By Muhammad Arif
Corporate governance, at its core, is not merely a mechanism of internal control — it is the constitutional backbone of corporate accountability, transparency, and ethical stewardship. In Pakistan, while the architecture of corporate laws has gradually evolved, the governance framework remains structurally fragmented and conceptually underutilized.
The Companies Act, 2017 ushered in a much-needed modernization, replacing the outdated 1984 Ordinance. It introduced statutory duties for directors and expanded the scope of fiduciary responsibility. Section 208, for instance, mandates that “a director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole.” Similarly, Section 209 underscores the obligation to exercise “care, skill, and diligence” and maintain “independent judgment.” These provisions align with global principles of corporate governance but suffer from weak enforcement and token compliance.
Pakistan’s Listed Companies (Code of Corporate Governance) Regulations, 2019, issued by the SECP, were a step forward in aligning disclosure and oversight practices with international benchmarks. They introduced requirements for board independence, risk management committees, and audit oversight. Yet, these remain applicable only to listed companies, leaving a vast unregulated terrain across unlisted, private, and state-owned enterprises.
The performance of many publicly listed companies — and notably the public-sector commercial entities — reveals a disturbing pattern: concentrated ownership, nominally independent directors, lack of ESG orientation, and boardrooms that function as rubber stamps rather than strategic oversight bodies. Governance failures at such institutions are not a legal accident — they are a policy design failure, exacerbated by a web of structural distortions: regulatory capture, where regulators become subservient to the very entities they are meant to oversee; Aitchisonian capture, where elite bureaucratic or alumni networks wield disproportionate influence over corporate boards; mafia capture, where corporate decisions are manipulated by cartels and vested interests; and the overreach of public sector shareholders, whose undue interference often converts companies into instruments of political patronage rather than professional management.
Moreover, while ESG (Environmental, Social, and Governance) frameworks are globally becoming integral to capital markets, Pakistan remains on the periphery of this transformation. The SECP’s Green Guidelines (2022) and PSX’s voluntary ESG dashboard are promising starts, but without enforceable standards, assurance protocols, and ESG-linked financial disclosures, they risk being reduced to cosmetic add-ons.
Reforming Pakistan’s corporate governance landscape must move beyond checklists. It requires embedding Governance 5.0 thinking — blending legal rigor with digital tools, ethical AI, ESG metrics, and institutional reform. Artificial intelligence, when used responsibly, offers unprecedented opportunities for strengthening governance. Through automated compliance monitoring, predictive analytics for board performance, real-time financial reporting, and AI-based risk scoring of corporate disclosures, regulators like the SECP can vastly improve their supervisory bandwidth and objectivity. AI can flag anomalies in related party transactions, track delays in disclosure filings, and benchmark ESG scores across sectors — enabling data-driven, proactive oversight rather than reactive enforcement.
These technologies can also be integrated into company secretarial tools to ensure timely compliance with board composition, meeting frequency, and committee obligations. For whistleblower protection and stakeholder grievance redressal, AI-powered platforms can offer anonymous, bias-free channels that enhance transparency and reduce retaliation risks. However, the implementation of such systems must be grounded in ethical principles, statutory clarity, and institutional accountability to prevent misuse and reinforce trust.
A comprehensive reset is required: formalization of ESG reporting, expansion of governance codes to private and state-owned enterprises, development of model performance contracts, deployment of intelligent compliance systems, and statutory protection for whistleblowers. Most importantly, regulatory bodies like SECP and SBP must be institutionally empowered — not just in law but in political practice — to uphold governance integrity without fear or favor.
Good governance is not an abstract virtue. It is a pragmatic necessity in a country besieged by financial mismanagement, institutional decay, and eroding public trust. In a time where capital is cautious and public sentiment skeptical, restoring the soul of corporate governance — supported by intelligent systems, independent regulators, and ethical resolve — is not just desirable. It is indispensable.
(The author is an energy law expert, governance reform advocate, and former Member (Gas) at OGRA, human and consumer rights advocate. He can be reached at [email protected]; 0333 5191381)
