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This publication is prepared with respect to independent directors currently serving on boards of various companies in Pakistan. It mainly focuses on their role, responsibility, diversity, selection, remuneration, representation, and board terms.

Authors: Mohammad Shoaib, CFA; Shahzad Saleem, CFA

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Corporatization is the process of converting new and existing noncorporate entities into a registered and well-structured business form to create entities with sufficient administrative and financial ransparency. The Securities and Exchange Commission of Pakistan (SECP), through its Company Registration Offices, plays an instrumental role in the continuous growth of the corporate sector in Pakistan.

As of July 2022, 172,206 companies have been registered with SECP, of which 551 are listed on the Pakistan Stock Exchange (PSX). This report focuses primarily on listed companies. Most of these companies are family-controlled companies. In family-controlled companies, the shadow of the sponsoring shareholders looms largely over the board. Pakistan has a comprehensive criterion on establishing the independence of any individual director. In 2018, selection of independent directors was mandated exclusively by way of nomination from a data bank maintained by Pakistan Institute of Corporate Governance (PICG). In the case of licensed entities, the aforementioned nominations are notified to SECP for seeking its prior approval.

Gender diversity on boards of directors was introduced in Pakistan through the Listed Companies (Code of Corporate Governance) Regulations, 2017 and it has been carried forward in the Listed Companies (Code of Corporate Governance) Regulations, 2019. Women are making their presence known on the Board of the Companies as independent and executive / nominee directors. For Listed Companies, Asset Management Companies and Deposit taking NBFCs, board member training is encouraged and specific Director Training Programs (DTPs) are approved by the regulator. For public sector companies, an Orientation Course is required by Public Sector Companies (Corporate Governance) Rules, 2013 to be held at least on an annual basis. This is expected to enable directors to better understand the specific context in which a board operates, including its operations and environment.

At present, listed companies, Asset Management Companies and Deposit taking NBFCs are required to have two or one-third of its board members whichever is higher as independent. In the public sector, at least one-third representation by the independent directors is mandatory. SECP has designed a comprehensive set of Codes of Corporate Governance (CCG), including the following:

  • Listed Companies (Code of Corporate Governance) Regulations, 2019
  • Public Sector Companies (Corporate Governance) Rules, 2013
  • Code of Corporate Governance for Insurers, 2016
  • Principles of Corporate Governance for non-listed companies


CFA Society Pakistan

CFA Society Pakistan is the premier professional body for investment professionals locally: the place to connect with CFA Charterholders, grow professionally by sharing ideas and learning opportunities, project yourself in your areas of expertise, stay abreast of new developments in your field, and give back to your profession and to your Institute by sharing your knowledge and experiences.

The Pakistan Credit Rating Agency Limited PACRA

PACRA, established in 1994, is the first and leading Credit Rating Agency of Pakistan. Since inception, PACRA has over 8,000 rating opinions spread across 10 distinct financial and more than 45 corporate sectors. This demonstrates PACRA’s expertise, exceptional command, market leadership, and the confidence reposed in its opinions.

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