Key Points:
1. In pursuance of rule 5 of the Public Sector Companies (Corporate Governance) Rules,
2013 and regulation 10 of the Listed Companies (Code of Corporate Governance)
Regulations, 2019, public listed and public sector companies are required have a code
of conduct for directors, senior management and other employees under respective
laws.
2. In absence of uniformed guidelines, there is a risk that the aforementioned companies
may formulate code of conduct covering different points in their code, while some may
rely on heavily regulated regime while others may not.
3. These guidelines are being issued to facilitate and provide general guidance to the
aforementioned companies in formulating their code of conduct for directors, senior
managers and other employees, by covering some broad areas, emphasizing individual
responsibility and the importance of business-led solution.
4. The code and its accountability measures would be implemented by the aforementioned
companies.
Table of Contents
1. Introduction………………………………………………………………………………………………………………..3
2. Legal Requirements Regarding Code of Conduct………………………………………………………….4
3. General Principles/Areas to be Included in the Company’s Code of Conduct…………………5
i. Encourage Environmental, Social and Corporate Governance (ESG) Practices:……………………5
ii. Understanding of the legal duties: …………………………………………………………………………………..6
iii. Personal Conduct:…………………………………………………………………………………………………………6
iv. Conduct in business dealings:…………………………………………………………………………………………7
v. Integrity and Honesty: …………………………………………………………………………………………………..7
vi. Avoid Conflict of Interest:……………………………………………………………………………………………..7
vii. Ensure Confidentiality:………………………………………………………………………………………………….7
viii. Diversity and Inclusion: ………………………………………………………………………………………………..8
ix. Role Towards Shareholders/Members and other Stakeholders:…………………………………………..8
x. Safeguarding company’s assets:……………………………………………………………………………………..8
xi. Promoting Safe and Healthy Environment:………………………………………………………………………8
xii. External Activities and Public Comments:……………………………………………………………………….8
xiii. Avoid Insider Trading: ………………………………………………………………………………………………….9
4. Non-Compliance, Disclosure & Other Aspects………………………………………………………………9
5. Disclaimer …………………………………………………………………………………………………………………..9
Securities & Exchange Commission of Pakistan
GUIDELINES FOR PREPARING CODE OF CONDUCT BY THE COMPANIES
FOR ITS DIRECTORS, SENIOR MANAGEMENT AND OTHER EMPLOYEES
1. Introduction
Every company needs a governing body to
determine its strategic objectives and
policies, to appoint and control its
operational management, to monitor its
progress towards business objectives;
effectiveness and efficiency of operations
in compliance with policies and to be
accountable for its activities. This
governing body is Board of Directors of
company. And all Directors are responsible
for collective decision making.
The success of a company depends upon the
competence and integrity of its directors.
The directors are duty bound to exhibit in
the performance of their functions the same
degree of care, skill and prudence as
generally expected from an ordinary-men in
exercising his own affairs. Since, directors
have fiduciary role, to act on behalf of the
shareholders of the company, therefore,
they must always act in the best interests of
the company and its stakeholders. The law
demands that the directors, senior managers
and other employees, while exercising their
legal duties, must possess the requisite
knowledge and competencies and exhibit
such conduct as expected from them by the
shareholders and other stakeholders.
In this regard, a well-defined code of
conduct is often viewed as a crucial and
useful mean in defining acceptable
behaviors, promoting company’s culture
and aligning the standards expected from
the directors and senior management with
the company’s vision and values.
These guidelines are being issued to
facilitate and provide guidance to the public
sector and public listed companies in
preparation of their Code of Conduct (the
Code) for directors, senior managers and
other employees. This document will
provide a basis to the companies to
formulate the Code by incorporating these
general/broader areas. The companies may,
however, determine the additional contents
to be incorporated in the Code depending
upon the nature, size and complexity of
their businesses.
Companies which are not required by law
or regulations to develop the code of
conduct for its directors, senior
management and other employees may also
opt to formulate the Code by seeking
guidance from these guidelines.
2. Legal Requirements
Regarding Code of Conduct
The Public Sector Companies (Corporate
Governance) Rules, 2013 (the “PSC
Rules”) and the Listed Companies (Code of
Corporate Governance) Regulations, 2019
(the “CCG Regulations”) require that the
board of such companies develop a formal
code of conduct for its directors, senior
management and other employees to
articulate expected behavior, promote
ethical culture in the company and prevent
conflict of interest in their capacity as
member of the Board and senior
management.
Rule 5(4) of the PSC Rules provides
that the Board shall ensure that
professional standards and
corporate values are in place that
promotes integrity for the Board,
senior management and other
employees in the form of a “Code of
Conduct”. The code of conduct shall
articulate acceptable and
unacceptable behaviors. The Board
shall ensure that appropriate steps
are taken to communicate
throughout the company the code of
conduct it sets together with
supporting policies and procedures,
including posting the same on the
company’s website. The Board shall
also ensure that adequate systems
and controls are in place for the
identification and redressal of
grievances arising from unethical
practices.
Regulation 10(3)(ii) of the CCG
Regulations provides that the Board
of the company shall ensure that a
formal code of conduct is in place
that promotes ethical culture in the
company and prevents conflict of
interest in their capacity as member
of the Board, senior management
and other employees. The Board
shall take appropriate steps to
disseminate code of conduct
throughout the company along with
supporting policies and procedures;
Aforementioned provisions of law provide
that the board of such companies shall take
appropriate steps to disseminate code of
conduct throughout the company along
with supporting policies and procedures.
Additionally, Public Sector Companies are
required to post such code at their website
in terms of rule 5(4) of the PSC Rules,
whereas a listed company may post it on its
website in terms of regulation 35 of the
CCG Regulations.
3. General Principles/Areas to be Included in the Company’s Code of
Conduct
The Companies may consider following areas while formulating their Code and require their
directors, senior management and employees to agree to the following broad principles:
Principles to be covered in the Code
Encourage Environmental, Social and Corporate
Governance (ESG) Practices
✓
Understanding of the Legal Duties ✓
Personal Conduct ✓
Conduct in Business Dealings ✓
Integrity and Honesty ✓
Avoid Conflict of Interest ✓
Ensure Confidentiality ✓
Diversity and Inclusion ✓
Role Towards Shareholders/Members and other
Stakeholders
✓
Safeguarding Company’s Assets ✓
Promoting Safe and Healthy Environment ✓
External Activities and Public Comments ✓
Avoid Insider Trading ✓
i. Encourage Environmental, Social and Corporate Governance (ESG) Practices:
• ESG is an approach of assessing companies on Environmental, Social and Governance
performance factors. Environmental Criteria addresses a company’s operations
impact on environment. Social criteria refer to how a company manages relationships
with and creates value for stakeholders. Governance criteria refers to a company’s
leadership & management’s practices, policies, internal controls and shareholders’
rights.
• Since, the investors are increasingly considering the sustainability factors while
making their investments, thus, the concepts of Environmental, Social and
Governance (“ESG”) are evolving, therefore, the directors, senior managers and
employees of such companies should advocate the best practices and ensure
commitment to strengthen environmental, social and corporate governance areas in
accordance with the global best practices.
• To encourage the management to adopt digitalization to enhance efficiency and to
protect the environment;
• To promote and ensure compliance with ESG policy of the company, if any;
• To encourage philanthropic activities, donations, contributions to charities and other
matters of social welfare, in terms of sustainable practices;
• To encourage the management to publish or disclose regular reports on their ESG
targets, environmental and social impact activities;
• To ensure that the company operates in an environmentally and socially responsible
manner, while having strong governance practices in place;
• To ensure that the company adopts most efficient energy management system,
prevention of energy waste and utilization of natural resources in responsible manner;
• To ensure commitment to prevent the wasteful use of natural resources and minimize
any hazardous impact of the development, production, use and disposal of any of its
products and services on the ecological environment in accordance with the applicable
laws.
ii. Understanding of the Legal Duties:
• Acquire appropriate knowledge of the legal requirements relating to their duties to
perform their obligations diligently and in compliance with the applicable laws,
relevant guidelines and policies of the company and to ensure compliance of
applicable regulatory frameworks;
• Make dedicated efforts to improve competence and skills in their respective roles
through continuing professional education;
• Bring to the notice of the board, any non-compliance or violation of law or policy by
the company, other board members or employees.
iii. Personal Conduct:
• Avoid following actions:
Misconduct, intimidating & insulting behavior, verbal onslaught, accusations,
misogynist behavior, sexual harassment, ignorance of regulatory framework, spate
communication (letters, emails, etc.) without highlighting specific discrepancies,
humiliation, pressurizing tactics, coerciveness, disruptive and distractive measures,
bullying, disruption of conduct of business, unnecessary interference in
management issues, unethically tarnishing image of any person;
• Exhibit high standards of personal conduct, both inside and outside the company.
iv. Conduct in Business Dealings:
• Treat everyone, inside and outside the company, professionally with respect and
equality without taking improper advantage of their position;
• To not involve in such practices like manipulation, misuse of privileged information
and concealment of facts.
v. Integrity and Honesty:
• Act, at all times, with honesty, integrity and independence to protect company’s
properties, reputation and image, and not get into dishonest practices such as bribery
or corruption, etc.;
• Exercise due diligence, objectivity, sound and independent judgement while
performing the duties;
• To not involve in practices with the intention to get any undue advantage either for
himself or his family members.
vi. Avoid Conflict of Interest:
• To not get into any such business or practice that would tend to influence him/her in
a way other than in the best interests of the company;
• To not get into any business transaction or agreement that would result in the conflict
of interest in any manner, other than those in the best interests of the company;
• To not receive gifts and other benefits from the outsiders having pecuniary and other
interest.
vii. Ensure Confidentiality:
• Protect confidential, proprietary and any such information received by virtue of their
position in the company and not disclose such information to anyone, unless the
disclosure is required under any law or authorized by the board of the company;
• To not use or intend to use the confidential and proprietary information for gaining
unfair advantage and personal benefits, unless it becomes public.
viii. Diversity and Inclusion:
• To promote diverse and inclusive board and management composition;
• Provide equal opportunities to all employees for employment in the company
irrespective of their culture, race, gender, caste, and religion;
• Promote a work environment free from discrimination, harassment and intimidations
of any nature.
ix. Role Towards Shareholders/Members and other Stakeholders:
• Treat all shareholders/members and stakeholders of the company in a fair and
respectable way;
• Act in the best interests of the company and fulfill their fiduciary responsibilities qua
the company;
• Understand and consider the interests of all stakeholders in the success of the
organization.
x. Safeguarding Company’s Assets:
• Use company’s assets, property, proprietary information and intellectual rights for
business purposes of the company and not for personal benefits or gains and to make
utmost efforts for the protection and efficient use of the company’s assets.
xi. Promoting Safe and Healthy Environment:
• Give due consideration to the safety and health of all employees and to provide safe,
competitive and healthy working environment.
xii. External Activities and Public Comments:
• To not undertake any external activities during the working hours or, at the expense
of company’s duties and commitments.
xiii. Avoid Insider Trading:
• To not indulge in insider trading on the basis of unpublished price sensitive
information, subject to exceptions given in section 128 of the Securities Act, 2015,
and ensure compliance with all relevant laws and company’s policies, if any, on
prohibition of insider trading.
Additionally, the directors, senior management and other employees of the companies shall
understand and comply with all applicable laws, rules, regulations of any government,
regulatory organization(s), licensing agency(ies), or professional association(s)/body(ies)
governing their professional activities.
4. Non-Compliance, Disclosure & Other Aspects
The companies may decide about the disclosure requirements, procedure and frequency
for signing of the declaration by directors, senior managers and other employees in compliance
to the Code. The companies may provide procedure for dealing with non-compliances of the
Code and provide a clause for waiver or relaxation of any clause of the Code. The companies
may designate a forum for providing clarity on the clauses of the Code, its implementation
thereof and reporting non-compliances and accountability associated with the Code.
5. Disclaimer
These are general guidelines to provide a flavor of how the Code might be and the
companies must refer to other relevant and applicable laws read with applicable policies and
procedures, as applicable.
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