect the rights and responsibilities of various stakeholders.
The need for corporate governance arises from the potential conflicts of interest among
stakeholders in the corporate structure. These conflicts of interest often arise from two main
reasons. First, different stakeholders have different goals and preferences. Second, the
stakeholders have imperfect information as to each other’s actions, knowledge, and
preferences. Though it is viewed as a recent issue, there is, in fact, nothing new about the
concept. Because it has been in existence as long as the corporation itself-as long as there has
been large – scale trade, reflecting the need for responsibility in the handling money and the
conduct of commercial activities.
Corporate governance also takes into account audit procedures in order to monitor outcomes
and how closely they adhere to goals and to motivate the organization as a whole to work
toward corporate goals. By using corporate governance procedures wisely and sharing
results, a corporation can motivate all stakeholders to work toward the corporation’s goals by
demonstrating the benefits, to stakeholders, of the corporation’s success.
Corporate governance may include: Control and direction processes, Regulatory compliance,
Active ownership and investment in a company. Primarily, though, corporate governance
refers to the framework of all rules and relationships by which a corporation must abide,
including internal processes as well as governmental regulations and the demands of
stakeholders. It also takes into account systems and processes, which deal with the daily
working of the business, reporting requirements, audit information, and long-term goal plans.
Corporate governance provides a roadmap for a corporation, helping the leaders of a
company make decisions based on the rule of law, benefits to stakeholders, and practical
processes. It allows a company to set realistic goals, and methodologies for attaining those
goals.
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Corporate governance is based largely on trust – the trust, by the stakeholders, that revenues
will be fairly shared, and that those directly involved in running the company is running it in
an aboveboard, honest, and open manner, and that they represent the best interests of the
company and of the shareholders. Therefore, key elements of corporate governance are
honesty, trust and integrity, openness, responsibility, and accountability. Recent new
governmental regulation has attempted to reinforce these elements.
1.2. Origin of the Study

Theoretical and practical knowledge both are important phases of learning. Perfect
combination of both practical and theoretical methods is necessary for holistic learning.
Theoretical knowledge has its own importance in the learning. It is the base of doing anything
practically. Practical knowledge assists us to attain the exact techniques that become the tools
of our job. Learning during internship is the best way of acquiring knowledge by using both
practical and theoretical aspects of a thing or situation.
This report on “Corporate Governance Practices: A study on Janata Bank Limited” is
initiated as a part of' the Internship Program which is required as a student of Master of
Business Administration to conduct a practical orientation in any organization. For fulfilling
the requirements I have done the 90 days internship Program at the Janata Bank Limited
(JBL), Corporate Branch Rajgong, Comilla. The report is generated under the supervision of
Md.Tarik Hossain , Assistant Professor, Department of Accounting and Information Systems,
Comilla University.
1.3. Objectives of the Study
1.3.1. Main objective

 To determine the current situation of Corporate Governance practices of Janata Bank
Ltd.
1.3.2. Specific objective
 To evaluate the practices of corporate governance in this bank.
 To analysis the theoretical aspect of corporate governance.
 To comply with guidelines of Bangladesh Bank as well as Securities and Exchange
Commission of Bangladesh.
 To identify the non-compliance of corporate governance activities within the bank.
 Finally, to make some recommendations and suitable conclusion regarding corporate
governance of Janata Bank Limited.
1.41.4. Research Methodology
.
Research is a systematic method of finding solutions to problems. It is essentially an

investigation, a recording and an analysis of evidence for the purpose of gaining knowledge.
Research comprises of defining and redefining problem, formulating hypothesis or suggested

solutions, collecting, organizing and evaluating data, reaching conclusions, testing
conclusions to determine whether they fit the formulated hypothesis.
The study uses two types of method in case of data collections, one is qualitative method and
another is quantitative method. Qualitative method indicate that data would not be presented
in terms of money, which means all kind of theoretical practices of CG in JBL would be
presented here.
1.4.1. Methods of Data Collection
In order to make the study more meaningful and presentable, two sources of data and
information will be used widely. The sources of data are:
1.4.1.1. Primary Sources 1.4.1.2. Secondary Sources
 Taking initial lectures from  Annual reports of Janata Bank
Branch Manager and Senior 2014, 2015, 2016, 2017.
Officers.  Periodical publications by JBL.
 Consulting with the supervisor.  Different books, training papers,
 Close observation of the several manuals, Newspapers and Journals.
tasks by the different  Website of Bangladesh Bank.
department’s officers.  Article published by JBL
1.5. Rationale of the Study

Banking in Bangladesh has to keep pace with the global change. The economy of the country
has a lot left to be desired and there are lots of scopes for massive improvement. In an
economy like this, banking sector can play a vital role to improve the overall social-economic
condition of the country. Now, Banks must compete in the market place both with local
institution as well as foreign ones. The management of the bank is responsible for taking
decisions and formulating plans and policies for the future. They, therefore, need to evaluate
the system of internal controls and procedures to protect the rights and responsibilities of
various shareholders. For this purpose Corporate Governance is important to the company’s
management. Corporate governance provides a roadmap for a corporation, helping the
leaders of a company make decisions based on the rule of law, benefits to stakeholders, and
practical processes. It allows a company to set realistic goals, and methodologies for attaining
those goals.
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It also works to achieve the goal of the organization and manages the relationship among the
stakeholders including the board of directors and the shareholders. It also deals with the
accountability of the individuals through a mechanism which reduces the principal-agent
problem in the organization. Fine corporate governance is an essential standard for
establishing the striking investment environment which is needed by competitive companies
to gain strong position in efficient financial markets.
1.6. Scope of the Study
The scope of the report is limited to the overall descriptions of corporate governance of the
bank, its services, its position in the industry, and its competitive advantage. The scope is also
defined by the organizational set-up functions, and performances. Here Janata BankLimited
has been compared in different aspects. I have no more scope to work in outside the branch.
The information which will provide by the bank is very small of area which can’t cover all
the sides of reporting. Corporate Governance obviously a broad things of concerning. Most
cases I have taken secondary sources of information for completion of my report.
1.7. Limitations of the Study
There are some limitations that I have faced in preparing this report. Basically I faced
difficulties in collecting data from the different sources. To collect primary data some
individual showed no interest in interviewing them. For secondary data, I faced problem of
unorganized record of documents keeping by different sources. Preparing the report I faced
some difficulties which are:
 Time will be a major constraint in accumulating all sorts of information in an
organized way.
 Scope of our study is so wide that analytical and comprehensive study is not possible.
 Acquiring the absolute raw information will be a difficult and large-scale research
will not be possible due to constraints and restrictions of both time period and by the
organization as well.
 The information sources regarding this study are not so much large. It would be more
correct if the study conduct with large information sources.
 As the data, in most cases, are not in organized way, the bank failed to provide all
information.
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Chapter Two
The Organization
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2.1 Corporate profile
Name of Company Janata Bank Limited

Registered Office Janata Bhaban
110, Motijheel C/A Dhaka-1000
Bangladesch
Legal Status Public Limited Company
Date of Incorporation 21 May 2007
Date of Commencement of Business 31 May 2007
Authorized Capital Tk. 30,000 Million
Paid up Capital Tk. 19,140 Million
Face value per share Tk. 100 per share
Shareholding Pattern 100% Share owned by the

Government of the Peoples Republic
of Bangladesh
Tax Identification No. 001-200-2732
Vat Registration No. 9011050160
Chairman Shaikh Md. Wahid-uz-Zaman
CEO & Managing Director Mr. Md. Abdus Salam, FCA
Chief Risk Officer Mr. Md. Abdus Salam Azad FF

(DMD)
Head of Internal Control and Mr. Md. Nazim Uddin (DMD)

Compliance
Chief Financial Officer (CFO) Mr. Md. Nurul Alam FCA, FCMA
.
(GM)
Company Secretary Mr. Md. Mosaddake-Ul-Alam (GM)
Total Number of Branch 910
Domestic Network
Number of Branch 906
Number of Divisional office 11
Number of Area Office 50
Number of AD Branch 56
Overseas Network
Number of Branch 04
Location Abudhabi, Dubai, Al-Ain and Sarjah.

UAE
Chief Executive Office Obeid Sayah Al – Mansuri Building

Zayed
1st Street (Electra Road), Post Box No

2630
Abu Dhabi, United Arab Emirates
Subsidiaries
Janata Capital and Investment Ltd Dhaka, Bangladesh
Janata Exchange Company srl. Rome & Milan, Italy
Janata Exchange Company, USA New York, United States of America

(USA)
Relationship Management Application 602
.
Number of Employees 13188
Number of Exchange House 76
Corporate Rating Status A + in the long term
Entity Rating ST-2 in the short term
As govt. owned Bank AAA in the long term
ST-1 in the short term
Telex 675840JBDBJ, 671288 JBHOBJ
Phone P ABX 9560000, 9566020, 9556245-49,

9565041-45, 9560027-30
Fax 88-02-9564644, 9560869
E-mail [email protected]
Website www.janatabank-bd.com, jb.com.bd
Swift Code JANBBDDH
Source: Annual report 2017
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2.2 Recent awards and achievements
Name of The Awards Presented By Year
Tax Card Sonmanona Internal Resources Division, 2016

MoF, GoB The Institute of Cost
ICMAB Best Corporate
and
Award-2015
ManagementAccountants
(ICMAB
School Banking Award Hon’able Governor of BB 2015
National Award for Best The Institute of Chartered 2014

Presented Annual Repor
Accountants of Bangladesh
National Award for Corporate (ICAB)
Governance Disclosure The Institute of Chartered
SAARC Anniversary Merit Accountants of Bangladesh

Award for (ICAB)
Corporate Governance South Asian Federation of

Disclosure Accountants (SAFA)
ICMAB Best Corporate The Institute of Cost and

Award-2014
ManagementAccountants
(ICMAB)
ICMAB Best Corporate Do 2012

Award-2012
Do
ICMAB Best Corporate
2011
Award-2011
.
Wholesale Banking Awards Asian Banking & Finance Year

Domestic Retail Bank of the Do 2015
Year Bangladesh
Bangladesh Domestic
Do
technology and
2015
Operations Bank of the Year
Do
Bangladesh Domestic Project
Finance
Bank of the year 2013
Bangladesh Domestic Trade Do

Finanzbranche
Bank of the year

2013
Bangladesh Domestic Trade
Finanzbranche
Bank of the year

2012
Domestic Retail Bank of the Asian Banking and 2013

Year Bangladesh
Finance Magazine
Domestic Retail Bank of the Do 2013

Year Bangladesh
Performance Excellence Award Citi Bank N.A 2013

2013
Foreign Remittance Award Ministry of Expatriates’ 2014

Welfare and
Overseas employment,
.
Bangladesch
Source: Annual report 2017
2.3 Number of Branches
Sl No. Category of branch Number
01 Special Corporate 02
02 Corporate -1 28
03 Corporate -2 77
04 Grade -1 209
05 Grade -2 223
06 Grade -3 275
07 Grade -4 92
08 Overseas 04
Total 910
Source: Annual report-2017
2.4 Corporate Social Responsibility:
Businesses should make a positive contribution to economic, environmental and social

progress with a view to achieving sustainable development and that businesses have a
responsibility to avoid and address the adverse impacts of their operations. Corporate Social
Responsibility (CSR) is the integration of business operations and values whereby the
interests of all stakeholders including customers, employees, investors, the community, and
the environment are reflected in the company’s policies and actions.The focus of Janata
bank’s CSR strategy is to help drive value for the Bank, its customers, shareholders,
employees, communities and society by creating business value and promoting positive social
.
change. The strategy is integrated into the core business objectives and competencies of the
organization, and embedded in day-to-day business culture and operations. JBL has
characterized its CSR activities and contributed the significant amount of the yearly allocated
budget in the following sectors:
1. Education & Research: Considering the benediction of education in national progress and
development of human resource, the main allocation of CSR budget has been targeted to the
development of education. JBL contributed BDT 125.04 million from 2014 to 2018 under
above Category.
2. Health & Treatment : JBL sets top priority on health initiatives and provides assistance in
buying equipment for infra-structure development of the government and non-govt. hospitals.
Besides, emphasis is given on the treatment of sick, poverty-stricken freedom-fighters and
their families as well as famous persons those who feel shy to disclose their financial crisis
even in time of treatment. JBL contributed BDT 128.76 million from 2014 to 2018 under
above category.
3. Poverty Reduction & Rehabilitation: Being a socially responsible bank, JBL comes
forward for humanitarian cause with passion and affection. For poverty reduction and
rehabilitation, the bank individually and in co-operation with other private or volunteer
organizations provides financial support. JBL contributed BDT 111.58 million from 2014 to
2018 under above category.
4. Combat against Natural Calamity: Under the program, Janata Bank Limited stretches its
helping hand to the people who are affected by flood, cyclone, earth-quake, winter, fire etc.
JBL contributed BDT 20.30 million from 2014 to 2018 under above category.
5. Helping the Poor and Marginal Farmers: The number of population affected by Sidr,
Aila and Monga of the northern belt of the country has been brought under rehabilitation
program. In this case, interest of the loans and other expenses will be adjusted from CSR
fund. The quintessence of the scheme is to make the deprived population free from the high
interest charged by the Mohajons and NGOs, with a view to making them self-depended
gradually. Likewise, assistance is provided from the CSR fund of the bank for the small
leather goods producers in a healthy atmosphere for producing quality products.JBL
contributed BDT 10.00 million from 2014 to 2018 under above category.
.
6. Preservation of History, Tradition, Culture and Sports: For the purpose of building a
tyranny-free society and flourishment of culture with the concept of liberation war,
preservation of primitive history with archaeological places, expansion of sports, Janata Bank
CSR fund is on the move. Besides, the financial assistance for arranging programmes for
celebration of different Red Letter Days having the enzyme of nation-building, the CSR fund
of the Bank loves to leave a footstep. Above all, according to the instruction of Bangladesh
Bank, Janata Bank Limited is inspiring publishing books and making of films/advertisement
on anti-terrorism (Jongibad). JBL contributed BDT 135.75 million from 2014 to 2018 under
above category.
7. Preservation of Environment: For sustainable development, preservation of environment

and establishing a wave of mob-sense has become an urgent need. Any environment related
organization that takes the effort of preserving the environment, the bank stays by their sides.
Besides, in the field of tree plantation, green-belts, sanitation, and pure drinking water etc. the
bank provides assistance. Preference is given on uses of technology, solar energy etc. for
promoting green banking. JBL contributed BDT 1.05 million from 2014 to 2018 under above
category.
8. Expansion of Technology: For building technology based skilled human resource, the
bank allocates handsome amount of money. Computer is one of the marbles of modern
technology. For building the “Digital Bangladesh” outlined by the government, full set of
computers are being provided to govt./ non-govt./ educational institutions, non-profitable
organizations from CSR fund. JBL contributed BDT 40.41 million from 2014 to 2018 under
above category.
9. Invention: Besides the categories cited, any invention that can influence the development
of the nation by the growth of agricultural production, processing environment friendly foods,
technology, Janata Bank Limited goes for helping the project financially. JBL contributed
BDT 0.70 million from 2014 to 2018 under above category.
.
10. Others: JBL has given BDT 1.23 million under above category in 2016 to establish a day
care center for children of employees of JBL and other banks in joint collaboration with
partner banks.
2.5 Products and services of JBL There are many state owned and private commercial
Bank in Bangladesh. Among all JBL is the second largest state owned commercial Bank. JBL
provide both corporate and retail banking services with a strong focus on socio economic
development of the country. The bank typically provides short term working capital loan and
limited long term credit exposure. Moreover, JBL offers micro enterprise and special credit
as well as rural banking. Under corporate banking services, JBL provides trade finance,
consumer finance, project finance and syndicate finance. On the other hand, various deposit
scheme and remittance facilities are delivered through retail banking.
Deposits
1 Current & Call Deposits
 Current Deposit
 Call Deposit
 Deposit in Foreign Currency
 Resident Foreign Currency Deposit
 Deposits in FC (WES)
 Convertible Taka A/C (D)
2 Savings Bank Deposits
 Savings Bank Deposit

 Savings Deposit from foreign remittance
 Q-Cash Deposit
 NRB FC Deposit
 School Banking Deposit
3 Monthly Scheme Deposits
 Deposit Pension Scheme

 JB Savings Pension Scheme
 Medical Deposit Scheme
.
 Education Deposit Scheme

 Ghore Ghore Sanchay
 JB Monthly Savings Scheme
 JB Special Deposit Scheme
 JB Monthly Amanat Prokalpa
4 Term Deposits
 Fixed Deposit
 JB Double Benefit Scheme
 JB Monthly Benefit Scheme
 Retirement Savings Scheme
 JBL Retirement Savings Scheme
 Continuous Benefit Account
5 Special Notice Deposit
 Special Notice Deposit

 Convertible Taka A/C (SND)
Loans & Advances
1 Term Loan
 Industrial Credit (IC)

 Housing Building Loan (General & Commercial)
 Agro based Industry/Project Loan
 Shipyard loan
 Loan for Overseas Employment
 Consumer Credit
2 Small and Medium Enterprise Loan
 Service Sector Loan

 Trading Sector Loan
 Manufacturing Sector Loan
.
3 Continuous Loan
 Cash Credit (Hypo)

 Cash Credit (Pledge)
 Export Cash Credit
 Secured Overdraft (SOD)
4 Rural & Agro Credit
 Crop Loan
 Fishery Loan
 Animal Husbandry Loan
 Agricultural Machineries Loan
 Rural Transport Loan
 Flower cultivation
5 Poverty Alleviation Program
 Supervised Credit Program

 Small Farmers & Landless Laborers
 Self-employment Scheme
 Ghoroa Prokalpa/Family Based Micro Credit
6 Specialized Loan Program
 Cyber Café
 Service holders Loan
 Doctor's Loan Scheme
 Special Credit Program for Women Entrepreneurs
7 Micro & Cottage industries loan
 Dairy/Poultry/Fish Culture
 Loan for Handicrafts/Disabled People
 NGO linkage loan
 Weavers’ Credit
 Swanirvar Loan
.
8 Import & Export Finance
 Loan Against Imported Merchandise (LIM)

 Inland Bill Purchase (IBP)
 Loan Against Trust Receipt (LTR)
 Payment Against Document (PAD)
 Packing Credit (PC)
 Local/Foreign Bills Purchased (FBP)
 Loan Against Export Development Fund (EDF)
 Advance Against Cash Incentive (Subsidy, Assistance)
 Products and Services of JBL
9 Letter of Credit
 Letter of Credit - at Sight

 Letter of Credit – Usance
 Back to Back L/C
10 Letter of Guarantee
 Advance Payment Guarantee

 Bid Bond
 Performance Guarantee
 Shipping Guarantee
11 Other Credit Program
 Transport
 Loan to Diagnostic Centers
 Loan to Travel Agencies
 Loan for Salt Production
Services
1 Financial Services (Inland Remittance)
 Demand Draft (DD)

 Telephonic Transfer (TT)
 Mail Transfer (MT)
.
 JB remittance payment system

 (Deposit/withdrawal from any branch)
 JB PIN cash System
2 Financial Services (Foreign Remittance)
 Online Speedy Remittance

 Maintaining NRT Account
 Foreign MT
 Foreign Remittance
 Foreign Demand Draft
 Collection of Draft, Cheque, TC
 Foreign Currency Endorsement
3 Other Financial Services
 Pay Order
 Pay Slip
 Security Deposit Receipt (SDR)
Other Services
1 Utility Services
 Gas Bills Collection

 Electricity Bills Collection
 Telephone Bills Collection
 Water/Sewerage Bills Collection
 Municipal Holding Tax Collection
 Port Bill Collection
 Land Rent Collection
2 ATM Service
 Cash withdrawal
 Balance inquiry
 Mini statement of accounts
 Point of Sale (POS)
.
 Mobile recharge
 Tax payment
3 Welfare Service
 Payment of Non- Govt. Teachers’ Salaries

 Payment of Primary and Secondary
 Girl Students Stipend
 Payment of Army Pension/Civil Pension
 Payment of Widows, Divorcees and
 Destitute Women Allowances
 Payment of Old-age/Disabled Allowances
 Food procurement bills
 Issuance of Television License
 Payment of Sanchayapatra
4 Service to the Government
 Sale of Prize Bond

 Sale of Wage Earner Bond (WEB)
 Sale of Sanchay Patra (SP)
 VAT collection
 Tax collection
 Excise duty collection
5 Other Service
 Locker Service
 SMS banking
 Sale of Lottery Ticket
 Foreign Currency Buying and Selling
 Bangladesh Electronic Fund Transfer
 Network(BEFTN)
 Bangladesh Automated Clearing House (BACH)
 Debit Card Service
 Credit Card Service
.
6 Customer Care
 Help/Information Desk
 Inquiry Desk
 Counseling
Internet based Foreign Remittance Cash Payment Services:
 Speedy Remittance Cell

 Western Union
 IME
 Placid NK Corporation
 X-Press Money
 NBL Quick-Pay
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Chapter Three
Theoretical Background
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3.1. Theoretical Background
A Theoretical Background is a clear and logical presentation of the relevant research work
done before in the same area of investigation and the documentation of a comprehensive
review of the published and unpublished work from secondary sources of data in the areas of
specific interest to the researcher.
3.1.1. Literature Review of Corporate Governance
Berle and Means (1932) and the even earlier Smith (1776) Corporate governance importance
arises in modern corporations due to the separation of management and ownership control in
the organizations. The interests of shareholders are conflicting with the interests of managers.
The principal agent problem is reflected in the management and direction related problems
due to the differential interests of firm’s stakeholders. There is not a single definition of
corporate governance rather it might be viewed from different angles.
Zalecki, P.H, (1993).defines corporate governance as “allocation of ownership, capital
structure, managerial incentive schemes, takeovers, board of directors, pressure from
institutional investors, product market competition, labor market competition, organizational
structure, etc., can all be thought of as institutions that affect the process through which
quasi-rents are distributed”.
Garvey and Swan (1994) assert that “governance determines how the firm’s top decision
makers (executives) actually administer such contracts (p. 139)”. Shleifer and Vishny (1997)
define corporate governance as “the ways in which suppliers of finance to corporations assure
themselves of getting a return on their investment (p.737)”. OECD in 1999 defined corporate
governance as "Corporate governance is the system by which business corporations are
directed and controlled. The corporate governance structure specifies the distribution of rights
and responsibilities among different participants in the corporation, such as, the board,
managers, shareholders and other stakeholders, and spells out the rules and procedures for
making decisions on corporate affairs. By doing this, it also provides the structure through
which the company objectives are set, and the means of attaining those objectives and
monitoring performance.”
Oman (2001) defined corporate governance as a term refers to the private and public
institutions that include laws, regulations and the business practices which govern the
relationship between the corporate managers and the stakeholders. The Ministry of Finance,
Singapore (corporate governance 2001) defines corporate governance as “the processes and
structure by which the business and affairs of the company are directed and managed, in
order to enhance long term shareholder value through enhancing corporate performance and
.
accountability, whilst taking into account the interests of other stakeholders. Good corporate
governance therefore embodies both enterprise (performance) and accountability
(conformance).” (Fin, 2004, pp 13-14).
La Porta, Silanes and Shliefer (2000, 2002) view corporate governance as a set of
mechanisms through which outside investors (shareholders) protect themselves from inside
investors (managers). The Organization for Economic Cooperation and Development
provides another perspective by stating that “corporate governance is the system by which
business corporations are directed and controlled. The corporate governance structure
specifies the distribution of rights and responsibilities among different participants in the
corporation, such as the Board, managers, shareholders and other stakeholders, and spells out
the rules and procedure for making decisions on corporate affairs. By doing this, it also
provides the structures through which the company objectives are set, and the means of
attaining those objectives and monitoring performance.
McColgan (2001) gave a very broader view of agency theory and corporate governance. The
major interest of his research was to cover the area that where the interests of managers
diverge from those of the interests of shareholders. He kept in view the agency relationship
and the agency cost which arises from these relationships. He extended the work of Jensen
and Meckling (1976) who defined the agency relationship as a type of contract in which the
principal keep the agent to carry out the services of the firm on his behalf. The agency
problem arises due to the different interest and the conflict between the ownership and
control as principal delegate some decision making authority to the agent.
Jensen and Meckling (1976) argued that this delegation authority reduces the value
maximizing decisions taking by the manager in the firm. Himmelberg,, Hubbard and Palia.
(1999), argued Jenson and Meckling (1976) by saying that principal agent problem are not
similar in all firms rather they are different in different firms, different industries and also in
different cultures.
Himmelberg et al. (1999) said that Jenson original theory “nexus of contract’ suggest the
same. McColgan (2001) agreeing with the authors said that agency problem can be reduces
by the help of effective corporate governance mechanism which can be important in reducing
the agency cost and the ownership problems in the firms.
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3.2. The Origin of Governance

Like government, the word governance derives, ultimately, from the Greek verb κυβερνάω
[kubernáo] (meaning to steer, the metaphorical sense first being attested in Plato). In above-
described sense, however, the term governance was re-minted as recently as the 1990s by
economists and political scientists, and disseminated by institutions such as the UN, IMF and
World Bank. Its use in English can be traced to Charles Plummer’s 'The Governance of
England published in 1885 as a translation from the original 13th century Latin of Fortes
cue’s 'The Difference between an Absolute and a Limited Monarchy'). This usage of
governance to refer to the arrangements of governing became orthodox including in Sidney
Low’s seminal text of the same title in 1904 and among later British constitutional historians.
3.3. Definition of Governance
Governance refers to "all processes of governing, whether undertaken by a government,
market or network, whether over a family, tribe, formal or informal organization or territory
and whether through laws, norms, power or language." Itrelates to "the processes of
interaction and decision-making among the actors involved in a collective problem that lead
to the creation, reinforcement, or reproduction of social norms and institutions.”
To distinguish the term governance from government: a government is a formal body
invested with the authority to make decisions in a given political system. In this case the
governance process, which includes all the actors involved in influencing the decision-
making process (such as lobbies, parties, medias), is centered on the relevant "governing
body". Whether the organization is a geopolitical entity (nation-state), a corporation (a
business or organization incorporated as a legal entity), a socio-political entity (chiefdom,
tribe, family, etc.), or an informal one, its governance is the way the rules, norms and actions
are produced, sustained, regulated and held accountable. The degree of formality depends on
the internal rules of a given organization.
3.4. Different Uses of Governance
Governance is a very general concept that can refer to all manner of organizations. Equally,
this generality means that governance is often defined more narrowly to refer to a particular
'level' of governance associated with a type of organization (including public governance,
global governance, non-profit governance, corporate governance, and project governance), a
particular 'field' of governance associated with a type of activity or outcome (including
environmental governance, internet governance, and information technology governance), or
a particular 'model' of governance, often derived as an empirical or normative theory
(including regulatory governance, participatory governance, multilevel governance, meta
governance, and collaborative governance). Governance can be used not only to describe
these diverse topics but also to define normative or practical agendas for them. Normative
concepts of fair governance or good governance are common among political, public sector,
voluntary, and private sector organizations.
.
3.5. Definition of Corporate Governance

Corporate governance refers to a blend of law, regulation and appropriate voluntary private
sector practices which enable the corporation to attract financial and human capital, perform
efficiently and thereby perpetuate itself by generating long term economic value for its
shareholders while respecting the interests of the shareholders and the society as a whole.
Dhiman Chowdhury in his book has mentioned “Corporate Governance is probably the
widest control mechanism used for efficient use of corporate resources”
Corporate governance broadly refers to the mechanisms, processes and relations by which
corporations are controlled and directed. Governance structures and principles identify the
distribution of rights and responsibilities among different participants in the corporation (such
as the board of directors, managers, shareholders, creditors, auditors, regulators, and other
stakeholders) and include the rules and procedures for making decisions in corporate affairs.
Corporate governance includes the processes through which corporations' objectives are set
and pursued in the context of the social, regulatory and market environment. Governance
mechanisms include monitoring the actions, policies, practices, and decisions of corporations,
their agents, and affected stakeholders. Corporate governance practices are affected by
attempts to align the interests of stakeholders. Interest in the corporate governance practices
of modern corporations, particularly in relation to accountability, increased following the
high-profile collapses of a number of large corporations during 2001–2002, most of which
involved accounting fraud; and then again after the recent financial crisis in 2008. Corporate
scandals of various forms have maintained public and political interest in the regulation of
corporate governance. In the U.S., these include Enron and MCI Inc. (formerly WorldCom).
Their demise is associated with the U.S. federal government passing the Sarbanes-Oxley Act
in 2002, intending to restore public confidence in corporate governance. Comparable failures
in Australia are associated with the eventual passage of the CLERP 9 reforms. Similar
corporate failures in other countries stimulated increased regulatory interest.
One source defines corporate governance as "the set of conditions that shapes the ex post
bargaining over the quasi-rents generated by a firm.” The firm itself is modeled as a
governance structure acting through the mechanisms of contract. The system of rules,
practices and processes by which a company is directed and controlled. Corporate
governance essentially involves balancing the interests of the many stakeholders in a
company - these include its shareholders, management, customers, suppliers, financiers,
government and the community. Since corporate governance also provides the framework for
attaining a company's objectives, it encompasses practically every sphere of management,
from action plans and internal controls to performance measurement and corporate
disclosure.
.
3.6. History of Corporate Governance
Robert E. Wright argues in Corporation Nation that the governance of early U.S.
corporations, of which there were over 20,000 by the Civil War, was superior to that of
corporations in the late 19th and early 20th centuries because early corporations were run like
"republics" replete with numerous "checks and balances" against fraud and usurpation of
power of managers or large shareholders.
In the 20th century in the immediate aftermath of the Wall Street Crash of 1929 legal scholars
such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered on the
changing role of the modern corporation in society. From the Chicago school of economics,
Ronald Coase introduced the notion of transaction costs into the understanding of why firms
are founded and how they continue to behave.
US expansion after World War II through the emergence of multinational corporations saw
the establishment of the managerial class. Studying and writing about the new class were
several Harvard Business School management professors: Myles Mace (entrepreneurship),
Alfred D. Chandler, Jr. (business history), Jay Lorsch (organizational behavior) and Elizabeth
MacIver (organizational behavior). According to Lorsch and MacIver "many large
corporations have dominant control over business affairs without sufficient accountability or
monitoring by their board of directors." In the 1980s, Eugene Fama and Michael Jensen
established the principal–agent problem as a way of understanding corporate governance: the
firm is seen as a series of contracts.
Over the past three decades, corporate directors’ duties in the U.S. have expanded beyond
their traditional legal responsibility of duty of loyalty to the corporation and its shareholders.
In the first half of the 1990s, the issue of corporate governance in the U.S. received
considerable press attention due to the wave of CEO dismissals (e.g.: IBM, Kodak,
Honeywell) by their boards. The California Public Employees' Retirement System (CalPERS)
led a wave of institutional shareholder activism (something only very rarely seen before), as a
way of ensuring that corporate value would not be destroyed by the now traditionally cozy
relationships between the CEO and the board of directors (e.g., by the unrestrained issuance
of stock options, not infrequently back dated).
In the early 2000s, the massive bankruptcies (and criminal malfeasance) of Enron and
WorldCom, as well as lesser corporate scandals, such as Adelphia Communications, AOL,
Arthur Andersen, Global Crossing, Tyco, led to increased political interest in corporate
governance. This is reflected in the passage of the Sarbanes-Oxley Act of 2002.
.
3.7. Fundamental Corporate Governance Theories

3.7.1. Agency Theory
Agency theory having its roots in economic theory was exposited by Alchian and Demsetz
and further developed by Jensen and Meckling. Agency theory is defined as “the relationship
between the principals, such as shareholders and agents such as the company executives and
managers”. In this theory, shareholders who are the owners or principals of the company,
hires the agents to perform work. Principals delegate the running of business to the directors
or managers, who are the shareholder’s agents. Indeed, Daily et al argued that two factors can
influence the prominence of agency theory. First, the theory is conceptually and simple
theory that reduces the corporation to two participants of managers and shareholders. Second,
agency theory suggests that employees or managers in organizations can be self-interested.
The agency theory shareholders expect the agents to act and make decisions in the principal’s
interest. On the contrary, the agent may not necessarily make decisions in the best interests of
the principals. Such a problem was first highlighted by Adam Smith in the 18th century and
subsequently explored by Ross and the first detailed description of agency theory was
presented by Jensen and Meckling. Indeed, the notion of problems arising from the separation
of ownership and control in agency theory has been confirmed by Davis, Schoorman and
Donaldson.
In agency theory, the agent may be succumbed to self-interest, opportunistic behavior and
falling short of congruence between the aspirations of the principal and the agent’s pursuits.
Even the understanding of risk defers in its approach. Although with such setbacks, agency
theory was introduced basically as a separation of ownership and control. Holmstrom and
Milgrom argued that instead of providing fluctuating incentive payments, the agents will only
focus on projects that have a high return and have a fixed wage without any incentive
component.
Although this will provide a fair assessment, but it does not eradicate or even minimize
corporate misconduct. Here, the positivist approach is used where the agents are controlled
by principal-made rules, with the aim of maximizing shareholders value. Hence, a more
individualistic view is applied in this theory. Indeed, agency theory can be employed to
explore the relationship between the ownership and management structure. However, where
there is a separation, the agency model can be applied to align the goals of the management
with that of the owners. Due to the fact that in a family firm, the management comprises of
family members, hence the agency cost would be minimal as any firm’s performance does
not really affect the firm performance. The model of an employee portrayed in the agency
theory is more of a self-interested, individualistic and are bounded rationality where rewards
and punishments seem to take priority.
.
This theory prescribes that people or employees are held accountable in their tasks and
responsibilities. Employees must constitute a good governance structure rather than just
providing the need of shareholders, which maybe challenging the governance structure.
Figure 2: The Agency Model
3.7.2. Stewardship Theory
Stewardship theory has its roots from psychology and sociology and is defined by Davis,
Schoorman & Donaldson as “a steward protects and maximizes shareholders wealth through
firm performance, because by so doing, the steward’s utility functions are maximized”. In
this perspective, stewards are company executives and managers working for the
shareholders, protects and make profits for the shareholders. Unlike agency theory,
stewardship theory stresses not on the perspective of individualism, but rather on the role of
top management being as stewards, integrating their goals as part of the organization. The
stewardship perspective suggests that stewards are satisfied and motivated when
organizational success is attained.
Agyris argues agency theory looks at an employee or people as an economic being, which
suppresses an individual’s own aspirations. However, stewardship theory recognizes the
importance of structures that empower the steward and offers maximum autonomy built on
trust. It stresses on the position of employees or executives to act more autonomously so that
the shareholders’ returns are maximized. Indeed, this can minimize the costs aimed at
monitoring and controlling behaviors. On the other end, Daly et al. argued that in order to
protect their reputations as decision makers in organizations, executives and directors are
inclined to operate the firm to maximize financial performance as well as shareholders’
profits. In this sense, it is believed that the firm’s performance can directly impact
perceptions of their individual performance.
Indeed, Fama contend that executives and directors are also managing their careers in order
to be seen as effective stewards of their organization, whilst, Shleifer and Vishny, insists that
managers return finance to investors to establish a good reputation so that that can re-enter
.
the market for future finance. Stewardship model can have linking or resemblance in
countries like Japan, where the Japanese worker assumes the role of stewards and takes
ownership of their jobs and work at them diligently. Moreover, stewardship theory suggests
unifying the role of the CEO and the chairman so as to reduce agency costs and to have
greater role as stewards in the organization. It was evident that there would be better
safeguarding of the interest of the shareholders. It was empirically found that the returns have
improved by having both these theories combined rather than separated.
Figure 3: The Stewardship Model
3.7.3. Stakeholder Theory
Stakeholder theory was embedded in the management discipline in 1970 and gradually
developed by Freeman incorporating corporate accountability to a broad range of
stakeholders. Wheeler et al argued that stake holder theory derived from a combination of the
sociological and organizational disciplines. Indeed, stakeholder theory is less of a formal
unified theory and more of a broad research tradition, incorporating philosophy, ethics,
political theory, economics, law and organizational science.
Stakeholder theory can be defined as “any group or individual who can affect or is affected
by the achievement of the organization’s objectives”. Unlike agency theory in which the
managers are working and serving for the stakeholders, stakeholder theorists suggest that
managers in organizations have a network of relationships to serve – this include the
suppliers, employees and business partners. And it was argued that this group of network is
important other than owner-manager-employee relationship as in agency theory. On the other
end, Sundaram & Ink pen contend that stakeholder theory attempts to address the group of
stakeholder deserving and requiring management’s attention. Whilst, Donaldson & Preston
claimed that all groups participate in a business to obtain benefits. Nevertheless, Clarkson
suggested that the firm is a system, where there are stakeholders and the purpose of the
organization is to create wealth for its stakeholders.
.
Freeman contends that the network of relationships with many groups can affect decision
making processes as stakeholder theory is concerned with the nature of these relationships in
terms of both processes and outcomes for the firm and its stakeholders. Donaldson & Preston
argued that this theory focuses on managerial decision making and interests of all
stakeholders have intrinsic value, and no sets of interests are assumed to dominate the others.
Government Investors Political Groups
Suppliers Customers
FIRM
Trade associates
Employees Communities
Figure 4: The Stakeholder Model
3.7.4. Transaction Cost Theory
Transaction cost theory was first initiated by Cyert and March and later theoretical described
and exposed by Williamson. Transaction cost theory was an interdisciplinary alliance of law,
economics and organizations. This theory attempts to view the firm as an organization
comprising people with different views and objectives. The underlying assumption of
transaction theory is that firms have become so large they in effect substitute for the market
in determining the allocation of resources. In other words, the organization and structure of a
firm can determine price and production. The unit of analysis in transaction cost theory is the
transaction. Therefore, the combination of people with transaction suggests that transaction
cost theory managers are opportunists and arrange firms’ transactions to their interests.
.
3.8. Systemic Problems Of Corporate Governance

Demand for information:
In order to influence the directors, the shareholders must combine with others to form a
voting group which can pose a real threat of carrying resolutions or appointing directors at a
general meeting.
Monitoring costs:
A barrier to shareholders using good information is the cost of processing it, especially to a
small shareholder. The traditional answer to this problem is the efficient-market hypothesis
(in finance, the efficient market hypothesis (EMH) asserts that financial markets are
efficient), which suggests that the small shareholder will free ride on the judgments of larger
professional investors.
Supply of accounting information:
Financial accounts form a crucial link in enabling providers of finance to monitor directors.
Imperfections in the financial reporting process will cause imperfections in the effectiveness
of corporate governance. This should, ideally, be corrected by the working of the external
auditing process.
3.9. Mechanisms and Controls
Corporate governance mechanisms and controls are designed to reduce the inefficiencies that
arise from moral hazard and adverse selection. There are both internal monitoring systems
and external monitoring systems. Internal monitoring can be done, for example, by one (or a
few) large shareholder(s) in the case of privately held companies or a firm belonging to a
business group. Furthermore, the various board mechanisms provide for internal monitoring.
External monitoring of managers' behavior occurs when an independent third party (e.g. the
external auditor) attests the accuracy of information provided by management to investors.
Stock analysts and debt holders may also conduct such external monitoring. An ideal
monitoring and control system should regulate both motivation and ability, while providing
incentive alignment toward corporate goals and objectives. Care should be taken that
incentives are not so strong that some individuals are tempted to cross lines of ethical
behavior, for example by manipulating revenue and profit figures to drive the share price of
the company up.
.
3.9.1. Internal corporate governance controls

Internal corporate governance controls monitor activities and then take corrective action to
accomplish organizational goals. Examples include:
Monitoring by the board of directors:

The board of directors, with its legal authority to hire, fire and compensate top management,
safeguards invested capital. Regular board meetings allow potential problems to be identified,
discussed and avoided. Whilst non-executive directors are thought to be more independent,
they may not always result in more effective corporate governance and may not increase
performance. Different board structures are optimal for different firms. Moreover, the ability
of the board to monitor the firm's executives is a function of its access to information.
Executive directors possess superior knowledge of the decision-making process and therefore
evaluate top management on the basis of the quality of its decisions that lead to financial
performance outcomes, ex ante. It could be argued, therefore, that executive directors look
beyond the financial criteria.
Internal control procedures and internal auditors:
Internal control procedures are policies implemented by an entity's board of directors, audit
committee, management, and other personnel to provide reasonable assurance of the entity
achieving its objectives related to reliable financial reporting, operating efficiency, and
compliance with laws and regulations. Internal auditors are personnel within an organization
who test the design and implementation of the entity's internal control procedures and the
reliability of its financial reporting.
Balance of power:
The simplest balance of power is very common; require that the President be a different
person from the Treasurer. This application of separation of power is further developed in
companies where separate divisions check and balance each other's actions. One group may
propose company-wide administrative changes, another group review and can veto the
changes, and a third group check that the interests of people (customers, shareholders,
employees) outside the three groups are being met.
Remuneration:
Performance-based remuneration is designed to relate some proportion of salary to individual
performance. It may be in the form of cash or non-cash payments such as shares and share
options, superannuation or other benefits. Such incentive schemes, however, are reactive in
the sense that they provide no mechanism for preventing mistakes or opportunistic behavior,
and can elicit myopic behavior.
Monitoring by large shareholders and/or monitoring by banks and other large
creditors: Given their large investment in the firm, these stakeholders have the incentives,
combined with the right degree of control and power, to monitor the management.
In publicly traded U.S. corporations, boards of directors are largely chosen by the
President/CEO and the President/CEO often takes the Chair of the Board position for
.
him/herself (which makes it much more difficult for the institutional owners to "fire"
him/her). The practice of the CEO also being the Chair of the Board is fairly common in large
American corporations. While this practice is common in the U.S., it is relatively rare
elsewhere. In the U.K., successive codes of best practice have recommended against duality.
3.9.2. External corporate governance controls

External corporate governance controls encompass the controls external stakeholders exercise
over the organization. Examples include:
 Competition
 Debt covenants
 Demand for and assessment of performance information (especially financial
statements)
 Government regulations
 Managerial labor market
 Media pressure
 Takeovers
3.10. Organization for Economic Co-Operation and Development (OECD)
Principles
i. Ensuring the basis for an effective corporate governance framework:
The corporate governance framework should promote transparent and efficient
markets, be consistent with the rule of law and clearly articulate the division of
responsibilities among different supervisory, regulatory and enforcement authorities.
ii. The rights of shareholders and key ownership functions:
The corporate governance framework should protect and facilitate the exercise of
shareholders’ rights.
iii. The equitable treatment of shareholders:
The corporate governance framework should ensure the equitable treatment of all
shareholders, including minority and foreign shareholders. All shareholders should
have the opportunity to obtain effective redress for violation of their rights.
iv. The role of stakeholders in corporate governance
The corporate governance framework should recognize the rights of stakeholders
established by law or through mutual agreements and encourage active co-operation
between corporations and stakeholders in creating wealth, jobs, and the sustainability
of financially sound enterprises.
v. Disclosure and transparency:
The corporate governance framework should ensure that timely and accurate
disclosure is made on all material matters regarding the corporation, including the
financial situation, performance, ownership, and governance of the company.
.
vi. The responsibilities of the board:

The corporate governance framework should ensure the strategic guidance of the
company, the effective monitoring of management by the board, and the board’s
accountability to the company and the shareholders.
1. Recognition of basic shareholder rights
2. Shareholders have the right to participate in decisions
concerning
3. Fundamental corporate changes
Rights of 4. Voting rights of shareholders
shareholders 5. Disclosure of disproportionate voting rights of certain
shareholders
6. To obtain a degree of control
7. Markets for corporate control should be allowed to
function
8. Shareholders should consider the costs and benefits of
exercising their voting rights
1. All shareholders of the same class should be treated
Equitable equally
treatment of 2. Insider trading and abusive self-dealing should be
shareholders prohibited
3. Board members and managers should disclose material
interests
1. Assure that rights of stakeholders are protected by law
2. Stakeholders should have the opportunity to obtain
Role of effectiveness redress for violation of their rights
stakeholders 3. Permit performance-enhancing mechanisms for
stakeholder participation
4. Stakeholders should have access to relevant information in
the corporate governance process
1. Scope of material information to be disclosed

2. Information should be prepared in accordance with high
Disclosure and accounting standards
transparency 3. Annual audit should be conducted by an independent
auditor
4. Fair, timely and cost-effective means of disseminating
information
.
1. Board members should act on the best interest of the

company with due diligence and care
2. The board should treat all shareholders fairly
Responsibilities of 3. The board should ensure compliance with the law and take
the board account the interest of stakeholders
4. Definition of key functions of the board
5. The board should exercise objective judgment independent
from management
6. Board members should have access to accurate, relevant
and timely information
Figure 5: OECD Principles of Corporate Governance (1999).
3.11. Corporate Governance Scenario in Bangladesh

Corporate governance practices in Bangladesh are quite absent in most companies and
organizations. In fact, Bangladesh has lagged behind its neighbors and the global economy in
corporate governance. One reason for this absence of Corporate Governance is that most
companies are family oriented. Moreover, motivation to disclose information and improve
governance practices by companies is felt negatively. There is neither any value judgment nor
any consequences for corporate governance practices. The current system in Bangladesh does
not provide sufficient legal, institutional and economic motivation for stakeholders to
encourage and enforce corporate governance practices; hence failure in most of the
constituents of corporate governance is witness in Bangladesh. Poor bankruptcy laws, no
push from the international investor community, limited or no disclosure regarding related
party transactions, weak regulatory system, general meeting scenario, lack of shareholder
active participations are some of the individual constituents that have been identified by
MamtazUddin Ahmed and Mohammad Abu Yusuf in their research study “Corporate
Governance : Bangladesh Perspective” (Mamtaz and Yusuf, 2005).
3.11.1. Corporate Governance in Financial Enterprises in Bangladesh

As in many developing countries, banks play a vital role in Bangladesh economy, as the
dominant financier for the industrial and commercial activities. Since the independence
in1971, the government until 1982, when the ‘ownership reform’ measures started in the
financial sector, had carried out the regulation and ownership of all the financial institutions.
During the reform period, two out of six National Commercial Banks (NCBs) were
denationalized and private commercial banks were allowed to operate in the country. In 2003,
.
out of the 49 banks operating in Bangladesh, 9 belong to the public sector, 30 are local
private and 10 are foreign owned banks (Bangladesh Bank, 2003).Despite the expansion, the
operational efficiency of the banking institutions has continued to be dismal . The sector
witnessed decreasing profitability, increasing non-performing assets, provision and capital
shortfalls, eroded credit discipline, rampant corruption patronized by political quarters, low
recovery rate, inferior asset quality, managerial weaknesses, excessive interference from
government and owners, weak regulatory and supervisory role etc. Internal control system
along with accounting and audit qualities are believed to have been substandard. Many of the
problems have been attributed to lack of sound corporate governance among the banks. The
reports by the Banking Reform Commission and BEI (2003) raises serious concerns on the
banking sector and criticize the quality of governance that prevails in the banking sector in
Bangladesh.
Securities and Exchange Commission Act
Notification
07 August 2012
No. SEC/CMRRCD/2006-158/134/Admin/44: Whereas, the Securities and Exchange
Commission (herein after referred to as the “Commission”) deems it fit that the consent
already accorded by the Commission, or deemed to have been accorded by it, or to be
accorded by it in future, to the issue of capital by the companies listed with any stock
exchange in Bangladesh, shall be subject to certain further conditions, on 'comply' basis, in
order to enhance corporate governance in the interest of investors and the capital market;
Now, therefore, in exercise of the power conferred by section 2CC of the Securities and
Exchange Ordinance, 1969 (XVII of 1969), the Commission hereby supersedes its earlier
Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated 20th February, 2006 and
imposes the following further conditions to the consent already accorded by it, or deemed to
have been accorded by it, or to be accorded by it in future, to the issue of capital by the
companies listed with any stock exchange in Bangladesh: Provided, however, that these
conditions are imposed on 'comply' basis. The companies listed with any stock exchange in
Bangladesh shall comply with these conditions in accordance with the condition No. 7.
.
Chapter Four
Corporate Governance Practices
.
Conditions.
4.1 Board of Directors:
4.1.1 Board's Size
The number of the board members of the company shall not be less than 5 (five) and more
than 20 (twenty): Provided, however, that in case of banks and non-bank financial
institutions, insurance companies and statutory bodies for which separate primary regulators
like Bangladesh Bank, Insurance Development and Regulatory Authority, etc. exist, the
Boards of those companies shall be constituted as may be prescribed by such primary
regulators in so far as those prescriptions are not inconsistent with the aforesaid condition.
4.1.2 Independent Directors
All companies shall encourage effective representation of independent directors on their
Board of Directors so that the Board, as a group, includes core competencies considered
relevant in the context of each company. For this purpose, the companies shall comply with
the following: -(i) At least one fifth (1/5) of the total number of directors in the company’s
board shall be independent directors.(ii) For the purpose of this clause “independent director”
means a director)
a) Who either does not hold any share in the company or holds less than one percent
(1%) shares of the total paid-up shares of the company;
b) Who is not a sponsor of the company and is not connected with the company’s any
sponsor or director or shareholder who holds one percent (1%) or more shares of the
total paid-up shares of the company on the basis of family relationship. His/her family
members also should not hold above mentioned shares in the company: Provided that
spouse, son, daughter, father, mother, brother, sister, son-in-law and daughter-in-law
shall be considered as family members;
c) Who does not have any other relationship, whether pecuniary or otherwise, with the
company or its subsidiary/associated companies?
d) Who is not a member, director or officer of any stock exchange?
e) Who is not a shareholder, director or officer of any member of stock exchange or an
intermediary of the capital market?
f) Who is not a partner or an executive or was not a partner or an executive during the
preceding 3 (three) years of the concerned company’s statutory audit firm;
g) Who shall not be an independent director in more than 3 (three) listed companies;
h) Who has not been convicted by a court of competent jurisdiction as a defaulter in
payment of any loan to a bank or a Non-Bank Financial Institution (NBFI);
.
i. Who has not been convicted for a criminal offence involving moral turpitude?
ii. The independent director(s) shall be appointed by the board of directors and
approved by the shareholders in the Annual General Meeting (AGM).
iii. The post of independent director(s) cannot remain vacant for more than 90
(ninety) days.
iv. The Board shall lay down a code of conduct of all Board members and annual
compliance of the code to be recorded.
v. The tenure of office of an independent director shall be for a period of 3
(three) years, which may be extended for 1 (one) term only.
4.1.3 Qualification of Independent Director (ID)
i. Independent Director shall be a knowledgeable individual with integrity who is able
the person to ensure compliance with financial, regulatory and corporate laws and can
make meaningful contribution to business.
ii. The person should be a Business Leader/Corporate Leader/Bureaucrat/University
Teacher with Economics or Business Studies or Law background/Professionals like
Chartered Accountants, Cost & Management Accountants, and Chartered Secretaries.
The independent director must have at least 12 (twelve) years of corporate
management/professional experiences.
iii. In special cases the above qualifications may be relaxed subject to prior approval of
the Commission.
4.1.4 Chairman of the Board and Chief Executive Officer
The positions of the Chairman of the Board and the Chief Executive Officer of the companies
shall be filled by different individuals. The Chairman of the company shall be elected from
among the directors of the company. The Board of Directors shall clearly define respective
roles and responsibilities of the Chairman and the Chief Executive Officer.
4.1.5 The Directors’ Report to Shareholders
The directors of the companies shall include the following additional statements in the
Directors' Report prepared under section 184 of the Companies Act, 1994 (Act No. XVIII of
1994):-
a. Industry outlook and possible future developments in the industry.
b. Segment-wise or product-wise performance.
c. Risks and concerns.
d. A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin.
e. Discussion on continuity of any Extra-Ordinary gain or loss.
.
f. Basis for related party transactions- a statement of all related party transactions
should be disclosed in the annual report.
g. Utilization of proceeds from public issues, rights issues and/or through any others
instruments.
h. An explanation if the financial results deteriorate after the company goes for
Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Offer, Direct
Listing, etc.
i. If significant variance occurs between Quarterly Financial performance and
Annual Financial Statements the management shall explain about the variance on
their Annual Report.
j. Remuneration to directors including independent directors.
k. The financial statements prepared by the management of the issuer company
present fairly its state of affairs, the result of its operations, cash flows and
changes in equity.
l. Proper books of account of the issuer company have been maintained.
m. Appropriate accounting policies have been consistently applied in preparation of
the financial statements and that the accounting estimates are based on reasonable
and prudent judgment.
n. International Accounting Standards (IAS)/Bangladesh Accounting Standards
(BAS)/International Financial Reporting Standards (IFRS)/Bangladesh Financial
Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in
preparation of the financial statements and any departure there-from has been
adequately disclosed.
o. The system of internal control is sound in design and has been effectively
implemented and monitored.
p. There are no significant doubts upon the issuer company's ability to continue as a
going concern. If the issuer company is not considered to be a going concern, the
fact along with reasons thereof should be disclosed.
q. Significant deviations from the last year’s operating results of the issuer company
shall be highlighted and the reasons thereof should be explained.
r. Key operating and financial data of at least preceding 5 (five) years shall be
summarized.
s. If the issuer company has not declared dividend (cash or stock) for the year, the
reasons thereof shall be given.
.
t. The number of Board meetings held during the year and attendance by each
director shall be disclosed.
u. The pattern of shareholding shall be reported to disclose the aggregate number of
shares (along with name wise details where stated below) held by:-
i. Parent/Subsidiary/Associated Companies and other related parties (name wise
details);
ii. Directors, Chief Executive Officer, Company Secretary, Chief Financial
Officer, Head of Internal Audit and their spouses and minor children (name
wise details);
iii. Executives;
iv. Shareholders holding ten percent (10%) or more is voting interest in the
company (name wise details).
Explanation: For the purpose of this clause, the expression “executive” means top 5 (five)
salaried employees of the company, other than the Directors, Chief Executive Officer,
Company Secretary, Chief Financial Officer and Head of Internal Audit.
v. In case of the appointment/re-appointment of a director the company shall
disclose the following information to the shareholders:-
i. A brief resume of the director;
ii. Nature of his/her expertise in specific functional areas;
iii. Names of companies in which the person also holds the directorship and the
membership of committees of the board.
4.2 Chief Financial Officer (CFO) and Heads of Internal Audit and
Company Secretary (CS):
4.2.1 Appointment
The company shall appoint a Chief Financial Officer (CFO), a Head of Internal Audit
(Internal Control and Compliance) and a Company Secretary (CS). The Board of Directors
should clearly define respective roles, responsibilities and duties of the CFO, the Head of
Internal Audit and the CS.
4.2.2 Requirement to attend the Board Meetings
The CFO and the Company Secretary of the companies shall attend the meetings of the Board
of Directors, provided that the CFO and/or the Company Secretary shall not attend such part
of a meeting of the Board of Directors which involves consideration of an agenda item
relating to their personal matters.
.
4.3 Audit Committee:

a) The company shall have an Audit Committee as a sub-committee of the Board
of Directors.
b) The Audit Committee shall assist the Board of Directors in ensuring that the
financial statements reflect true and fair view of the state of affairs of the
company and in ensuring a good monitoring system within the business.
c) The Audit Committee shall be responsible to the Board of Directors. The
duties of the Audit Committee shall be clearly set forth in writing.
4.3.1 Constitution of the Audit Committee
i. The Audit Committee shall be composed of at least 3 (three) members.
ii. The Board of Directors shall appoint members of the Audit Committee who
shall be directors of the company and shall include at least 1 (one)
independent director.
iii. All members of the audit committee should be “financially literate” and at
least 1 (one) member shall have accounting or related financial management
experience.
Explanation: The term “financially literate” means the ability to read and understand the
financial statements like Balance Sheet, Income Statement and Cash Flow Statement and a
person will be considered to have accounting or related financial management expertise if
(s)he possesses professional qualification or Accounting/ Finance graduate with at least 12
(twelve) years of corporate management/professional experiences.
iv. When the term of service of the Committee members expires or there is any
circumstance causing any Committee member to be unable to hold office until
expiration of the term of service, thus making the number of the Committee
members to be lower than the prescribed number of 3 (three) persons, the
Board of Directors shall appoint the new Committee member(s) to fill up the
vacancy immediately or not later than 1 (one) month from the date of vacancy
in the Committee to ensure continuity of the performance of work of the Audit
Committee.
v. The company secretary shall act as the secretary of the Committee.
vi. The quorum of the Audit Committee meeting shall not constitute without at
least 1(one) independent director.
4.3.2 Chairman of the Audit Committee
i. The Board of Directors shall select 1 (one) member of the Audit Committee to
be Chairman of the Audit Committee, who shall be an independent director.
.
ii. Chairman of the audit committee shall remain present in the Annual General
Meeting (AGM).
4.3.3 Role of Audit Committee
Role of audit committee shall include the following:-
i. Oversee the financial reporting process.
ii. Monitor choice of accounting policies and principles.
iii. Monitor Internal Control Risk management process.
iv. Oversee hiring and performance of external auditors.
v. Review along with the management, the annual financial statements before
submission to the board for approval.
vi. Review along with the management, the quarterly and half yearly financial
statements before submission to the board for approval.
vii. Review the adequacy of internal audit function.
viii. Review statement of significant related party transactions submitted by the
management.
4.3.4 Reporting of the Audit Committee
4.3.4.1 Reporting to the Board of Directors
i. The Audit Committee shall report on its activities to the Board of Directors.
ii. The Audit Committee shall immediately report to the Board of Directors on the
following findings, if any:-
a) report on conflicts of interests;
b) suspected or presumed fraud or irregularity or material defect in the internal control
system;
c) suspected infringement of laws, including securities related laws, rules and
regulations;
d) Any other matter which shall be disclosed to the Board of Directors immediately.
4.3.4.2 Reporting to the Authorities
If the Audit Committee has reported to the Board of Directors about anything which has
material impact on the financial condition and results of operation and has discussed with the
Board of Directors and the management that any rectification is necessary and if the Audit
Committee finds that such rectification has been unreasonably ignored, the Audit Committee
shall report such finding to the Commission, upon reporting of such matters to the Board of
Directors for three times or completion of a period of 6 (six) months from the date of first
reporting to the Board of Directors, whichever is earlier.
.
4.3.5 Reporting to the Shareholders and General Investors

Report on activities carried out by the Audit Committee, including any report made to the
Board of Directors under condition 3.4.1 (ii) above during the year, shall be signed by the
Chairman of the Audit Committee and disclosed in the annual report of the issuer company.
4.4 External/Statutory Auditors:
The issuer company should not engage its external/statutory auditors to perform the following
services of the company; namely:-
4.5 Subsidiary Company:
i. Provisions relating to the composition of the Board of Directors of the holding
company shall be made applicable to the composition of the Board of
Directors of the subsidiary company.
ii. At least 1 (one) independent director on the Board of Directors of the holding
company shall be a director on the Board of Directors of the subsidiary
company.
iii. The minutes of the Board meeting of the subsidiary company shall be placed
for review at the following Board meeting of the holding company.
iv. The minutes of the respective Board meeting of the holding company shall
state that they have reviewed the affairs of the subsidiary company also.
v. The Audit Committee of the holding company shall also review the financial
statements, in particular the investments made by the subsidiary company.
4.6 Duties of Chief Executive Officer (CEO) and Chief Financial Officer
(CFO):
The CEO and CFO shall certify to the Board that:-

i. They have reviewed financial statements for the year and that to the best of their
knowledge and belief:
These statements do not contain any materially untrue statement or omit any material
fact or contain statements that might be misleading;
a) These statements together present a true and fair view of the company’s affairs and
are in compliance with existing accounting standards and applicable laws.
ii. There are, to the best of knowledge and belief, no transactions entered into by the
company during the year which are fraudulent, illegal or violation of the company’s
code of conduct.
.
4.7 Reporting and Compliance of Corporate Governance:
a. The company shall obtain a certificate from a practicing Professional

Accountant/Secretary (Chartered Accountant/Cost and Management
Accountant/Chartered Secretary) regarding compliance of conditions of Corporate
Governance Guidelines of the Commission and shall send the same to the
shareholders along with the Annual Report on a yearly basis.
Explanation: Chartered Accountant means Chartered Accountant as defined in the Chartered

Accountants Act, 1949 (Act No. XXXVIII of 1949); Cost and Management Accountant
means Cost and Management Accountant as defined in the Cost and Management
Accountants Ordinance, 1977 (Ordinance No. LIII of 1977);
b. The directors of the company shall state, in accordance with the Annexure attached, in
the directors' report whether the company has complied with these conditions.
.
THE COMPANY’S ACT 1994
4.8 Directors
90. Directors obligatory –

1) Every public company and a private company which is a subsidiary of a public
company shall have at least three directors.
2) Every private company other than a private company mentioned in sub-section
(1) shall have at least two directors;
3) Only a natural person may be appointed a director.
91. Appointment of directors: -
1. Notwithstanding anything contained in the articles of a company—
a) The subscribers of the memorandum shall be deemed to be the directors of the
company until the first director are appointed.
b) the directors of the company shall be elected by the members from among their
number in general meeting; and
c) any casual vacancy occurring among the directors may be filled in by the other
directors but the person the appointed shall be a person qualified to be elected a
director under clause (b) and shall be subject to retirement at the same time as if he
had become a director on the day on which the director in whose place he is appointed
was last appointed a director.
2. Notwithstanding anything contained in the articles of a company other than a
private company not less than one third of the whole number of directors shall
be persons whose period of office is liable to determination at any time by
retirement of directors’ rotation.
92. Restrictions on appointment or advertisement of director –
1. A person shall not be capable of being appointed director of a company by the
articles and shall not be named as a director or proposed director of a company
in any prospectus issued by or on behalf of the company or in relation to any
intended company or in any statement in lieu of prospectus filed by or on
behalf of a company unless before the registration of the articles or the
publication of the prospectus, or the filing of the statement in lieu of
prospectus, as the case may be, he has by himself or by his agent authorized in
writing –
.
a) signed and filed with the Registrar a consent in writing to act as such director;
b) in the case of companies having a share capital –
I. signed the memorandum for a number of shares not less than his
qualification shares; or
II. taken from the company and paid or agreed to pay for his qualification
shares; or
III. signed and filed with the registrar a contract in writing to take form the
company and pay for his qualification shares; or
IV. Made and filed with the Registrar any affidavit to the effect that a number
of shares not less than his qualifications share are registered in his name.
93. Consent of candidate for directorship:

1. Every person, proposed as a candidate for the office of a director shall sign,
and file with the company, his consent in writing to act as a director, if
appointed.
2. A person shall not act as a director of the company unless he has, within thirty
days of his appointment, signed and field with the Registrar his consent in
writing to act as such director.
94. Disqualifications of directors:
1. He is a minor A person shall not be capable of being appointed director of a company, if
a) the payment of the call; or
b) He has been found to be of unsound mind by a competent court and the finding is in
force; or
c) He is an undercharged insolvent; or
d) He has applied to be adjudicated as an insolvent and his application is pending; or
e) He has not paid any call in respect of shares of the company held by him, whether
alone or jointly with others, and six months have elapsed from the last day fixed for.
2. A company may in its articles provide additional grounds for disqualification of a
director.
95. Notice of meetings:
Notice of every meeting of the Board of Directors of a company shall be given in writing to
every director for the time being in Bangladesh and at his address in Bangladesh.
96. Meeting of Board:

In the case of every company a meeting of its Board of Directors shall be held at least once in
every three and at least four such meetings shall be held in every year.
.
97. Qualification of Director:

(1) Without prejudice to the restrictions imposed by section 92, it shall be the duty of every
director to hold qualification share to be specified in the articles and, if he is not already
qualified, he shall obtain his qualification within sixty days after his appointment, or such
shorter time as may be fixed by the articles.
(2) If, after the expiration of the period mentioned in sub-section (1) any unqualified person
acts as a director of the company, he shall be liable to a fine not exceeding two hundred taka
for every day between the expiration of the said period and the last day on which it is proved
that he acted as a director (both days inclusive).
98. Validity director of act of:

The acts of a director shall be valid notwithstanding any defect that may afterwards be
discovered in his appointment of qualification:
Provided that nothing in this section shall be deemed to give validity to act done by a director
after the appointments of such director has been shown to be invalid.
99. Ineligibility of bankrupt to act as director:
1. If any person being an undercharged insolvent acts as director or managing
agent or manager of any company, he shall be liable to imprisonment for a
term not exceeding two years or to a fine not exceeding five thousand taka or
to both.
2. In this section the expression "company" includes a company incorporated
outside Bangladesh which has an established place of business within
Bangladesh.
100. Propitiation on assignment of office by director:
1. Any assignment of his office made after the commencement of this Act by any
director shall void and shall be of no effect.
.
4.9: Bangladesh Bank Guidelines on Corporate

Governance
Board of directors and management of a bank should comprise of the competent and
professionally skilled persons with a view to ensuring good and corporate governance in the
bank management. It is also inevitable to have specific demarcation of responsibilities and
authorities between these controlling bodies over bank's affairs. In absence of specific
division of responsibilities and authorities, even in spite of these bodies’ are being formed
with skilled and efficient persons, the desired goals of an institution cannot be achieved due
to lack of transparency and accountability of all concerned. Such kind of situation is more
undesirable in an institution like bank-company as it deals with huge public money and
interests of the depositors.
In view of the above, rescinding the previous instructions8 the specific demarcation of
responsibilities and authorities among the board of directors, its chairman, Chief Executive
Officer (CEO) of an adviser to the private bank in respect of its overall financial, operational
and administrative policymaking and executive affairs including overall business activities,
internal control, human resources management and development thereof, income and
expenditure etc., along with lending and risk management issues, is outlined as follows:-
4.9.1 Responsibilities and authorities of the board of directors:
a) Work-planning and strategic management:

i. The board shall determine the objectives and goals and to this end shall chalk
out strategies and work-plans on annual basis. It shall specially engage itself in
the affairs of making strategies consistent with the determined objectives and
goals and in the issues relating to structural change and reorganization for
enhancement of institutional efficiency and other relevant policy matters. It
shall analyze/monitor at quarterly rests the development of implementation of
the work-plans.
ii. The board shall have its analytical review incorporated in the Annual Report
as regard the success/failure in achieving the business and other targets as set
out in its annual work-plan and shall apprise the shareholders of its
opinions/recommendations on future plans and strategies. It shall set the Key
Performance Indicators (KPIs) for the CEO and other senior executives and
have it evaluated at times.
.
b) Lending and risk management:

i. The policies, strategies, procedures etc. in respect of appraisal of
loan/investment proposal, sanction, disbursement, recovery, re-schedulement
and write-off thereof shall be made with the board's approval under the
purview of the existing laws, rules and regulations. The board shall
specifically distribute the power of sanction of loan/investment and such
distribution should desirably be made among the CEO and his subordinate
executives as much as possible. No director, however, shall interfere, directly
or indirectly, into the process of loan approval.
ii. The board shall frame policies for risk management and get them complied
with and shall monitor at quarterly rests the compliance thereof.
c) Internal control management:
The board shall be vigilant on the internal control system of the bank in order to attain and
maintain satisfactory qualitative standard of its loan/investment portfolio. It shall review at
quarterly rests the reports submitted by its audit committee regarding compliance of
recommendations made in internal and external audit reports and the Bangladesh Bank
inspection reports.
d) Human resources management and development:
i. Policies relating to recruitment, promotion, transfer, disciplinary and punitive
measures, human resources development etc. and service rules shall be framed
and approved by the board. The chairman or the directors shall in no way involve
themselves or interfere into or influence over any administrative affairs including
recruitment, promotion, transfer and disciplinary measures as executed under the
set service rules. No member of the board of directors shall be included in the
selection committees for recruitment and promotion to different levels.
Recruitment and promotion to the immediate two tiers below the CEO shall,
however, rest upon the board. Such recruitment and promotion shall have to be
carried out complying with the service rules i.e., policies for recruitment and
promotion.
ii. The board shall focus its special attention to the development of skills of bank's
staff in different fields of its business activities including prudent appraisal of
loan/investment proposals, and to the adoption of modern electronic and
information technologies and the introduction of effective Management
Information System (MIS). The board shall get these programs incorporated in its
annual work plan.
.
e) Financial management:
i. The annual budget and the statutory financial statements shall finally be prepared
with the approval of the board. It shall at quarterly rests review/monitor the
positions in respect of bank's income, expenditure, liquidity, non-performing
asset, capital base and adequacy, maintenance of loan loss provision and steps
taken for recovery of defaulted loans including legal measures.
ii. The board shall frame the policies and procedures for bank's purchase and
procurement activities and shall accordingly approve the distribution of power for
making such expenditures. The maximum possible delegation of such power shall
rest on the CEO and his subordinates. The decision on matters relating to
infrastructure development and purchase of land, building, vehicles etc. for the
purpose of bank's business shall, however, be adopted with the approval of the
board.
f) Formation of supporting committees:
For decision on urgent matters an executive committee, whatever name called, may be
formed with the directors. There shall be no committee or sub-committee of the board other
than the executive committee and the audit committee. No alternate director shall be included
in these committees.
g) Appointment of CEO:
The board shall appoint a competent CEO for the bank with the approval of the Bangladesh
Bank.
4.9.2 Responsibilities of the chairman of the board of directors:

i. As 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, he shall not participate in or interfere into
the administrative or operational and routine affairs of the bank.
ii. The chairman may conduct on-site inspection of any bank-branch or financing
activities under the purview of the oversight responsibilities of the board. He may
call for any information relating to bank's operation or ask for investigation into
any such affairs; he may submit such information or investigation report to the
meeting of the board or the executive committee and if deemed necessary, with
the approval of the board, he shall effect necessary action thereon in accordance
with the set rules through the CEO. However, any complaint against the CEO
shall have to be apprised to Bangladesh Bank through the board along with the
statement of the CEO.
iii. The chairman may be offered an office-room, a personal secretary/assistant, a
telephone at the office and a vehicle in the business-interest of the bank subject to
the approval of the board.
.
4.9.3 Responsibilities of the adviser:
The adviser, whatever name called, shall advise the board of directors or the CEO on such
issues only for which he is engaged in terms of the conditions of his appointment. He shall
neither have access to the process of decision-making nor shall have the scope of effecting
executive authority in any matters of the bank including financial, administrative or
operational affairs.
4.9.4 Responsibilities and authorities of the CEO:
The CEO of the bank, whatever name called, shall discharge the responsibilities and affect
the authorities as follows:
a) In terms of the financial, business and administrative authorities vested upon him by
the board, the CEO shall discharge his own responsibilities. He shall remain
accountable for achievement of financial and other business targets by means of
business plan, efficient implementation thereof and prudent administrative and
financial management.
b) The CEO shall ensure compliance of the Bank Companies Act, 1991 and/or other
relevant laws and regulations in discharge of routine functions of the bank.
c) The CEO shall report to Bangladesh Bank of issues violate of the Bank Companies
Act, 1991 or of other laws/regulations and, if required, may apprise the board post
facto.
d) The recruitment and promotion of all staff of the bank except those in the two tiers
below him shall rest on the CEO. He shall act in such cases in accordance with the
approved service rules on the basis of the human resources policy and sanctioned
strength of employees as approved by the board. The board or the chairman of any
committee of the board or any director shall not get involved or interfere into such
affairs. The authority relating to transfer of and disciplinary measures against the
staff, except those at one tier below the CEO, shall rest on him, which he shall apply
in accordance with the approved service rules. Besides, under the purview of the
human resources policy as approved by the board, he shall nominate officers for
training etc.
.
Board of
Directors
Effectiveness
Financial Study
Reporting
Framework
Entrepreneur
Risk
Corporate
Governance
Review of
Financial
Management Control &
Process
Performance
Review
Shareholders
Figure 6: Corporate Governance
.
Chapter Five
Corporate Governance in Janata Bank Limited
.
5.1. Corporate Governance in Janata Bank Limited

Janata Banklimited was registered as a public limited company under the companies’ Act,
1994 on took over the business of Janata Bankon 15 November, 2007 with all its assets June
03, 2007 with the registrar of joint stock companies and firms. Bangladesh bank issued
Banking License on June 05, 2007 under the Bank Company Act, 1991(Amended in 2003).
JBL, liabilities, benefits, rights, powers, authorities, privileges, borrowing and obligations as
a going concern under a vendor’s agreement signed between the Government of the people’s
republic of Bangladesh and JBL with retrospective effect from 01 July, 2007. Since then, it
enjoys the status of a corporate entity focusing on ensuring proper delegation, transparency
and accountability in the organization through its corporate governance policies and
practices. The bank is structured and developed in accordance with the accepted corporate
governance practices and guidelines of Bangladesh Bank and the Bangladesh Securities and
Exchange Commission’s (BSEC) notifications in this regard. As a 100% state owned
commercial bank, it attaches utmost priority in ensuring a well-defined corporate governance
standard.
The Corporate Governance framework at Janata Banklay emphasizes on adhering to Good
Corporate Governance norms. And for its effective implementation Bank has an efficient
Board which constitutes Independent Directors, the separation of the Board’s supervisory role
from the management and the structure based on Board Committees, which are chaired by
independent Directors, to keep an eye on significant issues.
5.2. Corporate Governance Parties of Janata Bank Limited
The bank’s corporate governance structure comprises the following parties and participants:
The shareholders
The Board
Bank Management
Regulatory Authorities
Independent External Auditors
Employees
Shareholder
The shareholders of the bank exercise their right at the Annual General Meeting (AGM).
AGM is being held every year within April. The constructive suggestions of the shareholders
are implemented in the interest of the bank. They, by their considered votes, approve bank’s
financial statements, reports of the Board and that of the auditors, declaration of dividend by
the bank, elect/re-elect directors of the bank and appoint external auditors in the annual
general meeting of the bank. They also, by their considered votes, pass special resolutions in
extra-ordinary general meeting in amending Memorandum and Articles of Associations of
the Bank, issuance of right shares, Bond etc. by the bank. The bank’s share division is
shareholders’ relationship department. Shareholders have right to information which will
provide them timely. Any material change in the bank concerning shareholder interest or any
price sensitive information is quickly disclosed for information of the shareholders and
potential investors.
.
Corporate Culture: Board of Directors, Chairman and CEO

Formation of Board of Directors:
The newly amended Section 15 of the Bank Company Act, 1994 (Amended in 2013) includes
provisions for prior approval of Bangladesh Bank before the appointment of new bank
director, as well as dismissal, termination or removal of any director from the post; director’s
fit & proper criteria; maximum number of directors; appointment of independent directors;
etc.
Size of the Board of the bank
The board comprises of 07 (seven) members including the managing director as on 31
December, 2014. The number of the board members is within the range set by the Bank
Company Act- 1991 (Amended in 2013), Bangladesh Bank and the Articles of Association of
the Bank and Bangladesh Securities and Exchange Commission notification no.
SEC/CMRRCD/2006- 158/134/Admin/44 of 07 August 2012. All Directors of JBL are non-
executive Directors except the Managing Director.
Sl No. Name Status with the bank

1 Khondker Sabera Islam Chairman
1 Mr. Mohammad Abul Kashem Director
2 Mr. Arjit Kumal Paul , FCA Director
3 Mr. Meshkat Ahmed Chowdhury Director
4 KM Shamsul Alom Director
5 Mohammad Asadullah Director
6 Shaikh Shansuddin Ahmed Director
7 Mr. Md. Abdus Salam Azad CEO&Director
Figure 7: Size of the Board of the bank
Appointment of Directors
Under section 15(4) of the Bank Company Act, 1991 (amended up to 2013), every banking
company, other than specialized banks, at the time of taking prior approval from Bangladesh
Bank for appointing/reappointing directors should furnish the following documents along
with the application:
a. Personal information of the nominated person;
b. Nominated person’s declaration;
c. ‘Declaration for confidentiality’ by the nominated person;
.
d. In case of Independent director, the approval letter from Security and Exchange
Commission;
e. In case of Independent director, a declaration of the directors concern
f. CIB report of the nominated person
g. Updated list of the directors.
The members of the Board of Directors of JBL are appointed as per the provision of the
companies Act-1994, the Bank Company Act-1991 (Amended in 2013) and Memorandum
and Articles of Association of the Bank. JBL always complies with the guidelines of
Bangladesh Bank regarding appointment of directors.
Independent Director
All the members of the board, as nominated by the Government, are professionally and
financially literate and experienced. In line with the requirement of the notification of
Bangladesh Securities and Exchange Commission guidelines, all of the directors of JBL are
justifiably considered as independent director. It is because:
i. Each of the directors holds less than one percent (1%) shares of the total paid up
capital of the bank.
ii. On the basis of family relationship, the directors are not connected with the bank’s
shareholders who hold one percent (1%) or more shares.
iii. The directors are not sponsors of the company.
iv. The members of the family of the directors also do not hold any share of the
company.
Board members’ independence
Members of the board actively take part in deliberations in board meetings on various issues
as they are independent in expressing their views and opinions freely. They do not have any
sorts of business relationship or involvement with the bank management.
Bank Management
Credit and risk management
i. The policies, strategies, procedures etc. in respect of appraisal of loan/investment
proposals, sanction, disbursement, recovery, rescheduling and written-off thereof are
made with the Board’s approval under the purview of the existing laws, rules and
regulations. The board specifically distributes the power of sanction of
loan/investment among the CEO and his subordinate executives as much as possible.
No director, however, interferes directly or indirectly in the process of
loan/investment sanctioning.
.
ii. The board establishes efficient risk management policies, administers its compliance
and monitors at quarterly intervals.
Executive Committee
As per the BRPD circular No. 11 of 27 October 2014, an executive committee has been
formed with Directors for quick decision on urgent matters and execution of routine work in
between the board meeting. Executive committee performs according to their terms of
reference determined by the board of directors in line with Bangladesh Bank guidelines.
Audit Committee
As per Bangladesh Securities and Exchange Commission notification no. SEC/ CMRRCD/
2006-158/ 134/ Admin/ 44 of 07 August 2012, JBL has an Audit Committee as a sub-
committee of the board of directors in order to strictly observe the terms of references issued
by Bangladesh Bank BRPD circular No. 11 or 27 October 2014. The Audit Committee assists
the board of directors in ensuring internal control system. It also certifies that the financial
statements reflect true and fair view of the state of affairs of the company. It issues guidelines
for ensuring a good monitoring system within the business.
 The role of Audit Committee:
The Audit Committee of the Board plays significant role to ensure implementation of
policies, guidelines etc. provided by Bangladesh Bank, other regulatory bodies and the Board
of Directors of the Bank. The committee also reviews the policies, audit plan and its
execution, financial statements, audit reports, internal control and compliance report etc. In
the year 2012, eleven meetings of Audit Committee were held. The Audit Committee of the
Board plays significant role in proper functioning of the Bank, some of which are as follows:
 Reviews the implementation status of guidelines, provided by Bangladesh Bank and
other regulatory bodies;
 Reviews Bank’s own policies and procedures; such as Credit Policy, Foreign
Exchange Policy, Human Resources Policy etc.;
 Reviews the Bank’s audited and un-audited Financial Statements, discusses and
exchanges views with the External Auditors and Tax consultants on the adequacy of
disclosures of Financial Statements
 Reviews the corrective measures taken by the Bank’s Management as recommended
by the Board Audit Division, Internal Control and Compliance Division, Bangladesh
Bank’s Inspection Team and External Auditors relating to deficiencies in internal
control or other similar issues;
.
 Reviews whether Internal Control strategies recommended by the Board of Directors

have been implemented by the Management;
 Reviews the Human Resource management and evaluates whether the Management is
setting the appropriate compliance culture by communicating the importance on
Internal Control;
 Reviews the audit plan of Bank’s internal audit and inspection;
 Reviews the internal audit report of Head Office and Branches.
 Salient Features of the Audit Committee Charter

JBL’s Board of Directors has set some salient features for its Audit Committee Charter, such
as:
 The Audit Committee should be composed of at least 3 (three) members from the
Board;
 Chairman of the Audit Committee should have professional knowledge and relevant
financial expertise
 The Chairman of the Board of Directors shall not be a member of the Audit
Committee;
 Audit Committee meetings must be held quarterly to monitor internal and external
audits;
 Audit Committee must prepare reports on all meetings for the Board of Directors and
report annually to Shareholders;
 The Managing Director & CEO or the Chairman of the Board may be invited to
attend on the Audit Committee meetings as and when required.
The composition of Audit Committee:
Sl. No. Name Status with the Status with the Audit
Bank Committee
01 Mr.Ranjit Kumar Chakrabarty Director Chairman
02 Mr.Shekhar Datta Director Member
03 Mr. Md. Shaheb Ali Mridha Director Member
04 Mr.KaziTariqul Islam Director Member
Figure 8: Audit Committee
Management Committee
.
A Management Committee (MANCOM) is working in the Bank. It is composed of senior

members of the management team. The managing director acts as the chairman of
MANCOM. Its main functions are to address general issues of importance, introduce new
products, frame strategies for improvement of operations, evaluate different types of risks,
and monitor internal control culture and to review effectiveness of the internal control
system. The meetings of the MANCOM are held every month to review and address relevant
issues timely. The different Management committees are given below:
Sl. No. Name of committees

01 Risk Management Committee
02 Asset Liability Management Committee
03 Management Committee
04 Business Advisory Committee
05 Disciplinary Action Committee
06 Interest waiver Committee
07 Research and Planning Committee
Figure 9: Management Committee
 Role of MANCOM:
MANCOM of the Bank is primarily responsible to:
 Formulate procedures to identify, measure, monitor and control all risks;
 Assign clear responsibility, authority and reporting relationship;
 Monitor adequacy and effectiveness of the internal control system;
 Review overall effectiveness of the control system of the Bank;
 Recommend/ rectify alternatives in case of any deviation from desired goal.
Risk management Committee
 Organization Structure:
 Members of the committee are nominated by the board of directors from themselves;
 The Risk Management Committee comprises of maximum four members;
 Members are appointed for a 03 years term of office;
 Company secretary of the bank is the secretary of the Risk Management Committee.
As per the Bank Company Act 1991, and BRDP circular No. 11 of 27 October 2013, the Risk
Management Committee has been formed with 04 members which are given below:
.
Sl. Name Status with the Management Committee

No.
01 Mr.A K M Rezaur Rahman Chairman
02 Mr.Kazi Tariqul Islam Member
03 Mr. Md. Enamul Haque Choudhury Member
04 Mr.Md. Shaheb Ali Mridha Member
Figure 10: Risk management Committee

 Role of Risk Management Committee:
The responsibilities of the Risk Management Committee for risk oversight include, amongst
others, the following:
 To develop and foster a risk aware culture within the Bank;
 To review and approve risk management strategies, risk frameworks, policies, risk
tolerance and risk appetite limits;
 To review and assess adequacy of risk management policies and framework in
identifying, measuring, monitoring and controlling risks and the extent to which they
operate effectively;
 To ensure the infrastructure, resources and systems are in place for risk management.
The Staff responsible for implementing risk management systems perform those
duties independently of the financial institution’s risk taking activities;
 To review and approve model risk management and validation framework.
Credit Risk
Credit Risk is the potential that a bank borrower or counterparty fails to meet its obligation in
accordance with agreed terms. Credit Risk Management of JBL is passed through the
following procedures:
 Articulate Lending Guideline
 Credit Risk Grading Process
 Proper Assessment of Credit Proposal
 Precise Lending Process
 Separate Credit Administration Division
 Credit Recovery and Monitoring of Non-Performing Loans.
Market risk
Market risk is defined as the risk of loses in on and off-balance sheet positions arising from
movements in market price. Major market risks include: Interest Rate Risk, Foreign
.
Exchange Risk, Equity Risk, and Commodity Risk. MBL’s strategies to address these risks
are as under:
A. Managing Interest Rate Risk
Interest rate risk is the risk (variability in value) borne by an interest-bearing asset, such as a
loan or a bond, due to variability of interest rates. Bank faces various types of Risks including
Basis Risks, Yield Curve Risk, Re-pricing Risk, Option Risk and Model Risk.
 JBL’s Interest Rate Risk Management Strategies
 Market Trend Analysis
 Interest Rate Sensitivity Analysis
 Gap Analysis
B. Managing Foreign Exchange Risk
Foreign exchange risk or exchange rate risk is a form of financial risk that arises from the
potential change in the exchange rate of one currency in relation to another.
 JBL’s Foreign Exchange Risk Management Strategies
Policies and Manuals with a view to reducing the foreign exchange risk
Treasury division of the Bank manages and controls day-to-day trading activities under the
supervision of ALCO that ensures continuous monitoring of the level of assumed risks. All
the transactions are carried out on behalf of the customers, i.e. JBL’s foreign exchange
trading exposures are principally derived from customer driven transactions, and major risk
arises from movement of price.
C. Equity Price Risk Management
Equity price risk is the risk that one's investments will depreciate because of stock market
dynamics causing one to lose money. Equity price risk may arise from general or specific risk
or for both.
Liquidity Risk
Liquidity Risk is the potential for loss to an institution arising from either its inability to meet
its obligations or to fund increases in assets as they fall due without incurring unacceptable
cost or losses. Liquidity risk is considered a major risk for banks. It arises when the cushion
provided by the liquid assets are not sufficient enough to meet its obligation.
 JBL’s Liquidity Risk Management Strategies
i. Acceptable assets and liabilities mix
ii. Diversified sources and stability of liabilities
iii. Scientific cash flow projections
iv. Various ratios to maintain liquidity and to create limits for liquidity management
.
v. Ratios are used in conjunction with more qualitative information about borrowing
capacity.
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events. It is a very broad concept which focuses on the
risks arising from the people, systems and processes through which a company operates. It
also includes other categories such as fraud risks, legal risks, physical or environmental risks.
JBL’s Board of Directors and Senior Management have established an organizational culture
that places a high priority on effective operational risk management and adherence to sound
operating controls. Senior Management transforms the strategic direction given by the Board
through operational risk management policy.
Asset Liability Committee

Asset Liability Committee (ALCO) is mainly accountable for managing the market risks. The
results of Balance Sheet analysis along with recommendations are placed before ALCO
meeting to aid the decision making process of the Senior Management. In each ALCO
meeting following issues are addressed:
 Review of actions taken in previous ALCO;
 Review of the assets’ and liabilities’ pricings;
 Review of interest rate structure in different economic scenarios;
 Liquidity risk related to the Balance Sheet;
 Economic and market scenario
Advisory Committee
Under Pillar-2 of Basel-II (Supervisory Review Process), all banks are required to design
their own Supervisory Review Process to ensure maintenance of adequate capital to fully
cover all risk exposures. As per Guidelines on Supervisory Review Evaluation Process, the
level of Capital Adequacy will be determined after evaluation and dialogue between
Bangladesh Bank and the Advisory Team.
 Function of Advisory Team:

BB’s Advisory Team will arrange dialogue to evaluate Minimum Capital Requirements
(MCR) against Credit, Market and Operational risks; Risks not fully covered under MCR
(e.g. Residual Risks deriving from risk mitigation techniques, securitization risk, and model
risk); Risks which to be covered under SRP (Credit concentration risk, Country risk, Interest
rate risk in the banking book, Liquidity risk, Settlement risk, Reputation risk, Strategic risk,
.
Other material risks, etc.); Risks deriving from external factors (such as, change in economic
and regulatory environment); Adequate capital against comprehensive risks of the Bank. SRP
Team of the Bank will attend on the dialogue arranged by BB’s SREP Team. BB’s SREP
Team will also evaluate the Bank’s SRP findings. In the SRP findings capital allocation
against each category of risks is to be disclose
SRP Team of the Bank will discuss and allocate capital against above-mentioned Risks. SRP
Team of the Bank will also describe the assessment procedures for these risks and rationale
for selecting any particular method and discuss the assessment techniques used (model based,
scenario analyses, and stress testing) and quantitative results of each risk. SRP Team will
discuss and explain present challenges faced by the Bank to improve the risk management
framework and will develop action plans with suitable timeline to adopt/develop the
sophisticated advanced techniques or assessment and measurement of all material risks.
Interest Committee
With a view to achieve diversification in asset portfolio and generating a healthy revenue (as
income from buy/sale of shares through secondary market), MBL has formed an Investment
Committee, which is primarily responsible to take investment decision in shares.
Responsibilities of Investment Committee
 The Committee will sit for meeting at least once in a week, or as and when necessary
after having consent from the Chair;
 The Committee will take primary decision for investment in shares;
 The Committee will ensure compliance of investment policy while maintaining
portfolio of shares;
 The Member Secretary will prepare a weekly report on status of investment and report
the same to Managing Director & CEO through Chairman;
 The Committee will determine buy range, sale range and loss limit for every share in
the portfolio and Member Secretary will convey the same to the Front Office.
Regulatory Authorities
 Role of Regulatory Bodies
The role of regulatory authorities is very important in respect of corporate governance
practices of Janata BankLimited. The bank is pledge-bound to comply with all the
requirements of regulatory authorities. Their continuous support and cooperation to the bank
are highly valued by the bank’s board and the management.
 Audit by Bangladesh Bank
.
Apart from Bank’s internal audit, Bangladesh Bank also conducts audit and inspection of the
banks. Their reports are extensively reviewed by the bank’s board of directors in a single-
agenda meeting in which officials of the Department of Banking Inspection (DBI) of
Bangladesh Bank also remain present to apprise the Board of their findings and their
implications.
Independent External Auditor
Khan Wahab Shafique Rahman & Co., Chartered Accountants and K. M. Hasan & Co. have
been appointed as the External Auditors of the Bank in the 13th AGM of the Shareholders.
They audited the Financial Statements of the Bank namely, Balance Sheet, Profit and Loss
Account, Cash Flow Statement, Statement of Changes in Equity, Statement of Liquidity
Analysis and put explanatory notes to financial statements. External Auditors were entitled to
enquire from the Bank’s employees such information and explanation as they thought
necessary for the performance of their duties as External Auditors. Bank employees provided
accurate, timely information and explanations as and when required by the External Auditors.
Employees
The employees who are working in this organization take active role in decision making.
They strictly follow the principles of corporate culture. They do not engage themselves in any
sort of sub-culture and counter culture. The banks encourage their individuality and drive
them to exploit their full potential and creativity for the greater good of the bank. It gives
them adequate training to enhance their competence and capability. As a member of the
wining team, they have learned to believe that working together in a team multiplies strength
of individual.
5.3. Compliance With Regulatory Matters:

5.3.1 Compliance with relevant Rules and Regulations:
JBL runs its business activities in full compliance with relevant rules and regulations. While
conducting its operation, the Bank follows strictly Bank Companies Act 1991, The
Companies Act 1994, Central Bank’s Guidelines, Bangladesh Securities and Exchange Rules
1987, Dhaka Stock Exchange and Chittagong Stock Exchange Listing Rules, Bangladesh
Accounting Standards (BAS), Bangladesh Financial Reporting Systems (BFRS), IAS/IFRS
guidelines, SAFA & CAPA guidelines, BIS and UCPDC and other ICC rules.
5.3.2 Environmental Promotion:
JBL concentrates on environment preservation by financing Projects in the field of renewable
energy, organic agriculture across the entire value chain including health food shops and
.
environment technology such as recycling companies and nature conservation projects. JBL
always encourages projects which take care of following points while financing them viz., (a)
sustainable development and use of renewable natural resources (b) protection of human
health, bio-diversity, occupational health and safety, efficient production, delivery and use of
energy (c) pollution prevention and waste minimization
.
Chapter Six
Analysis
Status of Compliance : SEC & Bangladesh
Bank
.
6.1. Status of Compliance Bangladesh Securities and

Exchange Commission (BSEC) Guidelines for Corporate
Governance for the year December 2018
Status of compliance with the conditions imposed by the Commission’s Notification

No . SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012, as amended vide
notification dates 21 July 2013 and 18 august 2013 issued under section 2CC of the
Securities and Exchange Ordinance, 1969:
Condition Title Compliance Status Remarks

No. (Put √ in the (if any)
appropriate column)
Complied Not Stated in
Complied Annual
Bericht
1 Board Of Directors
1.1 The Number of the board members of 
Board’s Size the company shall not be less than 5
(five) and more than 20 (twenty).
I. At least one fifth (1/5) of 
the total number of directors in All board
the company’s board shall be members
independent directors. are
II. For the purpose of this nominated
clause ‘Independent director’ by the
1.2 means a director – Governme
Independent a) Who either does not hold  nt, holding
Directors any share in the company or 01 share
holds less than one percent (1%) face value
shares of the total paid-up shares Tk. 100.
of the company? They are
b) Who is not a sponsor of  treated as
the company and is not Independe
connected with the company’s nt Director.
any sponsor or director or
shareholder who holds one
percent (1%) or more shares of
.
the total paid-up shares of the

company on the basis of family
relationship. His/her family
members also should not hold
above mentioned shares in the
company: provided that spouse,
son, daughter, father, mother,
brother, sister, son-in-law, and
daughter-in-law shall be
considered as family members;
c) Who does not have any 
other relationship, whether
pecuniary or otherwise, with the
company or its
subsidiary/associated companies;
d) Who is not a member, 
director, or officer of any stock
exchange;
e) Who is not a shareholder, 
director or officer of any
member of stock exchange or an
intermediary of the capital
market;
f) Who is not a partner or 
an executive or was not a partner
or an executive during the
preceding 3 (three) years of any
statutory audit firm;
g) Who shall not be an 
independent director in more
than 3 (three) listed companies;
h) Who has not been 
convicted by a court of
component jurisdiction as a
defaulter in payment of any loan
to a bank or a Non-Bank
Financial Institution (NBFI);
i. Who has not been 
convicted for a criminal offence
involving moral turpitude;
.
iii. The independent  Approved

director’s shall be appointed by by the
the board of directors and Governme
approved by the shareholders in nt Order
the Annual General Meeting
(AGM).
iv. The post of independent 
director(s) cannot remain vacant
for more than 90 (ninety) days.
v. The Board shall lay down a code 
of conduct of all Board Members
and annual compliance of the code
to be recorded.
vi. The tenure of office of an 
independent director shall be for
a period of 3 (three) years, which
may be extended for 1 (one)
term only.
i. Independent Director 
shall be a knowledgeable
individual with integrity who is
able to ensure compliance with
financial, regulatory and
corporate laws and can make
meaningful contribution to
1.3 business. Stated in
Qualificatio ii. The person should be a  their CV
n Business Leader / Corporate
of Leader / Bureaucrat / University
Independent Teacher with Economics or
Director Business Studies or Law
(ID) Background / Professionals like
Chartered Accountants, Cost &
Management Accountants, and
Chartered Secretaries. The
independent director must have
at least 12 (twelve) years of
corporate management /
professional experiences.
iii. In special cases the above  No such
.
qualifications may be relaxed case

subject to prior approval of the
Commission.
1.4 The position of the Chairman of the 
Chairman of Board and the Chief Executive Officer
the Board of the companies shall be filled by
and Chief different individuals. The Chairman of
Executive the company shall be elected from
Officer among the directors of the company.
The Board of Directors shall clearly
define respective roles and
responsibilities of the Chairman and the
Chief Executive Officer.
i. Industry outlook and 
possible future developments in
the industry. Stated in
ii. Segment-wise or  Annual
product-wise performance. Report
iii. Risks and concerns. 
iv. A discussion on Cost of 
Goods Sold, Gross Profit Margin
and Net Profit Margin.
v. Discussion on continuity  No such
of any Extra-Ordinary gain or gain or loss
loss.
vi. Basis for related party 
1.5 transactions- a statement of all
The related party transactions should
Directors’ be disclosed in the annual report.
Report to
Shareholder vii. Utilization of proceeds  N/A
s from public issues, rights issues
and / or through any others
instrument.
viii. An explanation if the  N/A
financial results deteriorate after
the company goes for Initial
Public Offering
.
ix. If significant variance 

occurs between Quarterly
Financial Performance and
Annual Financial Statements the
management shall explain about
the variance on their Annual
Report.
x. Remuneration to 
directors including independent
directors.
Stated in
xi. The financial statements 
Annual
prepared by the management of
Report
the issuer company present fairly
its state of affairs, the result of
its operations, cash flows and
changes in equity.
xii. Proper books of account 
of the issuer company have been
maintained.
xiii. Appropriate accounting 
policies have been consistently
applied in preparation of the
financial statements and that the
accounting estimates are based
on reasonable and prudent
judgment.
xiv. International Accounting 
Standards (IAS) / Bangladesh
Accounting Standards (BAS) /
International Financial Reporting
Standards (IFRS) / Bangladesh
Financial Reporting Standards
(BFRS), as applicable in
Bangladesh, have been followed
in preparation of the financial
statements and any departure
there-from has been adequately
disclosed.
xv. The system of internal 
.
control is sound in design and

has been effectively
implemented and monitored.
xvi. There are no significant 
doubts upon the issuer company
’s ability to continue as a going
concern. If the issuer company is
not considered to be a going
concern, the fact along with
reasons thereof should be
disclosed.
xvii. Significant deviations 
from the last year’s operating
results of the issuer company
shall be highlighted and the
reasons thereof should be
explained.
xviii. Key operating and 
financial data of at least
preceding 5 (five) years shall be
summarized.
xix. If the issuer company has 
not declared dividend (cash or
stock) for the year, the reasons
thereof shall be given.
xx. The number of Board  Stated in

meeting held during the year and Attendance
attendance by each director shall Register
be disclosed.
xxi. The pattern of
shareholding shall be reported to
disclose the aggregate number of
shares (along with name wise
details where stated below) held
by:-
a) Parent / Subsidiary / 
Associated Companies and other
related parties (name wise
details);
.
b) Directors, Chief 
Executive Officer, Company
Secretary, Chief Financial
Officer, Head of Internal Audit
and their spouses and minor
children (name wise details);
c) Executives; 
d) Shareholders holding ten 
percent (10%) or more votes’
interest in the company (name
wise details).
xxii. In case of appointment /

re-appointment of a director the
company shall disclose the
following information to the
shareholders:-
a) a brief resume of the 

director;
b) nature of his / her 

expertise in specific functional
areas;
c) Names of companies in  Stated in

which the person also holds the Annual
directorship and the membership Report
of committees of the board.
The company shall appoint a Chief 
Financial Officer (CFO), a Head of
2.1 Internal Audit (Internal Control and
Appointmen Compliance) and a Company Secretary
t (CS). The Board of Directors should
clearly define respective roles,
responsibilities and duties of the CFO,
the Head of Internal Audit and the CS.
The CFO and the Company Secretary 
.
2.2 of the companies shall attend the

Requiremen meetings of the Board of Directors,
t provided that the CFO and / or the
to attend Company Secretary shall not attend
the Board such part of a meeting of the Board of
Meetings Directors which involves consideration
of an agenda item relating to their
personal matters.
i. The company shall have 
an Audit Committee as a
subcommittee of the Board of
Directors.
ii. The Audit Committee 
3. shall assist the Board of
Audit Directors in ensuring that the
Committee financial statements reflect true
and fair view of the state of
affairs of the company and in
ensuring a good monitoring
system within the business.
iii. The Audit Committee 
shall be responsible to the Board Stated in
of Directors. The duties of the their CV
Audit Committee shall be clearly
set forth in writing.
i. The Audit Committee 
shall be composed of at least 3
(three) members.
ii. The Board of Directors  All board

shall appoint members of the members
Audit Committee who shall be are
directors of the company and nominated
shall include at least 1 (one) by the
independent director. Governme
nt, holding
3.1 01 share
Constitution face value
of the Audit Tk. 100.
Committee They are
.
treated as
Independe
nt Director.
iii. All members of the Audit 
Committee should be financially
literate ’ and at least 1 (one) Stated in
member shall have accounting or their CV
related financial management
experience.
iv. When the term of service 

of the Committee members
expires or there is any
circumstance causing any
Committee member to be unable
to hold office until expiration of
the term of service, thus making N/A
the number of the Committee
members to be lower than the
prescribed number of 3 (three)
persons, the Board of Directors
shall appoint the new Committee
member(s) to fill up the vacancy
immediately or not later than 1
(one) month from the date of
vacancy in the Committee to
ensure continuity of the
performance of work of the
Audit Committee.
v. The company secretary 

shall act as the secretary of the
Committee.
vi. The quorum of the Audit 
Committee meeting shall not
constitute without at least 1
(one) independent director.
i. The Board of Directors 
shall select 1 (one) member of
3.2 the Audit Committee to be
.
Chairman of Chairman of the Audit

the Audit Committee, who shall be an
Committee independent director.
ii. Chairman of the Audit  Stated in
Committee shall remain present their
in the Annual General Meeting attendance
(AGM). Register
i. Oversee the financial 
reporting process.
ii. Monitor choice of 
accounting policies and
principles.
iii. Monitor internal Control 
Risk Management process.
3.3 iv. Oversee hiring and 
Role of performance of external auditors.
Audit v. Review along with the 
Committee management, the annual
financial statements before
submission to the Board for
approval.
vi. Review along with the 
management, the quarterly and
half yearly financial statements
before submission to the board
for approval.
vii. Review the adequacy of 
internal audit function.
viii. Review statement of 
significant related party
transactions submitted by the
management.
ix. Review Management 
Letters / Letter of Internal
Control weakness issued by
statutory auditors.
x. When money is raised  N/A
through Initial Public Offering
(IPO) / Repeat Public Offering
(RPO) / Rights Issue the
.
company shall disclose to the

Audit Committee about the uses
/ applications of funds by major
category (capital expenditure,
sales and marketing expenses,
working capital, etc.), on a
quarterly basis, as a part of their
quarterly declaration of financial
results. Further, on an annual
basis, the company shall prepare
a statement of funds utilized for
the purposes other than those
stated in the offer documents /
prospectus.
i. The Audit Committee 
shall report on its activities to the
Board of Directors.
ii. The Audit Committee
shall immediately report to the
3.4.1 Board of Directors on the
Reporting to following findings, if any:-
the Board of a) report on conflicts of 
Directors interests;
b) suspected or presumed  No such
fraud or irregularity or material matter
defect in the internal control arose as
system; stated by
c) suspected infringement  the
of laws, including securities manageme
related laws, rules and nt
regulations;
d) any other matter which 
shall be disclosed to the Board of
Directors immediately.
3.4.2 If the Audit Committee has reported to 
Reporting the Board of Directors about anything
to the which has material impact on the
Authorities financial condition and results of
operation and has discussed with the
Board of Directors and the management
.
that any rectification is necessary and if

the Audit Committee finds that such
rectification has been unreasonably
ignored, the Audit Committee shall
report such finding to the Commission,
upon reporting of such matters to the
Board of Directors for three times or
completion of a period of 6 (six) months
from the date of first reporting to the
Board of Directors, whichever is earlier.
3.5 Report on activities carried out by the 
Reporting to Audit Committee, including any report
the made to the Board of Directors under
Shareholder condition 3.4.1 (ii) above during the
s and year, shall be signed by the Chairman of
General the Audit Committee and disclosed in
Investors the Annual report of the issuer
company.
i. Appraisal or valuation 
4. services of fairness opinions.
External/ ii. Financial information 
Statutory systems design and
Auditors iii.implementation.
Book-keeping or other 
services related to the accounting
records or financial statements.
iv. Broker-dealer services. 
v. Actuarial services. 
vi. Internal audit services. 
vii. Any other service that the 

Audit Committee determines.
.
viii. No partner or employees 

of the external audit firms shall
possess any share of the
company they audit at least
during the tenure of their audit
assignment of that company.
ix. Audit / certification 

services on compliance of
corporate governance as required
under clause (i) of condition No.
7.
i. Provisions relating to the 
composition of the Board of
Directors of the holding
company shall be made
applicable to the composition of
the Board of Directors of the
subsidiary company.
ii. At least 1 (one)  Stated in
independent director on the subsidiary
Board of Directors of the companies
holding company shall be a Annual
director on the Board of Report
5. Directors of the subsidiary
Subsidiary company.
Company iii. The minutes of the Board 
meeting of the subsidiary
company shall be placed for
review at the following Board
meeting of the holding company.
iv. The minutes of the 
respective Board meeting of the
holding company shall state that
they have reviewed the affairs of
the subsidiary company also.
v. The Audit Committee of 
the holding company shall also
review the financial statements,
in particular the investments
made by the subsidiary
.
company.
i. They have reviewed
financial statements for the year
and that to the best of their
knowledge and belief:
a) These statements do not 
6. contain any materially untrue
Duties of statement or omit any material
Chief fact or contain statement that
Executive might be misleading;
Officer b) These statements 
(CEO) and together present a true and fair
Chief view of the company’s affairs
Financial and are in compliance with
Officer existing accounting standards
(CFO) and applicable laws.
ii. There are, to the best of 
knowledge and belief, no
transactions entered into by the
company during the year which
are fraudulent, illegal or
violation of the company’s code
of conduct.
i. The company shall 
obtain a certificate from a
practicing Professional
Accountant / Secretary
7. (Chartered Accountant / Cost &
Reporting Management Accountant /
and Chartered Secretary) regarding
compliance compliance of conditions of
of Corporate Corporate Governance
Governance Guidelines of the Commission
and shall send the same to the
shareholders along with the
Annual Report on a yearly basis.
ii. The directors of the 
company shall state, in
accordance with the Annexure
attached, in the directors’ report
whether the company has
complied with these conditions.
Source: Annual Report 2015 Figure 15: Status of Compliance Bangladesh Securities and Exchange
Commission (BSEC) Guidelines for Corporate Governance for the year December 2015
.
6.2. Status of Compliance Bangladesh Bank Guideline’s For

Corporate Governance
The bank fulfils all of the guidelines of Bangladesh Securities and Exchange Commission
(BSEC) as well as Bangladesh Bank. Now the compliance is given below:
Title Compliance Status

Condition No.
Complied Not
Complied
1. Responsibilities and Authorities of
the board: All of the conditions are
fulfilled by JBL according to the
guideline of Bangladesh Bank.
a) Work-Planning and Strategic Complied
Management: All of the
conditions are fulfilled by
JBL according to the
guideline of Bangladesh
Bank.
b) Lending and Risk Complied
Bank.
c) Internal Control Complied
Bank.
d) Human Resource Complied
Management and
Development: All of the
.

Bank.
e) Financial Management: All Complied
of the conditions are fulfilled
by JBL according to the
Bank.
f) Formation of Supporting Complied
Committee: All of the
Bank.
g) Appointment of CEO: All of Complied
the conditions are fulfilled by
Bank.
2. Responsibilities of Chairman and Complied
Board of Directors: All of the
conditions are fulfilled by JBL
according to the guideline of
Bangladesh Bank.
3. Responsibilities of the Advisor: All Complied
of the conditions are fulfilled by JBL
according to the guideline of
Bangladesh Bank.
4. Responsibilities and Authorities of Complied
the CEO: All of the conditions are
fulfilled by JBL according to the
guideline of Bangladesh Bank.
Source: Annual Report 2017

Figure 16: Status of Compliance Bangladesh Bank Guideline’s For Corporate Governance
.
Chapter Seven
Findings, Recommendation, Conclusion
.
7.1. Findings
 The current situation of corporate governance practice of Janata Bankis good but in
some cases they wouldn’t comply with the some guidelines.
 The bank practices all the guidelines by BB and BESC. Like as, number of board
member, appointment of director, auditor and independent direction etc.
 Through the overall study of the topics I personally get more knowledge about the
theoretical aspects of Corporate Governance.
 The bank complied with all guidelines issued by Bangladesh Bank but it is unable to
comply with all the guidelines issued by Bangladesh Securities and Exchange
Commission (BSEC).
 The non-compliance of corporate governance activities in this bank are as follows:
These 7 guidelines are not complied in the Directors’ Report to shareholders
1. A discussion on Cost of Goods Sold, Gross Profit Margin and Net Profit
Margin.
2. An explanation if the financial results deteriorate after the company goes for
Initial Public Offering.
3. If significant variance occurs between Quarterly Financial Performance and
Annual Financial Statements the management shall explain about the variance
on their Annual Report
4. There are no significant doubts upon the issuer company’s ability to continue
as a going concern. If the issuer company is not considered to be a going
concern, the fact along with reasons thereof should be disclosed.
5. Significant deviations from the last year’s operating results of the issuer
company shall be highlighted and the reasons thereof should be explained.
6. If the issuer company has not declared dividend (cash or stock) for the year, the
reasons thereof shall be given.
7. Parent / Subsidiary / Associated Companies and other related parties (name
wise details);
These 4 guidelines should be regarding External/ Statutory Auditors.
1. The Audit Committee of the holding company shall also review the financial
statements, in particular the investments made by the subsidiary company.
2. The minutes of the Board meeting of the subsidiary company shall be placed
for review at the following Board meeting of the holding company.
3. The minutes of the respective Board meeting of the holding company shall
state that they have reviewed the affairs of the subsidiary company also.
4. Provisions relating to the composition of the Board of Directors of the holding
company shall be made applicable to the composition of the Board of
Directors of the subsidiary company.
.
7.2. Recommendations
 The directors should be reported to shareholders about the financial results deteriorate
after the company goes for Initial Public Offering and if significant variance occurs
between Quarterly Financial Performance.
 JBL should maintain a remuneration committee with other committee.
 The management has to be providing independency to audit committee as the
committee is able to provide a true and fair report on subsidiary company.
 JBL have to follow and implement the rules and regulations according to BSEC
Bangladesh Bank (BB) and company act 1994.
.
7.3. Conclusion
The Janata BankLtd. is one of the banks for the future planning and succession in terms of
achieving “The Vision” within the on-going competitive environment, this report could be
treated as a guideline up to some extent in establishing corporate governance within the bank.
Bank always contributes towards the economic development of a country. JBL has always
played its’ leading role in socio-economic development of our country. Besides its’
traditional function such as deposit mobilization, deployment of fund in trade, commerce,
industry, agriculture, import and export business, outward and inward remittance, also being
a promising pioneer of all the Bangladeshi commercial bank, the JBL has always given lead
from the front.
In this report it can easily understood that the JBL maintains all the OECD principals. It can
comply with the SEC notification, the Company Act 1994. The Bank’s corporate governance
structures which they maintained are complying with the SEC Notifications and also they
follow status of compliance with BRPD (Banking Regulation and Policy Department). Their
activities audit by Bangladesh Bank. Their controlling mechanism is working well and has
further strengthened by the bank day by day.
This study was conducted on the proceeding of the activities carried out by Janata
BankLimited (JBL) concerning the corporate governance. As the study was concentrated
towards the management efficiency and the stakeholder and investors services so it may have
some limitations. In spite of having many challenges, adverse economic conditions and
market pattern during the years, the bank tried to maintain its growth trend through the
indicators like strong management efficiency, proper corporate governance and their timely
services to their clients.
On the basis of convincing reasons, the management of Janata Bank Limited do believe that
in the coming years the bank will try it’s level best to sustain good corporate governance and
maintain rest of the years.
.
References
1. Ahmed, S., Dilli, R. K., (2007). “Service Trade in Developing Asia: A Case Study of the Banking
and Insurance Sectors in Bangladesh” Asia –Pacific Research and Training Network on Trade
Working Paper series, No.38, July 2007.
2. Annual report of Janata Bank Limited (2013-2017).
3. Circulars of Janata Bank Limited.
4. Different types of voucher of Janata Bank Ltd.
5. Official Website of JBL:www.janatabank-bd.com
6. Annual Report of Janata Bank Limited, 2018

7. Mahmud Shabuz and AraJesmin, CORPORATE GOVERNANCE PRACTICES IN
BANGLADESH AN OVERVIEW OF ITS PRESENT SCENARIO IN BANKING. INDUSTRY.
8. www.janatabank.bd.com

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Corporate Governance Practices: A Study on Janata Bank Limited

Department of Accounting & Information Systems, Comilla University. Page | 1

Department of Accounting & Information Systems, Comilla University. Page | 2

1.2. Origin of the Study

1.3. Objectives of the Study

1.3.1. Main objective

Department of Accounting & Information Systems, Comilla University. Page | 3

Research is a systematic method of finding solutions to problems. It is essentially an

Research comprises of defining and redefining problem, formulating hypothesis or suggested

1.5. Rationale of the Study

Department of Accounting & Information Systems, Comilla University. Page | 4

1.6. Scope of the Study

1.7. Limitations of the Study

Department of Accounting & Information Systems, Comilla University. Page | 5

Department of Accounting & Information Systems, Comilla University. Page | 6

2.1 Corporate profile

Name of Company Janata Bank Limited

110, Motijheel C/A Dhaka-1000

Legal Status Public Limited Company

Date of Incorporation 21 May 2007

Date of Commencement of Business 31 May 2007

Authorized Capital Tk. 30,000 Million

Paid up Capital Tk. 19,140 Million

Face value per share Tk. 100 per share

Shareholding Pattern 100% Share owned by the

Tax Identification No. 001-200-2732

Vat Registration No. 9011050160

Chairman Shaikh Md. Wahid-uz-Zaman

CEO & Managing Director Mr. Md. Abdus Salam, FCA

Chief Risk Officer Mr. Md. Abdus Salam Azad FF

Head of Internal Control and Mr. Md. Nazim Uddin (DMD)

Department of Accounting & Information Systems, Comilla University. Page | 7

Company Secretary Mr. Md. Mosaddake-Ul-Alam (GM)

Total Number of Branch 910

Number of Branch 906

Number of Divisional office 11

Number of Area Office 50

Location Abudhabi, Dubai, Al-Ain and Sarjah.

Chief Executive Office Obeid Sayah Al – Mansuri Building

1st Street (Electra Road), Post Box No

Abu Dhabi, United Arab Emirates

Janata Capital and Investment Ltd Dhaka, Bangladesh

Janata Exchange Company srl. Rome & Milan, Italy

Janata Exchange Company, USA New York, United States of America

Relationship Management Application 602

Department of Accounting & Information Systems, Comilla University. Page | 8

Number of Employees 13188

Number of Exchange House 76

Corporate Rating Status A + in the long term

Entity Rating ST-2 in the short term

As govt. owned Bank AAA in the long term

ST-1 in the short term

Telex 675840JBDBJ, 671288 JBHOBJ

Phone P ABX 9560000, 9566020, 9556245-49,

Fax 88-02-9564644, 9560869

Website www.janatabank-bd.com, jb.com.bd

Swift Code JANBBDDH

Source: Annual report 2017