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Institute of Chartered Secretaries of Bangladesh (ICSB)

Institute of Chartered Secretaries of Bangladesh (ICSB), established under an Act of Parliament i.e. Chartered Secretaries Act 2010, is the only recognized professional body in Bangladesh to develop, promote and regulate the profession of Chartered / Company Secretaries in Bangladesh. The affairs of the Institute of Chartered Secretaries of Bangladesh (ICSB) are managed by a Council consisting of thirteen elected members and five nominees of the Government. The major contribution of a Chartered Secretary is in the corporate sector. Chartered Secretary is a requisite qualification to become a Company Secretary. Company Secretary is an important professional, aiding the efficient management of the corporate sector. Company Secretary is a Statutory Officer under the Companies Act 1994. According to Bangladesh Securities and Exchange Commission (BSEC) all the listed companies should have a Company Secretary. Company Secretary is the compliance officer of the company, who has to interact, coordinate, integrate and cooperate with various other functional heads in a company.

THE COUNCIL 2013-2016

EDITORIAL BOARD

Subscription Rate

Mohammad Asad Ullah FCS M. Naseemul Hye FCS Md. Monirul Alam FCS Mohammad Bul Hasan FCS Mohammad Sanaullah FCS Itrat Husain FCS N.G. Chakraborty FCS Md. Shahid Farooqui FCS Md. Azizur Rahman FCS Md. Selim Reza FCS M. Nurul Alam FCS Hossain Sadat FCS A.T.M. Tahmiduzzaman ACS Md. Shawkat Ali Waresi Additional Secretary, GoB Md. Ekhlasur Rahman Joint Secretary, GoB Nasreen Begum Additional Secretary, GoB Prof. Md. Helal Uddin Nizami Commissioner, BSEC Bijon Kumar Baishya Registrar, RJSC, GoB Editor Itrat Husain FCS Members Mohammad Sanaullah FCS Md. Shahid Farooqui FCS Hossain Sadat FCS Kazi Ashiqur Rahman FCS For Students : per copy Tk. 100; per year Tk. 350 Others : per copy Tk. 150; per year Tk. 560

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President Senior Vice President Vice President Treasurer Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor Councilor


In this issue The Council 2013-2016

03

Editorial

04

Message from the President

06

Institute News

08

ARTICLES

Costing Strategy by Value Stream Consideration(VSC) - Prof. Feroz I. Faruque DBA, FCS, CPA, FCCE, CEPA (USA)

15

Corporate Business Plan - Itrat Husain FCMA, FCS

19

Corporate Management: An Overview - Mustafa Mohiuddin

22

Sustainable Managementthe new dimension of Modern Management - Asaduzzaman Patwary

25

Human Resource Management Practices: Recent Trends - Hasan Muhommod Sabbir

29

Managing Sales & MarketingLife Line of an Organisation - Riyad S A Husain

32

Strategic Financial Management (SFM) - Razia Sultana Lubna

34

Strategies for Better Time Management - Rahat Mahmud

38

The views and opinions expressed in the articles published in this Journal are those of the writers only

Leadership & Management-Unboss! - Ishrat Jahan Rimi ACS

41

Published by The Institute of Chartered Secretaries of Bangladesh (ICSB)

Development Resources from Bangladesh Capital Market - Masih Malik Chowdhury FCA, FCS

45

Insider Trading – How to Combat this Menace Effectively? - Bipul Kumar Bhowmik FCS

51

Whistleblowing Policy: An effective tool to fight against corruption - Mohammad Khasru Noman ACS

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Knowledge Bank Compiled by Itrat Husain FCMA, FCS

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Notifications

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Office

: National Scout Bhaban (2nd floor) 60 Anjuman Mufidul Islam Road, Kakrail Dhaka-1000, Bangladesh

Phone Fax E-mail

: 880 2 933 4878 & 933 9957 : 880 2 933 9957 : secretary@icsb.edu.bd icsb@icsb.edu.bd : http://www.icsb.edu.bd

Web

Campus : 107 Kakrail (Ground & 1st Floor) Dhaka-1000, Bangladesh Phone

: 880 2 934 9578 & 933 6901


THE COUNCIL 2013-2016

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EDITORIAL this issue...

Achieving Synergy through Effective Management

A

manager is a person who plans, organizes and decides what is to be done on a priority basis and gets the jobs done through others. Management would therefore include all the processes such as planning, organizing, executing, monitoring and controlling of all the activities of an organization. The concept of management is applicable to all organizations, small and large. As business grows it becomes imperative to organize the activities in a formal manner to ensure that synergy is achieved. For this the structure of the departments and the internal and external communication systems must be planned professionally. The role of the various departmental heads must be well defined to avoid overlaps, confusions and conflict. Broadly the areas of management and expertise could be classified as follows:

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Human Resources & Administration Corporate & Legal Affairs Accounting, Finance & Planning Sales, Marketing & Distribution Production Risk Commercial & Logistics MIS & Internal Control

The functional heads must be knowledgeable persons and each of the functions mentioned above would be required to work independently but effectively as a team. The communication among the various functions must be clear to ensure achievement of all the Corporate Objectives. The management function is an ongoing process in all organizations and is carried out consciously or unconsciously. But for it to be effective, it is necessary to work in a professional and coordinated manner. There

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EDITORIAL

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are many management theories but the concepts are not un-surmountable and need the support and commitment of the top management i.e. the Chairperson, CEO and the entire Board of Directors for implementation of good management systems.

team on various aspects of corporate governance so that the organization which they serve can perform effectively with better bottom line. Therefore the Chartered Secretaries have to be equipped with knowledge and experience of Management.

Regular periodic “management meetings”, with the participation of all the departments, will ensure a healthy debate on the operations to ensure that the plans and objectives are achieved with an increase in profitability. Through discussions the plans can be reviewed and amended, if required. The management style should therefore be “participative”.

In each issue of the journal we try to publish articles which may be of interest to both the members and students of ICSB and other external readers and increase their knowledge. We feel that all the readers of the current issue will find most of the articles relevant, most of which are related to “Management Issues”.

Experience is a key factor for good management and organizations should therefore initiate management development programmes and motivate the employees to contribute effectively for the growth of the organization. A proper succession plan must be in place to take over the future responsibilities, hence making future leaders. Many companies are now aware of the benefits of good governance and management systems. Effective management will ensure effective utilization of resources. The Company Secretaries are also playing an effective role in changing the mindset of the top management. They should continue to do so and be proactive.

The journal has been redesigned with a new look from this year which I am sure it will be appreciated by all the readers. Wishing a happy reading to everyone.

Itrat Husain FCMA, FCS Editor

Management By Objectives” or MBO is considered to be an effective tool, where objectives are set for the company and the entire management strives to achieve the goal(s) in a concerted manner. At the end of the year the actual performance is measured against the set objectives and variance analysis is done for necessary corrective measures. Good leadership is just unavoidable to manage businesses effectively. The Chartered Secretaries are the new breed of leaders in Bangladesh who have been playing an important role in advising the management

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Message from the President Preparing to Face Growing Challenges

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ssalamualikum-Wa-Rahmatuallh Wa-Barkatuhu.

I feel proud and privileged to avail this platform as a medium of interaction with my professional colleagues and members of the Institute. Such interactions in repeated intervals always provide me an opportunity to inform the Fellow professionals about the Institutional activities as well as help the members with institutional support for development of professional skills. Let me, at the outset, on behalf of the Council, express deep tribute and regard to one of our Founding Members and Secretary M S Alam Mia’s departed soul and empathy to the grieved family as well as acknowledgement to his pioneering and unparalleled contributions in his life time and sacrificed himself for establishing the Institute and recognition of the Chartered Secretary profession in Bangladesh. Since the present Council took over the ICSB operations, we left no stone unturned to ensure developments in the operations of ICSB. Meanwhile, we have considered and taken important decisions which would add extra-ordinary values to the Institute. Besides, having our new office at National Scout Bhaban and equipping the office with officers and logistic support, we have undertaken some ambitious programmes for uplifting the prestige and image of the Institute. In order to increase the ICSB operational network, the following decisions have been considered:

• Initiative has been taken to purchase a piece of land at Aftabnagar, Dhaka for construction of ICSB Complex. • Discussion held with RAJUK for prompt decision for allotment of Land at Uttara Model Town. • The allocation for ICSB Annual budget from the Ministry of Commerce to be increased from the previous allocation of Tk. 40 (Forty) lac to about Tk. 80 (Eighty) lac.

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• A project proposal worth amount of Tk.40.00 crore for infrastructural development including our own office cum campus with state of the art facilities, has already been submitted to the Ministry of Commerce for recommending to Ministry of Finance by April 2014. • Fourteen new Qualified Associate Members of Chartered Secretaries included. • Board of Trustees Meeting held and Trust Deed and Rules for ICSB Members’ Benevolent Fund already finalized. • National Convention shall be held by August, 2014. Establishment of new Campus at Aftabnagar, Dhaka

As you all are aware that we have been trying hard to get a piece of Land for building our own campus and also negotiating with the Ministry of Works, Govt. of Bangladesh for a long time. Unfortunately, lack of proper persuasions, we are yet to be successful. Recently we have located a land at Aftabnagar, Dhaka with an area of 15 decimal of land mortgaged to Dutch Bangla Bank Ltd. We have decided to purchase the land in the name of ICSB from the owners for construction of our own academic and administrative building on it with all modern facilities and for that purpose we need an amount of Tk. 8 (Eight) Crore as loan from Dutch Bangla Bank Ltd, Dhaka. Since Dutch Bangla Bank Ltd. is the custodian of this mortgaged property, we may purchase the land with loan from the aforesaid Bank. We have approached to the Ministry of Commerce to provide us financial assistance under development Project of the Government. january-march 2014


Message from the President

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Meanwhile, as a persuasion we already met with the new Honourable Works Minister for allotment of a plot at Uttara Model Town, Dhaka for ICSB under government organizational head. New enrolment and Completion of Course

It is my pleasure to share with all of you that the Institute has already completed the admission of January 2014 intake and the number of enrolled students is on the increase. this is an indication of emerging demand of our profession and growing reputation. On the other hand, another achievement is that a total of twenty two students have already completed all taught modules of Final Level of Chartered Secretaries Program successfully and are only step away from being fully qualified Chartered Secretaries. I hope they will soon go for Internship Programmes. CSR AT ICSB

I am also delighted to let inform you that a Corporate Social Responsibility (CSR)event has taken place on International Mothers’ Language Day, 21st February 2014 by organising a Blood Donation Programme in collaboration with Quantum Foundation at the Campus of the Institute. I believe, this CSR move will strengthen our public relation and humanitarian commitment to the people of the society. I congratulate Dhaka Regional Chapter for taking this initiative with Quantum Foundation and I commit to be more involved in CSR activities in future. Annual Picnic

As a part of our commitment to staff welfare, members as well as ICSB Council organised the Annual Picnic with the presence of almost all Fellow Members, Associate Members and Employee of the ICSB which was undoubtedly a great fun and immensely entertaining event as well an opportunity to enhance their mutual harmony and correlation. Such an event is very inevitable in enhancing the fraternity and bondage among all Members and Employees which results in increase of organisnational coherence and collective spirit towards target.

Challenges and Competitiveness

The Global ambience of Corporate Business issues and changing factors expose us to challenges professionally and academically and we are required to be steadfast and firm to deal with these emerging issues in order to keep us competitive and up to the standard in relation to professional standards and nature of global corporate dimensions. With this in mind the current Council is determined and vigilant with sharp awareness to address and cope with all changing issues with appropriate and time befitting course of action to implement the Global standards and effective improvement in our indigenous corporate practices and governance in place. The following thoughts are in consideration in respect to the challenges • Tailor made CPD and Training programs. • Formulating a Guideline of Training and CPD Programs. • Introducing Corporate Governance Award to create awareness in the Corporate Sector of the country. • Publication of all instructions and amendments of BSEC in a compiled form. Conclusion

As you know development is a continuous and life long process and spree of this development is being enriched and equipped with our collective efforts, diligence and professional commitment, I am confident that our positive attitude to the progressive growth of organization, will take us to our desired level in the long run. In order to achieve rebranding of this gradually emerging organisation, relentless endeavors and professional minds are required wholeheartedly and I am sure all of you will work for paving the way to take off towards excellence. Kindest Regards,

New Recruitment and Pay Rise

Some employees in different capacities have been recruited through fair and competitive assessment at the Institute to accelerate the operations of Institute and they have meanwhile joined their positions and new job responsibilities have been allocated to them. january-march 2014

Mohammad Asad Ullah FCS President

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institute News January- March 2014

T

he first Quarter (January– March 2014) of the year was quite significant for the Institute.

MEETING INTERNAL

• Examination Committee, February 12 & March 12, 2014 • Executive Committee, March, 03, 2014 • Education Committee, March 08, 2014

Council Meeting The Council met on March 12, 2014 and the meeting was chaired by the President Mohammad Asad Ullah, FCS. The following major decisions were taken at the Council Meeting. • Result of the Examination for the Session Summer 2013 was adopted • The Budget of the Institute for the Year 2014 was considered

Besides, a number of Sub- Committee Meetings particularly on Corporate Governance Award, CS Regulation and Journal & Publication were held during this quarter. Trustee Board Meeting of Member's of Benevolent Fund were also held.

as well as future programmes and impressed upon him about the justification of the Institute for having its own campus. The Minister was also informed about the application for a plot in Uttara as a statutory body under Ministry of Commerce and requested him to sanction the same in favour of ICSB, free of cost. Honourable Minister later thanked the President of ICSB for the activities of the Institute and recommended the application to Chairman of RAJUK for taking further necessary actions. Annual Picnic 2014 Likewise every Year ICSB organized

MEETING EXTERNAL

• Decision on the acquisition of land for the Institute at Aftabnagar, Dhaka, was finalized • Decision to hold the 5th National Convention in the 1st week of December, 2014 • Decision to take loan from Dutch-Bangla Bank for Construction of Campus on the purchased land • Formed a Committee for formulating policy for conducting training by the Institute

President along with Secretary of ICSB with the Honourable Works Minister

Standing Committee Meeting There were a number of Standing Committee meetings held during this 1st quarter. And, list of meeting are below: • Audit Committee, January 11, 2014 • Research and February 02, 2014

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Development,

Meeting with Honourable Works Minister President of ICSB Mohammad Asad Ullah FCS had a meeting with the Honourable Works Minister, Engineer Mosharaf Hussain, M.P, on February 26, 2014 at his office. The President briefed the Honourable Minister on the present activities of the Institute

the Annual Picnic, at Bornochotta, Ashulia in Dhaka on February 7, 2014. The Former Secretary, Ministry of Commerce and Honorary Fellow Member Suhel Ahmed Chowdhury and the former Secretary, Ministry Of Commerce and Honorary Fellow Member, Feroz Ahmed participated as the Guests of Honour. The President, Council Members, Employees of ICSB

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Secretariat and a good number of Fellow and Associate Members along with their family members were also present on the occasion.

Musical band programme was participated by ICSB family members. The Lunch was delicious. The prize giving ceremony for winners in Sports

Committee for arranging such a wonderful event. Blood Donation Programme The Dhaka Regional Chapter of the Institute organized a Blood Donation Programme with Quantum Foundation, Dhaka on the occasion of International Mother Language day and Amar Ekushey February on Friday, February 21, 2014 at 10:00 AM at the Campus of the Institute at 107 Kakrail (1st floor), Dhaka-1000.

President along with the Guests of Honour at a leisure time at the picnic This occasion brought about an opportunity to rediscover the bondage and interactions among all Members of ICSB family.

and Raffle draw were added attractions. The event of Picnic was so mind blowing that memories are still sweep through our mind.

The ICSB family day out on the countryside with lush green Picnic Spot, hugged by gigantic trees was really enjoyable to all. The location was actually a splendid dissected with natural landscape bereft of urban wrangle and hassle. The spot of picnic was 40 KM away from Dhaka City and 1 hour long travel. The location was breathtakingly beautiful and stunning within a scenic portrait. As soon as the members got there, they felt like that they had gone back to loving nature. There were sport events, amusement and enjoyment shared and enjoyed by all. The day long event was blend of sports for kids, games like Football and Cricket for Members and Sports events for women, Cultural event,

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Suhel Ahmed Choudhury, Former Secretary, Ministry of Commerce and Honorary Fellow Member of ICSB, inaugurated the programme as the Chief Guest. He emphasized on the need and responsibility of the Institutes like ICSB to not only work for professional development, but also for the greater cause of humanity and social service. He expressed his happiness for the initiative taken by ICSB for saving lives of patients at critical stage.

Blood Donation Programme at ICSB The ICSB family is truly thankful to the Picnic organizing Committee specially Md. Monirul Islam FCS, Chairman of Members’ Welfare & Recreation Sub

Among others the President Mohammad Asad Ullah FCS, Senior Vice President M. Naseemul Hye FCS, Vice President Md. Monirul Alam FCS,

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ÂŤ List of the Donors is as follows: Sl. No.

Name of Donor

Membership/Reg. Number

01

Md. Oliullah Khan ACS

A-0300

02

Imrul Ahmed FCS

F-0072

03

Md. Zahirul Islam

CS-1817

04

Chowdhury Mohammad Hanif

05

M. M. Munir Ahmed

CS-3293

06

Tasnima Tarannum Archi

CS-3307

07

Mohammed Enamul Hye FCS

F-0058

08

Krishna Kumar Sarma

CS-2607

09

Md. Saiful Islam

CS-3178

10

Kazi Tahseen Asad

CS-3182

11

Mohammad Monirul Islam ACS

A-0227

12

Md. Faruque Hossain

CS-3207

13

Muhammed Akber Hussain

CS-3109

14

Abdullah Al Mamun

CS-3170

15

Md. Saiful Islam

FL-0060

16

Iqbal Hossain Chowdhury

FL-0080

17

Md. Mazharul Islam

FL-0065

18

Mohammad Asadur Rahman ACS

A-0220

19

Rahat Mahmud

FL-0062

20

Muhammed Saifullah

CS-1217

21

A T M Tahmiduzzaman ACS

A-0205

22

Asadullah Mahmud

CS-1801

23

Khalid Mohammad Sharif ACS

A-0225

24

Md. Saifuddin Ahmed Tusar

CS-2711

25

Md. Maminul Islam

FL-0070

26

Md. Amirul Islam

CS-2067

27

Md. Rashel Siddique Rubel

CS-3240

28

Md. Aminul Huq

CS-2621

29

Selim Ahmed

FL-0061

30

Mohammad Monirul Islam Khan ACS

A-0269

31

Raja Mahmudul Haque ACS

A-0180

32

Md. Shamibur Rahman

DD (A&F), ICSB

33

Md. Enamul Haque

Jr. Officer, ICSB

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Land lord of ICS Campus

institute News

Treasurer Mohammad Bul Hassan FCS and Chairman, Dhaka Regional Chapter Salim Ahmed FCS of the Institute participated in the program and encouraged the Members and Students in their voluntary donation of blood. A large number of Members and Students of the Institute participated in the programme and a total of thirty three donors consists of Fellow Members, Associate Members, Institute shaft land lord and Students donated blood voluntarily on the occasion spontaneously. Internship Report Reviewed by the Education & Examination Committee A Multimedia Presentation for the Qualified Secretaries was held on Saturday, March 8, 2014 at the Training Room of ICSB Campus in compliance with the requirements of Chartered Secretaries course Thirteen Qualified Secretaries presented their Internship Report. Mohammad Asad Ullah FCS the President of ICSB along with Senior Vice President M. Naseemul Hye FCS, Vice President Md. Monirul Alam FCS attended the presentation ceremony. The Chairman of the Education Committee Md. Shahid Farooqui FCS, Mohammad Sanaullah FCS, immediate Past President and Chairman of the Examination Committee, Md. Selim Reza FCS and Hossain Sadat FCS and other Members of the Educational Committee were also present during the presentation session. The Qualified Chartered Secretaries also answered different questions as put forwarded by the expert group comprising of the Members of Educational Committee. Later the President, Senior Vice President, immediate Past President

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An Intern presents his Report and Chairman of the Examination Committee addressed the Qualified Chartered Secretaries and encouraged them to contribute to the respective professional field and the Institute when they become Associate Members of the ICSB. DOA MAHFILL for M. S. Alam Mia A Discussion, Doa and Milad Mahfil was held at the Auditorium of Dhaka

Secretary of ICSB, who passed away on March 19, 2014 (Inna lillahi Wa Inna Ilaihi Rajiun). A special doa was offered for the peace and salvation of the departed soul. The programme was presided over by the President of ICSB, Mohammad Asad Ullah FCS, the discussion and Doa Mahfil was addressed by Past Presidents, Muzaffar Ahmed FCS, A.K.A Muqtadir FCS, Itrat Husain FCS, Immediate Past President,

Vice President, M. Naseemul Hye FCS, and the President, Mohammad Asad Ullah FCS. They discussed on different aspects of late Alam Mia's life and recalled his talent as an outstanding professional as well as his remarkable contributions in shaping ICSB to its present form and structure. Expressing their heartfelt sympathy to the bereaved family, the speakers prayed for the salvation of his departed soul and wished him the best place in Jannatul Ferdous. In his speech the President of the Institute underscored the need of such a person like late M.S Alam Mia in the society and impressed upon all the Members to follow the ideals of late M.S Alam Mia so as to build ICSB as a center of excellence, taking it to a greater height. Later a Milad Mahfil was conducted by Moulana Khondokar Mizanur Rahman followed by Munajat. The Mahfil was also attended by the family members of late M.S Alam Mia. The Doa and Milad Mahfil was attended by Fellow and Associate Members, Qualified Chartered Secretaries and shaft of ICSB. Meeting with successful & failed candidates

President along with Past President & Son of Late M. S. Alam Mia at Doa Mahfil University Alumni Association, Senate Bhaban, Dhaka on Saturday, March 22, 2014 in memory of M. S Alam Mia, a Founder Member and Founder

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Mohammad Sanaullah FCS, Council Members N. G. Chakraborty FCS, and Md. Shahid Farooqui FCS, Vice President Monirul Alam FCS, Senior

The Examination Committee had a meeting with the students who passed the Group 2 Final Examination at ICSB campus on March 24, 2014. The meeting was chaired by Chairman Examination Committee Mohammad Sanaullah, FCS while the Chairman of Education Committee Md. Shahid Farooqui, FCS, Sr. Vice President M. Naseemul Hye, FCS and Treasurer Mohammad Bul Hassan, FCS, were also present. The Committee sat with them in pursuant to decision taken in the last

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ÂŤ Standing Committee meeting held on 12th of March, 2014 and duly approved by 25th Council. In this session, passed students were congratulated and greeted by the Chairman of Examination Committee and Chairman of Education Committee because of their rewarding achievement of this milestone in the theoretical part of the course. Mohammad Sanaullah, FCS, also added qualified students can seek any guidance and consultation from the Council Members in relation to decision making of Internship placement. Sr. Vice President M. Naseemul Hye, FCS and Teasurer, Mohammad Bul Hasan, FCS of the Institute also addressed the students.

institute News

CS Final Qualified Students list SL

Roll

Name

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

F-58 F-59 F-60 F-62 F-64 F-65 F-66 F-67 F-70 F-73 F-96 F-75 F-77 F-81 F-83 F-84 F-85 F-91 F-92 F-93 F-95 F-98

Arif Abdut Towab Ummey Tahera Sultana Muhammad Nurul Islam Prodip Lal Bhowmick Mohammad Asaduzzaman Md. Amirul Islam Mohammad Mostafa Hossain Suman Md. Sahabuddin Mohammad Abu Salam Mohammad Shahidul Islam Shariar Al Mamun Mohammad Jaman Khan Md. Atiqur Rahman Kazi Kamal Hossain Mohammed Harun-Ar- Rashid Md. Muniruzzaman Md.Ismail Hossain Mohammad Kamruzzaman Mahamudhul Hasan Mohammad Mahbubur Rahman A.K.M.Rashidul Hasan Babul Meah

Success Greetings M. Naseemul Hye FCS

Secretary of the Institute, Mustafa Mohiuddin, in his address to the students assuring of every possible support required for securing an Internship Placement.

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Has recently been promoted to the position of Senior Executive Director & Company Secretary of Bashundhara Group. Prior to his elevation he was the Executive Director & Company Secretary in the same group.

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institute news

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Inna Lillahe Wa Inna Ilaihi Rajeun

WE Mourn We are deeply shocked at the sad demise of M. S. Alam Mia FCS, Founder Member and Founder Secretary of the Institute of Chartered Secretaries of Bangladesh(ICSB), who passed away on Wednesday, 19 March, 2014 at 5.00 a.m. (Inna Lillahe Wa Inna Ilaihi Rajeun). He was 82. He played a pioneering role for establishing the Institute and contributed a lot for the development of the Profession of Chartered Secretary in Bangladesh for more than one and half decade. He qualified as a Chartered Secretary from the Chartered Institute of Secretaries and Adminisatrators, U.K. in 1960. He started his career with Ralli Brothers Limited in June, 1950 as an Executive and subsequently worked with: • Hunslet Holdings Limited, Leeds, U.K. as Cost Assistant (1960-61); • Spencers Pakistan Limited as Secretary & Chief Accountant of its Subsidiaries (1961-65); • East Pakistan Industrial Development Corporation(EPIDC) as Manager, Managing Agency Division (1961-65); • Bangladesh Textile Mills Corporation as Secretary, (1972 - 77); • Bangladesh Handloom Board as Member, Finance and Planning, (1977-82) We extend our deepest sympathy and sincerest condolences to the bereaved members of his family and pray to the Almighty Allah to grant him eternal peace and salvation of the departed soul. A discussion and Doa Mahfil was held at the Auditorium of the Senate Bhaban, Dhaka University on Saturday, March 22, 2014 at 4:00 P.M. organized by Institute of Chartered Secretaries of Bangladesh(ICSB) attended by his children, relative and a good number of Members of Institute of Chartered Secretaries of Bangladesh(ICSB).

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article

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Costing Strategy by Value Stream Consideration(VSC) - Prof. Feroz I. Faruque DBA, FCS, CPA, FCCE, CEPA (USA)

I

ntroduction

Value stream mapping is a lean manufacturing or lean enterprise technique used to document, analyze and improve the flow of information or materials required to produce a product or service for a customer. Value stream mapping is typically used in lean, it differs from the process mapping of Six Sigma in four ways: •

It gathers and displays a far broader range of information than a typical process map.

It tends to be at a higher level than many process maps.

It tends to be used at a broader level, i.e. from receiving of raw material to delivery of finished goods.

It tends to be used to identify where to focus future projects, subprojects, and/or kaizen events.

A value stream map takes into account not only the activity of the product, but the management and information systems that support the basic process. This is especially helpful when working to reduce cycle time, because you gain insight into the decision making flow in addition to the process flow. It is actually a lean tool.

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The production material costs are generally calculated from how much material has been purchased for the value stream during the week(period). Every time material is brought into the Making Value Stream plant its cost is assigned to the value Costing Work stream. The total value stream material cost is the sum of everything The value stream cost is typically purchased in the week (period). For calculated weekly, bi-weekly or this material cost to be valid there monthly and it takes account of all the needs to be low raw materials and costs in the value stream. It makes no work-in-process inventories; and distinction between direct costs and these inventories must be under good indirect costs; all the costs within the control. If inventories are low, then the value stream are considered direct. If materials brought in the week(period) will be used quickly and will accurately reflect the material THE VALUE STREAM MANAGER cost of the product IS ACCOUNTABLE FOR manufactured in the INCREASING THE VALUE week(period). The basic idea is to first map your process, then above it map the information flow that enables the process to occur.

CREATED BY THE VALUE STREAM, REMOVING WASTE, AND INCREASING PROFITS FOR HIS/HER VALUE STREAM. there are costs outside of the value stream; we do not include them in our value stream costing. These include all labor costs; both traditionally direct costs and traditionally indirect costs. If the people work in the value stream then they are included irrespective of whether they make the product, move materials, design the product, maintain machines, plan production, make sales, or do the accounting.

Support costs like spare parts and soft tooling are purchased for the value stream (often using a purchase credit card assigned to the value stream so the costs are directly posted to the value stream cost/profit center. The costs of consumables, supplies, and other day-to-day expenses are similarly assigned to the value stream. The only allocation used regularly within value stream costing is a square footage (or square meters) cost for the facility. The reason is we want to motivate the value stream team-members to reduce the amount

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« of space used by the value stream. The square footage cost typically includes the rent or lease cost of the building, utilities, and the maintenance costs for the building. The total facilities costs are divided by the total square footage of the building to get the cost per square foot. The facilities cost assigned to the value stream will be the cost per feet multiplied by the amount of square feet used by the value stream. This square footage will include the production area, stockroom area, and the office space area used by the people working in the value stream. There is no attempt to “fully absorb” the facilities costs; only the square footage used by the value stream is included. Material costs are also collected in summary over the week(period). Once the company’s inventory is low and under control the material costs of the value stream will be the cost of the materials purchased for that value stream. All purchases are assigned to the cost center for that value stream. The same is true for supplies, tooling, and other costs. They are applied simply to the value stream cost center, or they are derived from the Accounts Payable process. A further aspect of the simplicity of value stream costing is the reduction in cost centers. It is no longer necessary to have a huge number of departmental cost centers broken down into all kinds of cost elements. The costs are collected by value stream and each value stream has very few cost centers. The information on the value stream Income Statement is “real”. It comprises what actually happened that week (period or month). The revenue is the real amount of invoices processed for products manufactured

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in that value stream. The labor costs are what we actually spent on labor. Similarly for the material costs and other costs. The elimination of overhead allocations means that the information provided is not complicated by unnecessary application of costs outside the control of the value stream managers. This makes the cost and profit information “real” and understandable to the people working in the value stream and their managers. There are some people in the plant or organization who do not work in the value streams. These are people who do tasks unrelated to the value streams (financial accounting, for example) or they do work that crosses all value streams (ISO-9000 or ISO-14000 support, for example). The costs and expenses associated with these non-value stream tasks are not allocated to the value streams. They are treated as sustaining costs of the business. They are budgeted and controlled, but they are not allocated. There is no need for full absorption costing. The purpose of the value stream costing is to provide relevant, accurate, and understandable cost information to the people managing the value streams. To absorb into the value stream costs that occur outside the value stream does not provide anything helpful for managing or improving the value stream processes. The non-value stream costs are inevitably small because most of the work of the organization will be associated with value streams. These costs will be reported on the plant or company P&L as sustaining costs (or a similar description) and people within these areas will be

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responsible for the elimination of costs and improvement of the processes. Reporting Value Stream Profits The results of this simple approach to cost accounting are used to create a value stream P&L and a value stream performance measurement. Lean companies provide P&L information to the Value Stream Managers. The Value Stream Manager is accountable for increasing the value created by the value stream, removing waste, and increasing profits for his/her value stream. The information is gathered - usually weekly - from the value stream costing. If necessary, the P&L can show an additional breakdown of the information, but it is always best to keep these reports as simple as possible. The report does not take account of the changes in inventory level when calculating the value stream profit. The reason for this is that we want to provide the right motivation for the value stream team. If the value stream reduces inventory by selling more than it makes, the value stream P&L will show a higher profit and a lower average unit cost. Conversely, if inventory is increased this will show bad results in the P&L. Using Cost Information to Manage the Value Stream The purpose of the Scorecard is to provide the Value Stream Manager (and his/her team) a succinct view of the value stream’s performance. The value stream performance measurements are shown in the upper section. A simplified value stream P&L is shown in the lower

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section. And the current capacity usage is shown in the center section. The Scorecard is usually reported weekly and shows several weeks of prior history as well as current week’s results. The right hand column is often used to show the goals the value stream team has set for each of the measurements. These goals do not come from wishful-thinking or by establishing “stretch” objectives. They come from the plans the team has in place for on-going lean improvements. The value stream team (or the continuous improvement teams within the value stream) will have a specific plan for kaizen events and continuous improvement projects to reach these objectives. The Scorecard format is also used to document the expected benefits of major lean improvements. The average cost is sometimes calculated using just the conversion costs. This is done when the material costs vary significantly from one product to the next but the conversion process is more consistent. Occasionally the average cost is calculated for an attribute of the product rather than the full product. The mix of products varies considerably from one week to the next. The average cost is reported per end rather than per unit, because this is the primary driver of the product cost. Product Costing If costs are collected and reported by value stream and the average product cost calculated then we do not know the cost of individual products. The question to ask is why is the product cost needed? Standard costs are typically used for the following reasons: •

Pricing decisions

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Profit margins on product lines and customer orders

Performance measurement of the factory (using efficiency measures, utilization measurement, cost variance, and absorption)

Encourage process improvement through analysis of the product costs and the variances.

Make/buy decisions

Product and rationalization

Inventory valuation

customer

When using value stream costing it is not necessary to know the cost of specific products to make decisions on these issues. Pricing decisions for lean organizations are never made with reference to the cost of the product. Lean organizations focus on the value created for the customer or the market. It is customer value that determines the price. Customer value has no relationship to product cost. Stating that prices are market driven only begs another question; “Are we making a profit on this product if we sell at this price?” Once again it is unhelpful to determine profitability by referencing the product cost. The right approach is to look at the potential order and work out the effect on the value stream profitability. A decision relating to make/buy is again addressed with reference to the profitability of the value stream as a whole, not the individual product. Using a standard cost to determine the make/buy status of an item is very dangerous. The standard cost will almost certainly lead to the wrong decision. If the value stream has the capability of making an item and has capacity to make it, then there is no

(financial) reason for making outside. The cost of doing it in-house is virtually nothing because the cost of the machines, the people, and the facility is already being paid for. Standard costs are not required for valuing inventory providing the inventory levels are low and under control. When lean manufacturing is introduced into a value stream the level of inventory falls substantially. If the inventory level is low then the valuation of the inventory is far less important than when inventory is high. If, for example, a value stream has 3 months of inventory then it is very important to value this inventory in a detailed way like the use of standard costs. If the inventory is less than 5 days then the materiality of the inventory value to the calculation of the company’s profits and financial position is low. When inventory is low and under control there are several methods of valuing inventory. These run from the use of average costs, the use of direct material costs but adjusted for the labor & overhead required to bring the valuation up to full absorption, through to a simple calculation based upon the number of days of inventory and the estimation of a day’s cost-of-sales amount. Lean manufacturing creates low and consistent inventory. This in turn enables very simple approaches to inventory valuation. A standard cost is not required for inventory valuation. Indeed a perpetual inventory quantity for each item is no longer required. Implementing Value Stream Costing For value stream costing to work effectively the following must be in place:

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« •

Reporting needs to be by value stream and not by departments

The people in the company must be assigned to value streams with little or no overlap

Few (or no) shared services departments and few monuments

Production processes must be reasonably under control and low variability.

There must be thorough tracking of “out-of-control” situations and of exceptions like scrap, rework, etc.

Inventory must be reasonably control, relatively low, and consistent

Introducing value stream costing has a maturity path just like any other aspect of Lean Accounting. It is introduced once the company moves into the management of value streams. In the early stages of lean manufacturing, when you are working just on local production cells, there is no need to change the costing system. But once you move to working by value streams, then value stream costing becomes the best way to collect the costs and report the value stream profitability.

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Conclusion Lean organizations manage their business by the value streams. The value streams are where the value is created and the money is made. The value streams are also where the waste & delays can be identified and eliminated. Continuous improvement teams are established by value stream because it is important to make improvements from an understanding of the value and the flow. A team of people is needed within each value stream whose sole focus is to grow the value stream, increase customer value, and make more money. As lean manufacturing matures within the company it becomes increasingly necessary to manage the value streams. Performance measurements are reported by value stream. Value stream managers are appointed to have P&L responsibility for the value stream. Growth and improvement strategies revolve around the value stream. The value stream focus greatly simplifies the management of the organization. The change to value stream management is another part of the maturity path. There is no need to make management changes when the

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lean improvements are restricted to pilot cells. But when lean manufacturing (and other lean initiatives) are widespread in the plant, we begin to manage by value stream. This does not require dismantling the company’s departments; there can be a matrix approach where people work in the value stream but still report to a functional manager. Over time, however, it usually becomes clear that reorganizing the company around the value streams is the best way to run a lean operation. Value stream costing provides excellent performance measurements and provides a P&L statement for each value stream. These value stream P&L’s are combined to provide a plant-wide or company-wide P&L statement. Standard costs can be eliminated in favor of value stream costs because there is no longer a need to use standard costs for such decisions as order profitability, make/buy decisions, or inventory valuation. These decisions are made with reference to the overall profitability of the value stream. » About the Author Fellow Member, ICSB

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CORPORATE BUSINESS PLAN - Itrat Husain FCMA, FCS

D

EFINITION

period of time in the future which takes into account the objectives of an organization and lists the actions to be taken to meet those objectives.

We discuss and plan casually all the time. But those are not systematic or recorded. But when we plan for the future business activities of an organization in a systematic and planned way, taking all the variables into account, we come up with the “Corporate Business Plan”.

A Business Plan is a formal statement of a set of Business Goals, the reasons they are believed attainable and the plan for reaching those goals.

From the above we now have a fairly good idea of what a Corporate Business Plan is.

It is the desired course of actions for a future pre-determined period. Business Plans are decision making tools. A Corporate Business Plan represents all aspects of the Business Planning process declaring “Vision” and “Strategy" alongside sub-plans to cover marketing, finance, operations, supply chain management, human resources as well as a legal plan. A Business Plan is a summary of those disciplinary plans. It encompasses all the activities to be undertaken within a given timeframe considering costs, manpower and all other required resources to achieve the goals and objectives. Therefore we can say that •

A Business Plan is business document prepared for a given

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It includes the resources required, the expected results and the profitability of an organization for the defined period.

“Why do we need a Corporate Business Plan”? What benefits will accrue to the organization by going through the long methodical procedures?

A BUSINESS PLAN IS A FORMAL STATEMENT OF A SET OF BUSINESS GOALS, THE REASONS THEY ARE BELIEVED ATTAINABLE AND THE PLAN FOR REACHING THOSE GOALS.

Let us define the four terms which come up repeatedly. VISION outlines what the organization wants to be or how it wants the world in which it operates to be. It is a long term view and concentrates on the future and is a descriptive picture of a future desired state. For example “We want to be the

leading Company in Bangladesh in the Textile Sector”. MISSION defines the fundamental purpose of an organization clearly describing why it exists and what it does to achieve its vision. It is a statement of a rationale applicable now as well as in the future. For example “We want to produce quality textile clothing in the country and continue to grow at a high rate through ethical means”. STRATEGY includes a combination of the ends (goals) for which the organization is striving and the means (policies) by which it is seeking to get there. A strategy is sometimes called a “Road Map” which is the path to be chosen to move towards the end vision. For example “We will reduce the price by 5% to increase the sales volume and capture a bigger share of the market”. The most important part of implementing the strategy is ensuring that the organization is going in the right direction. STRATEGIC PLANNING is an organization's process of defining its strategy or direction and making decisions on allocating its resources to pursue this strategy. How to develop a Business Plan? We need to consider the following in developing a Business Plan:

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« • • • • • •

• • • • • •

• • • • • • • • •

We need to define the Vision, Mission and the Objectives Profile/management information about the organization. What business are we in Why are we in this business Where are we now Where do we want to be in the short term, medium term and long term Where are we likely to be heading if don’t develop an effective plan How do we close the gap How will we get there When can we get there What will be the costs & benefits of getting there The market information of the product/services and the opportunity for us to grow

include short term and long term budgets .

Details about our competition, which is a big factor Technology Government legislations Economic indicators Human Resources Financing requirements Management Plans Financial Statements SWOT Analysis

OBJECTIVES OF A BUSINESS PLAN

Each of the above will have to be quantified in detail, where possible The framework of a Business Plan will be the outcome of the SWOT Analysis, a widely used tool for Strategic Planning. A Business Plan should

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What is SWOT Analysis? S W O T

= = = =

STRENGTHS WEAKNESS OPPORTUNITIES THREATS

internal internal external external

Since SWOT Analysis is essential external consultants may be engaged to assist the Management if trained manpower is not available within the organization. A careful analysis of SWOT will help the Management to work out the Strategy and Plan effectively

Without a formal Business Plan an organization, whether small, medium or large, will be functioning based on guesswork and luck. But in the modern competitive world it is difficult to grow or even survive in business simply by running the operations based on experience and intuition. Hence the need for a formal Business Plan. With a good plan monitoring progress regularly becomes easier. Good reporting systems can also be

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developed. The formats of a Business Plan may vary from organization to organization; but the basic information contained will be more or less same. Users of the Business Plan • • • •

The Top Management The Departmental Heads Concerned Managers Officers/Executives

Planning is a fundamental element of Management that pre determines what the business organization proposes to accomplish and how this is to be accomplished. There is an old saying “you either fail to plan or plan to fail”. Therefore it is essential to plan.

A Corporate Business Plan is about achieving success and performs the role of getting a business and “the team” organized so that business success can be achieved. Clarity of thinking and clarity of implementation are the hallmarks of a good Corporate Business Plan. IMPORTANCE OF A BUSINESS PLAN A Corporate Business Plan brings to the table commitments from the Board Members, Staff, Stakeholders and produces an action plan which reflects the “Mission Statement”

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A Business Plan is important to • • • • • •

Potential investors Bankers Suppliers Customers A realistic Business Plan is a step by step plan on how to succeed. Good leadership is required for the successful implementation of a Business Plan From the SWOT Analysis the business can consolidated. It is a powerful technique.

Look outside the business (completion and environment) to tackle the THREATS • • •

• • •

Count your STRENGTHS • • • • •

What advantages does your company have What do you do better than the others What unique or lowest-cost resources do you have access to What do people in the market see as your strength What factors mean that you get the sales

Determine the WEAKNESSES and eliminate it. It cannot be handed over to others • • • •

What can you improve What should you avoid What are the people in the market likely to see as your weakness What factors lose your sales

Extend yourself and grab the OPPORTUNITIES • • • • •

What are the good opportunities facing you What are the interesting trends you are aware of Changes in technology Change in government policies Changes in social patterns/habits, population profiles, lifestyle changes, etc. Local events

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What obstacles do you face What is your competition doing that you should be worried about What are the changes in specification of products and services Is changing technology threatening your position Do you have bad debt or cash flow problems Could your weakness seriously threaten your business

Monitoring progress • •

Assists in Planning for the future • • • • •

A sound Business Plan contains the information needed for effective operation and management of the organization. It explains what is possible for the business, how it will be done and why it will be successful.

A Business Plan is a focusing device. It helps the entrepreneur think long term. When preparing a Business plan, it is important to project into the future. Having a road map helps the Management focused.

It functions as a prospectus for potential investors.

It anticipates capital requirements and predicts cash flow to reassure the stakeholders

It can also play a part in attracting reliable suppliers of goods and services

A good Business Plan should also include its CSR programme i.e. its responsibility towards the business environment and society in which it operates. This will have a lot of impact on the reputation of the company.

Chances of success of an organization are higher if there is a good Corporate Business Plan in place. It is important to have a Corporate Business Plan for all organizations especially new ventures so that the queries and concerns of the stakeholders are answered. It will help: • • • • • •

To sell the business ideas To obtain finance for the operations Obtain funds for investments To arrange and secure strategic alliances To attract key employees To motivate and focus the Management

Review of performance SWOT Analysis Funding Tax issues Product/Services diversification

Acts as a guide

After the detailed SWOT Analysis a lot of questions will be answered and the business leader will be in a position to plan and organize better to take the organization forward. Resource utilization will improve and employees may need to trained further.

Short term/long term Regular checking, comparison and feed back

It serves the following purposes Communication with • Potential investors/financiers • Management • Stakeholders

» About the Author • Council Member, ICSB • Past President, ICSB

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Corporate Management: An Overview - Mustafa Mohiuddin

C

orporate Management

The process of leading, administrating and directing a company is termed as corporate management. Business tasks often performed by corporate management might include strategic planning as well as managing company resources and its application toward attaining the company's objectives. It is the role of corporate management to conduct the day-to-day operations of an organization in a way that is consistent with the strategic plans, business plans and budgets approved by the authority. Traditional corporate management is developing as markets become more complex and new regulatory requirements are introduced. Today's corporate management involves not only planning and control mechanisms but additionally has to generate added value for the business and support managers in strategic and operational decisions. Increasing the effectiveness and efficiency of corporate management is therefore our top priority when we advise businesses. Features of effective corporate management Effective and efficient corporate management is characterized by the following features:

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The Board acts as an internal business advisor for the management and ensures that strategic and operational issues are transparent at all times so that appropriate recommendations for action can be developed. Governance, control and risk management processes are actively used to identify current and future risks.

Corporate Management Hierarchy Before discussing about the corporate management hierarchy that is prevalent in most of the organizations, let us talk a bit about the importance of a definite hierarchy in an organization. An organizational hierarchy is developed for the benefit of both the employees and the employer.

THE BOARD ACTS AS AN INTERNAL BUSINESS ADVISOR FOR THE MANAGEMENT AND ENSURES THAT STRATEGIC AND OPERATIONAL ISSUES ARE TRANSPARENT AT ALL TIMES SO THAT APPROPRIATE RECOMMENDATIONS FOR ACTION CAN BE DEVELOPED. •

Reports present a transparent picture of how the business is developing.

The Corporate processes identified include • • • • • • • • • •

Quality Management Risk Management Communication Management Performance Management Human resource Management Configuration Management Procurement Management Requirement Management IT Management Portfolio Management

An organization is made up of different departments and a proper coordination between the departments is crucial for the overall success. A hierarchy directly or indirectly helps in maintaining the coordination between the different departments through the proper flow of information.

The hierarchy also provides a clear path for the employees in order to excel in their respective field, which ultimately leads to the productivity of the organization. Through an efficiently managed hierarchy, it becomes very easy to communicate the messages of the employees to the Board of Directors and in this way sustainable development of the organizations could be possible. Board of Directors The Board of Directors holds the highest position in the corporate management hierarchy. The board manages the overall operations of the january-march 2014


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Board of Directors

they set realistic goals related to each department. They make business presentations from time to time so as to communicate with the Chief Executive Officers.

Chief Executive Officer

Managers

Chief Operating Officer

The Managers can also be referred to as team leaders. They lead the team of the executives in the department and oversee the day to day affairs to ensure that all the work is carried out effectively.

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General Managers

Executives Executives report to the managers and are responsible for the day to work communicating with people both internally and externally.

Managers

Core Skills in Management and Supervision

Executives

• organization. All the members of the board attend the committee meetings at regular intervals of time, provide their views in the decision making process of the board, analyze the various monthly reports and establish the job roles for the responsible officers and employees of the organization. Chief Executive Officer The Chief Executive Officer (CEO) performs various key tasks for the organization. S/he develops various strategic plans in conjunction with his colleagues, so as to implement the organizational decisions as set forth by the board of directors. The officers ensure that all the activities and operations performed by the

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organization are in accordance with the terms and conditions mentioned by the shareholders. • Chief Operating Officer The Chief Operating Officer (COO) assists the CEO in various activities. S/he evaluates the long term and short term goals of the organization and participates in the various quality improvement projects of the organization. S/he undertakes the various projects as delegated by the Chief Executive Officer. General Managers The General Managers oversee the work of specific functional departments of the organization and

• • • • •

Integrity is perhaps the most valued and respected quality of leadership and one of the most important management skills you need to attain. Problem Solving and Decision Making Planning Effective Delegation Basics of Internal Communications Meeting Management Managing Yourself

Difference between Management and Leadership Very often people make mistakes on the issue of management and leadership. •

People use the terms “management” and “leadership”

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Leadership is entirely different. It is associated with taking an organization into the future, finding opportunities that are coming at it faster and faster and successfully exploiting those opportunities. Leadership is about vision, about people buying in, about empowerment and, most of all, about producing useful change. Leadership is not about attributes, it’s about behavior. And in an ever-faster-moving world, leadership is increasingly needed from more and more people, no matter where they are in a hierarchy. The notion that a few extraordinary people at the top can provide all the leadership needed today is ridiculous and it is a recipe for failure.

interchangeably. This shows that they don’t see the crucial difference between the two and the vital functions that each role plays. •

People use the term “leadership” to refer to the people at the very top of hierarchies. They then call the people in the layers below them in the organization “management.” And then all the rest are workers, specialists, and individual contributors. This is also a mistake and very misleading.

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In fact, management is a set of well-known processes, like planning, budgeting, structuring jobs, staffing jobs, measuring performance and problem-solving, which help an organization to predictably do what it knows how to do well. Management helps you to produce products and services as you have promised, of consistent quality, on budget, day after day, week after week. In organizations of any size and complexity, this is an enormously difficult task.

Some people still argue that management should be replaced with leadership. This is obviously not so: they serve different, yet essential, functions. Both management and leadership are very essential for the success of any venture or business. Both are required to make the complex organizations reliable and efficient. Ironically there are very few organizations today that have sufficient leadership. » About the Author Secretary, ICSB

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Sustainable Managementthe new dimension of Modern Management - Asaduzzaman Patwary

A

s pace of multilateral and pressures, and simple common sense multidirectional Globalisation about the well-being of Earth as a trade progresses along with shared home are all rapidly increasing emerging manifold challenges and and calling for you and your severe global warming. Sustainability organization to operate with has become a big question to sustainable practices. irrespective of all business organisations including non-profit and To be a sustainable organization profit public business organisations. requires that the “Triple Bottom Line” Sustainability is being able to endure (TBL/3BL) or “People-Planet-Profit/ and survive in an environment into the Prosperity” (PPP) approach of and future. In terms of business, sustainability–interlinking the economic, sustainability management is about integrating incorporating social, economic and environmental, and social dimensions environmental factors into your of sustainable development – be put business decisions. It involves placing into operational practice. Through an emphasis on future, long term goals for your business SUSTAINABLE MANAGEMENT rather than focusing on short INCLUDES CONCEPTS SUCH AS term profits.

CORPORATE SOCIAL

Being a sustainable business RESPONSIBILITY AND doesn't mean you need to BUSINESS ETHICS. sacrifice your bottom line. In the long term, sustainable businesses prove to be more sustainability education, you will learn profitable as they adapt and grow with how to think, create, and plan for the changing market. It can provide sustainable development, to then you with a competitive advantage and become a member of that still allow you to differentiate your relatively new and now fast-growing cohort of global citizens who are business from the competition. envisioning and building the Global transition is actively underway sustainable future in which humans toward sustainability and sustainable will live. development in the corporate, There are many advantages that governmental, and NGO (voluntary, result from incorporating social, third, or civil society) sectors. Public economic and environmental factors expectations, market and political into the decision making process in

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your business. It can help you to identify and avoid future costs associated with unsustainable business practices, such as dumping industrial waste into the environment. It can also help you to plan for changes in consumer expectations and allow you to capitalise on emerging markets and industries. Sustainable management includes concepts such as corporate social responsibility and business ethics. A socially responsible business is one that aims to reduce its negative impact on society and increase its positive influence. Business ethics are especially important as failing to adhere to them can have a catastrophic impact on the viability of a business. Currently, the focus of sustainability management has been placed on the importance of environmental sustainability. Environmental sustainability is an increasingly important aspect of modern business management, as market pressure from regulators and consumers holds organisations accountable for their actions. Responsible businesses are congratulated and improve their image as leaders in the field. Developing your understanding of sustainability and applying it to the

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ÂŤ way you operate your small business will help you to remain successful into the future.

environmental impact caused by unsustainable business practices and international trade.

As with most areas of modern business management, Globalisation has had an impact on business sustainability. The level of competition in the world market has increased and organisations have been compelled to improve their levels of efficiency and innovation. Globalisation has increased the level at which organisations rely on each other to deliver products and services to the market. Improved technology, communications and distribution channels have changed the number of participants and physical distances between partners in the supply chain. This means that the sustainability of any single organisation can now have an impact on the sustainability of the other participants in the supply chain.

It is inevitable to consider that many issues can significantly impact the sustainability of your business show disregard to international and state boundaries. Global warming, emissions and pollution, inflation, exchange rates, unemployment, politics, conflict and healthcare issues occurring anywhere in the world can cause problems for the sustainability of your business

Business sustainability is closely linked to economic stability and market growth. If one of your buyers or suppliers found themselves in difficult economic conditions, it could have an impact on your business. This is even more apparent as globalisation links businesses that operate under totally different circumstances in different countries. Contrastingly, growth in certain global markets can increase your options and provide new business opportunities. One of the most pressing issues directly linked to Globalisation is environmental sustainability. As international trade increases, so does the number of industrialised nations and consequently, the amount of pollution. As new industries emerge and thrive in the developing and LDCs world, they add to the negative

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Corporate governance is the system by which organisations are directed and managed. It influences how business objectives are set and achieved, how risk is monitored and assessed and how performance is optimized sustainably. Corporate governance is considered to be a crucial hub to support and manage a sustainable business. There are a number of examples of where poor corporate governance has resulted in catastrophic implications for an organisation. In Australia, one of the better known cases is the collapse of the ‘HIH Insurance' company and BP in 2010 in Mexico Gulf oil leakage poor decision making processes and a lack of accountability eventually lead to the disaster of the business. This particular case is about a large corporation, however, similar principles can be applied to small businesses. Accountability is one of the most important parts of corporate governance. Accountability is concerned with making people responsible for the actions and decisions that they make in the course

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of business. By making people accountable for their actions, you encourage them to act in a way that results in the best possible outcome for the business' stakeholders (shareholders, the organisation itself, employees, suppliers, customers, etc.). Transparency is another key part of corporate governance. Management in any organisation needs to be open about their decision making processes and be able to justify why they are taking certain actions. This allows more people the opportunity to critically assess the decisions and raise any objections or issues before they are finalised. Financial sustainability is achieved when a business is able to deliver products and services to the market at a price that covers their expenses and generates a profit. In financially sustainable businesses, long term profitability takes priority over any short term gains. To operate a financially sustainable business, you need to develop long term goals that outline where you want your business to stand financially in the future. The profit each organization desires to make, level of debt and cash flow requirements all need to be taken into consideration. Organisations should develop plans that will help to arrive at this position within a specified time frame. When making decisions that will affect the financial situation of your business, Business focus should be on achieving your long term goals. Avoid making decisions that will give you a short term financial gain but have a

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ÂŤ

negative impact on your ability to achieve your long term goals. Maintaining your cash flow requirements is another crucial part of operating a financially sustainable business. Management needs to ensure that you have enough cash coming into the business to cover your outgoing expenses. Increasing the sustainability of your operations involves improving efficiency to help reduce costs, utilise available capacity and achieve business objectives. Efficiently using your resources means that you are getting as much positive return from them as possible. It enables to offer lower prices to consumers while maintaining your profit margins, providing you with a sustainable source of revenue. Management need to structure their businesses so that they utilise the skills, knowledge and experience of your employees to their maximum potential. Recruiting the right people for the right jobs and providing them with the necessary support and responsibility to work efficiently is important to the long term sustainability of your business. Effective management of your equipment and infrastructure is vital to the long term sustainability of your organisation. You need to ensure that your equipment and premises are well maintained to increase their useful working life, capability and operational capacity. While maintenance can be expensive in the short term, it will pay off over the life of the asset. Remember, sustainability is all about considering the long term benefits of your actions over any short term cost savings.

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Environmental sustainability is another important part of operations management in modern business. The public expects that businesses operate in an environmentally responsible way and governments are increasingly implementing policies that force businesses into complying with sustainable practices. Any business that continues to operate without considering and trying to reduce its environmental impact will struggle to remain sustainable in the long term. Use of innovation to improve the sustainability of your business is essential. Innovation is a process that involves coming up with new ideas, products and solutions that meet the needs of the market. It can also be used as an internal business process to improve you systems and processes. Innovation can help you to remain up to date and competitive in the marketplace. Most products and services have a useful lifecycle, after which they become superseded, irrelevant or are made redundant by new products and services. Without innovation, a

business will only survive as long as the products and services it offers are still valued in the market. We require to generate new ideas and solutions to problems to ensure that your business doesn't get left behind as the market advances. For a business to remain sustainable, it needs to be able to compete with other businesses for the opportunity to sell to consumers. Businesses that offer innovative products and services are able to differentiate themselves from the competition and attract or maintain a share of the market. Sustainable market share is crucial to the long term viability of your business. Innovation can also lead to new opportunities in industries that have potential for strong future growth. For instance, the renewable energy sector, a few years ago, there was very little money invested in this industry and few opportunities to generate a profit, however, with the increased attention now placed on environmental sustainability, it is a viable option that many companies are capitalising on.

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ÂŤ The emergence of this industry has been driven by greater awareness about the environment and by innovation. The earning potential for an innovative product that meets the energy needs of the market in a sustainable way is significant, as the generation of energy is a necessity in society. In deed seventy percent of CEOs of TNCs & MNCs urgently feel the transition of current business into Sustainable Business Management. Sustainable Management perspective in Bangladesh

variability and its disarrayed actions. In industry, local and international Manufacturers come across challenges of renovation, reform and restructure of business in order to minimizing harms to environment and embed interest of environment within the business. Better to be late than never as many of the business organisations realized this pressing need and began working in the same direction as Bangladesh likewise other countries are at alarming and vulnerable state in regards to environmental changes threat.

In the wake of Globalisation, almost all Business organisations are gradually feeling to comply with change factors sprouting from environmental

Off late, all stakeholders of environment are putting relentless pressure on both business owners and Government to promulgate and

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implement realistic regulations and initiatives which would result in balance of safety of environment and creation of environmentally adaptable and sustainable mode of business in long run. However, this balance has not fully implemented in Bangladesh but regardless of all stakeholders, pressure group and interests communities, they all are fully committed to this timely and worthwhile movement across the globe in the corporate Business Management culture and sustainable growth and development of business in the line with Global spree. Âť About the Author Deputy Secretary, ICSB

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HUMAN RESOURCE MANAGEMENT PRACTICES: RECENT TRENDS - Hasan Muhommod Sabbir

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ristotle told us that ‘the whole is more than the sum of its parts’, this is certainly true when it comes to having all managers fully understanding the organization’s documented Business Plan and ensuring the alignment of management thinking… simply the process of ensuring that all managers are working and driving the organization in the same direction. Basically, Human Resource Management is the management of the employees of an organization. Simply speaking, it is putting right people to the right task thereby making maximum use of the employees' talent and abilities. Human resource management is responsible for how people are treated in an organization. They deal with: • • • •

Bringing people together in an organization Helping them perform their work Compensating them for their work Solving problems that arise

OBJECTIVES Human Resource Management has the following major objectives: •

Effective utilization of human resources

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Desirable working relationships among all members of the organization Maximum individual development

These are four major functional areas in human resource management. These are:

• • • • • • • •

Orientation Training and Development Performance Appraisal Career Planning Compensation Benefits Labour Relations Personnel records

RECENT TRENDS • • • •

Planning Staffing Employee development Employee maintenance

These four areas and their related functions share the common

Nobel Prize-winning economist Gary S. Becker, who coined the term “Human Capital,” says that “the basic resource in any company is the people. The most successful companies will be those that manage human capital in the most effective and efficient manner.”

“THE HIGHEST REWARD FOR WORK FOR A PERSON’S TOIL IS NOT WHAT THEY GET FOR IT BUT WHAT THEY BECOME BY IT” - JOHN RUSKIN objective of an adequate number of competent employees with the skills, abilities, knowledge, and experience needed for further organizational goals. Although each human resource function can be assigned to one of the four areas of personnel responsibility, some functions serve a variety of purposes. A list of usual human resource functions are given below:

The present day economy has been titled as “Knowledge Economy”. In such an economy, it is people who make all the difference. In political economy capital or market was important. Talent occupies centre stage in the Indian workplace. In view of this, managing and retaining manpower is becoming crucial to an organization’s success. To achieve this, companies across sectors are focusing on some of the more critical HR practices. Some of the trends that have been noticed are: Leadership development

• • •

Human Resource Planning Job Analysis Staffing

Creating a pipeline of leadership talent is key to a business’ future growth. It is

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« imperative for the top level of an organization to make leadership talent management a priority, and put its money into long-term plans, as opposed to short-term ones. If companies are worried about their talent pipeline, they have to develop their people. Work-life balance No company or employee has found the Holy Grail of balancing work and life, but that is a work in progress. However, multinationals, information technology (IT) and IT enabled

companies should see the work-life balance as a business proposition since progressive companies carry business forward with employees and families. Inclusion and diversity Companies are investing both time and resources in ensuring that all age groups are comfortable working together. For Example, organizations in India have also been focusing on making workplaces more representative. area of focus.

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offering yoga classes and health camps and have doctors on campus. Right skill development Developing right skills, or matching jobs with a particular level of training rather than hiring over skilled workers, is gaining currency. Companies use this strategy to tide over a manpower supply crunch and to broaden their talent base. Apart from IT and ITeS firms, organizations in the banking and financial services sector, too, have been increasingly hiring graduates and training them. Managing “solid citizens” Organizations which neglect their solid citizens are doing this at their own peril, say experts. Unlike star performers who are potential leaders, and therefore more likely to move out of an organization faster, this group provides stability and bench strength to an organization. Experts say companies need to take a fresh look at solid citizens and invest time and resources in managing and developing this group. Instant rewards

services (ITeS) companies have been able to promote the balance between career, family and leisure-time better. Other sectors have also been increasingly promoting a work-life balance. Interestingly, most companies in India use benefits such as flexible timings, telecommuting, crèche facilities and concierge services as an attraction and retention strategy. Experts say

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Health and wellness The work culture at globalized workplaces involves long working hours, frequent travel, multitasking and tight deadlines - and all this often leaves employees mentally and physically stressed. Companies have begun to realize that healthy employees contribute to higher efficiency and productivity. Apart from medical benefits, companies are also

Recognizing and rewarding performers is one of the most effective tools to attract and retain the right talent. Companies in India are looking at rewards systems more seriously, and are adopting total rewards practices that include compensation in both cash and kind. Measuring human capital Evaluation of performance plays a key role, not just in rewarding an individual employee, but also in setting

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performance benchmarks. And hence, the need for a fair and transparent performance management system. A strong performance analysis helps make human resources both efficient and effective. Managing aspirations As aspirations of organizations grow, so do those of employees. And, with the changing lifestyles and profiles of the workforce, personal and professional aspirations of employees are not just varied, but are increasingly on the rise. Experts say people as well as organizations have aspirations, and when the two get aligned, achieving business goals becomes easier. Companies should be clear about goals of individuals as well as of the organization, and the role each needs to play. The firm should also communicate the goals, and have robust and reliable processes to execute them. 360 degrees feedback Finally, recognizing the need to make performance appraisal systems more effective, an increasing number of companies are using the 360 degrees or multi-rater feedback process. Unlike the traditional appraisal system, which gives unidimensional feedback, this one allows an employee

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to give feedback to her reporting manager, peers, direct reports and others. While most companies started using this system as a means for performance appraisal, most of them now use the 360 degrees feedback system to identify the learning and development needs of employees. Since companies are finally valuing people and their softer skills, there arises a question whether that does makes it easier to hire good people or not. The answer is no. In today’s business climate, attracting and retaining the best employees is very difficult. The reason is a combination of the change in business practices and the shift in employee attitudes. The business landscape has changed dramatically in the past decade as a result of many factors from the feverish hiring boom of the 90s to the economic slowdown in the later part of the last decade. During this same period of time, employee attitudes have changed dramatically. Exposure to widespread layoffs and corporate scandals has led to an erosion of company loyalty and reevaluation of career and life priorities by many employees. So now we have companies looking to acquire the best talent and a growing workforce of talented individuals who

are no longer attracted by compensation alone, but who require and value intangibles as well. The bottom line is this. In order to achieve professional growth and success in the next period of increased talent acquisition, technology professionals are going to have to step out of their comfort zone and develop the holistic, relationship-focused business skills that companies are requiring. And by the same token, companies are going to have to take a more strategic and supportive approach to recruiting and retention if they want to find and keep the new breed of evolving talent. We may therefore conclude that any organization, without a proper setup for Human Resource Management is bound to suffer from serious problems while managing its regular activities. For this reason, today, companies must put a lot of effort and energy into setting up a strong and effective Human Resource Management. Âť About the Author IT Officer, ICSB

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MANAGING SALES & MARKETING - LIFE LINE OF AN ORGANISATION - Riyad S A Husain

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o what exactly is sale?

A sale is the act of transferring ownership of a product or service in return for money. It is the beginning of an engagement between customer and vendor. A sale can take place through -

Stores & Showrooms Agents Travelling Salesmen Business to Business eCommerce Website or other Digital Platforms Mail Order

Marketing is much wider than sales. Broadly speaking,sales is a sub set of marketing. Effective marketing strategies will ultimately lead to increase in sales and therefore increase in revenue. Sales is converting an inquiry or lead into a “contract”. It starts with creating “awareness”,which leads to “desire to buy”, which in turn is converted into a “need”, which finally leads to the ultimate sale. Thus we can say that Sales is the task of selling what we have, while marketing involves those activities which will assist in improving the sales situation. Marketing Management encompasses all those managerial tasks which are

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required to achieve effective sales and targets with reference to the Marketing Mix, Marketing Strategies, Product Life Cycle, Branding, Market Research, Segmentation, Distribution, etc. in both short and long term. The traditional marketing mix includes the 4 P’s: Product, Price, Promotion, Place. In recent times, some say People is the 5th P!

they want and how much they are willing to spend. Advertising is the promotion of a service or product. It features a strong call to action and promotes the benefits of that being advertised. Branding is an integral part of Advertising & Promotion.

Marketing strategies must be reviewed constantly and the For effective management, the plans management team must think “out of prepared must be realistic and the box” for innovative ideas. monitored very closely so that any Marketing strategy involves attention deviation or underperformance can to internal and external environments. environment includes: be identified, causes analyzed and Internal marketing mix, performance analysis, etc. whereas external EVERY SALE HAS FIVE BASIC environment includes OBSTACLE : NO NEED, NO MONEY, competitor analysis, target NO HURRY, NO DESIRE, NO market analysis, technological changes, economic changes, TRUST. - ZIG ZIGLAR cultural environment, etc. The list of strategies which need to be considered is fairly long. rectified promptly without giving the competition an opportunity to take Marketing management is a business discipline which focuses on the advantage of the situation. practical application of marketing Teamwork is extremely important in techniques and the management of a sales and marketing activities. The firm’s marketing resources and two departments must work very activities. It plays an important role in closely to achieve the organization’s the preparation of strategic plans of a goals and objectives.Both the company. activities are aimed at increasing the As marketing management depends revenue and profit of an organization. on a detailed marketing plan based on Marketing is not advertising; it is both internal and external factors, the finding out what people want, why success and growth of a business will

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depend on accomplishment of the plans through good management – forecasting, planning, delegation, monitoring, feedback, controlling, etc. in a dynamic situation. To be successful, an organization must have clearly defined Mission Statements, Vision Statements,

Marketing Objectives and various strategies. SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is a very useful technique used in planning marketing activities as it highlights the internal strengths and weaknesses and the external opportunities and threats faced by an organization.

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For managing marketing activities effectively, the communication system must be excellent. Any miscommunication may lead to faulty decisions resulting in disaster for an organization. All statistics and market information must be checked and cross checked to ensure its authenticity.

Marketing Director, etc.). But with the growth of the organization the structure needs to be reviewed to ensure that it has not become outdated in view of constant changes in the market.

As far as the organizational structure of the marketing function is concerned, the functional organization is the most common type. It has various functional specialists such as sales manager, service manager, advertising manager, product manager, market research manager, etc. who report to a senior manager (General Manager,

an organization. Its importance cannot be understated since sales and marketing is crucial for revenue generation. Like the other functions in an organization, it is yet another key piece of the jigsaw puzzle.

In conclusion, the marketing function is extremely crucial to the survival of

Âť About the Author CEO, Magnito Digital

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Strategic Financial Management (SFM) - Razia Sultana Lubna

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he concept Strategic Financial Management (SFM) is a study of finance that handles organization’s money in order to achieve organization’s goals in a manner of identifying policies those capable to maximize organization’s NPV (Net Present Value), proper utilization of scarce capital resources and then execute as well as examine any particular strategy in a competitive market. In another word, SFM is a management approaches that considers financial techniques so that the organization can surfaces a classy strategic decision making plan. More specifically, it’s a study that involved with long term financing plan where scope of financial strategy incorporated with following ingredients. Financial Decisions – it is the region where financing approaches or the mix of equity capital as well as debt capital is studied. Here, an optimal financial mix would be existed if there any scope to alter the total value (TV) of an organization by the alteration of organization’s capital structure that would produce a maximum market value for the organization. Investment Decision – the investment decision is involved with advantageous utilization of organization’s funds and resources,

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most importantly, long term capital projects. Key focus of this task is to assemble future benefits linked with the projects attributing high risks. Here, point should be noted that investment decisions necessarily involve with risk. Therefore, the projects are assessed by considering expected returns along with risks and these are the key factors that undoubtedly determine the market value of an organization. In order to maximize the market value, a financial manager is assign to pay significant interest on these along with the

this case, most significant sources of funds are retained earnings for financing corporate growth. On other side, dividends assemble the valuable shareholders by constituting the cash flows. Though both corporate growth and dividends are significantly required but these terms are conflicting with each other. In brief, a greater dividend rate refers low amount of retained earnings that would result downward rate of growth in potential earnings and share price also. To resolve this conflict, finance managers are required to provide a reasonable answer.

GLOBAL TRANSITION IS ACTIVELY UNDERWAY TOWARD SUSTAINABILITY AND SUSTAINABLE DEVELOPMENT IN THE CORPORATE, GOVERNMENTAL, AND NGO (VOLUNTARY, THIRD, OR CIVIL SOCIETY) SECTORS.

maximum return and the minimum risks respectively. Additionally, a strong perspective on the cost of capital (COC), capital structure and the portfolio theory is also required here. Dividend Decision – the third issue, dividend decision is the determinant of payments and reinvestments between shareholders and in the organization respectively. In

Considering aforesaid discussion, the SFM has to note that the theory of corporate finance is grounded on the assumptions those involved to accomplish the goal of managing and maximizing market value of the organization. Moreover, key focus of an organization is to entail maximizing wealth of its ordinary shareholders. SFM Attachment with Accounting Taking into account all of above issues, this segment of the paper is now illustrate a comparative view between SFM and accounting models. Briefly, the SFM is not only a management approach but also a series explore the major accounting models. january-march 2014


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Firstly, nature of accounting refers that accounting models are not suitable in applying steps of management strategies. Here it has to note that, accounting has played vital role in executing investment or finance function that include financial management. The central of accounting is feature with stewardship reporting that conveys a comprehensive explanation towards the valuable investors regarding theirs uses of money. In this case, the report has required considering minimum endorsement of passive and the impartial observers namely, regular, comparable, standardized and so on. But there also need significant consideration for those uncertainties relate with investors money, cannot be control by reporting and at this point, control is the proactive involvement with the financial analysis team who are responsible to make as well as monitor all the decisions relates with the money entrusted toward the organization. This task and required information vary from organization to other and additionally, customized to the decisions will being taken. Secondly, accounting is a backward looking where figures are needed to verify by an external auditor and key focus is unavoidably on those already happened. For instance, profit of an organization has been realized in terms of tangible assets and moreover, no claim requires quantifying total value of the organization during auditing. On the other hand, financial management or the SFM is forward looking as well as comfortable with the assessment of an uncertain future. As this point, key is on wealth creation by value implying potentials in order to realize that in future. In short, the SFM is absolutely intangible. january-march 2014

Thirdly, accounting is excessively inward looking assembled by and for an external auditor or outsider’s ruling and to satisfy this objective key concentration is here on cost and capital management and profit is termed as affords to remain and to distribute. By contrast, the SFM is required to be outward looking considering perceived value of organization’s outcomes focusing individual’s value. Forthly, accounting is static that structured to allocate costs as well as revenues of an organization relatively in short deadline between discrete. This is the expression of a concept categorizing i) expenses as revenue in order to charge against current revenue and ii) capital to carry forward. On the other side, the SFM is basically; concentrate on major dynamics of an organization for long where as accounting is not needed this view since it rooted in the cash flow. In the light of above contrasts, the SFM is a process not to maintain capital of an organization but to create more wealth relatively capital employed. Practically, it refers seeking returns in excess of the cost of capital. In order to perform these tasks, both accounting and the SFM required separate skills because, accounting involved with verifying neutral accuracy and the SFM reflects subjective conclusion on an uncertain future. In defining attachment with accounting, both SFM and accounting are not put down the accounting models but also have a significant role in corporate governance in protecting creditors and assessment of tax liabilities and furthermore, perform and monitor strategic decisions,

which could protect the future of the organization. SFM and Its Two Aspects Including abovementioned issues, financial management is far away from accounting and is a subject of economics expressed how organizations allocate scarce resources among competing opportunities. Highlighting this point, this part of the writing has given an attention on the profit generation segment of economics and this dynamism is ingrained into two attributes and let have a look on them as bellow. a) Organization’s those are enough effective to meet society’s greatest needs will have keen potentiality to earn greatest profits relatively to the capital employed. b) In case of investment in an organization, people will choose their preference because of the prospect of the greatest return. Aggregate form of these two phases, it has examined that those organizations are able to meet society’s most important and desired needs will able to craft handsome amount of profit and in addition, to attract additional capital that will prominently assist to explore globally. This refers that, top management of an organizations required to look into two major directions i) internal aspects and ii) external aspects for durable sound financial health. i)

Internal aspects: temporarily, the internal aspect analyzes the correlation between the

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« organizations and their indispensible businesses intend to discover potentialities to invest either may in tangible or intangible assets, assessment of the probable returns generated by each opportunity and organize funds in order to support the considerations for execution. ii) External Aspects: The external aspect defines the relationship between organization and the capital market where – •

Identify the sources of funds available for the organization, ranging from borrowings to equity through various hybrids. Assessment of potential reward expectations of the investors in terms of interest, taxation and dividends. Employment of the mix of sources that is deemed minimizing the overall expected average returns or the cost of capital.

In describing the external aspect, ‘viable’ is a term refers reason or atmosphere offers potentiality of a return over the cost of capital. As a result, organizations can perceive the rate of return essential for employment of funds as well as attributes of their deployment. On an average, investors are expecting a return annually and there is no point in investing on a project offers prospect of an annual return. Key emphasizes of the cost of capital that has significant role in making realistic assessments is here – •

Organization that use relatively low figure has possibility of

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uneconomic projects and will face a liquidity crisis soon. An organization which use relatively high figure has potentiality to yield opportunities to better placed rivals and consequently finds itself shrinking. An organization that gets the right to be in a position to feed areas of strength as well as starve areas of weakness and in this case maximizing its opportunities of survival.

Alike cost of capital, there is one other relation between internal and external aspects is forecasting cash flows and in brief, here business identify the excess of profit over expansion where as the organizations assess the excess of distributions over new financing. Considering these two phases together, an organization will lead naturally to a unifying financial objective to distribute profit seeking sector of the economy such as maximization of NPV of projected cash flows and discounted cost of capital. Notably, this can be expressed as a feature of making and monitoring of strategic financial decisions. Strategic Financial Management and Corporate Failure Now days, it is common in a newspaper or business magazine report of collapse of an organization for administration or insolvency. In this case, common reaction is that “Why the directors did not see it coming and take avoiding action?” and common answer is here is that “Clearly, they had not adopted the principles of SFM”. Usually, its true but

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relatively unsophisticated. To explore this circumstances, again two views has to require consider a) aspects of financial management and b) financial engineering. a) Aspects of Financial Management: it is a universal truth is that business and financing has individual identity and two significant broader term of SFM. For this, it’s the best platform to start to inspect reasons behind failure. From business perspective, chief focus on the recognition that expresses that nothing lasts forever and convey thanks for developing familiar spheres of influence on business organization namely, economic, social and political and lastly, scientific and technological. The direct result is commonly as reduction of potential market for goods and services or products of an organization. now a days, the noticeable example is the impact and influence of digital or technological revolution on retailers like – on book, photography, music and so on. Small numbers of directors are ready to accept the forecast that their business is in decline, considering it as harbor a self-fulfilling prophecy. In fact, they often influence the forecasts to show sufficient growth to enable them to justify carrying on as they had been. Alternatively, directors turn a blind eye to the need for a new strategy, to be able to focus on the tactical level of management with that they are more familiar and comfortable. Moreover, what they should be

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doing is adaptation their cost structure so that the appropriate to their reducing volumes. By contrasts, fixed costs that were thought of as strengths when the business was growing, in that case they provided the benefits of economies of scale unexpectedly become weaknesses when its shrinking. Its almost too understandable to say that they should be seeking to lower their break-even point. b) Financial engineering: from view point of financing, key focus of recognition is that patient namely equity and other is fickle namely borrowings. The more uncertain of the cash flows of the business is that significantly it is to have the precautionary buffer of sufficient equity to absorb the fluctuations. However, sorry to say, in recent years of the century experienced a lot of financial engineering that generally, amounted to large pay-outs to shareholders in terms of special dividends or the buying-back of shares. At what time, cash flows were good, high financial gearing was strength consequently, it enhanced the underlying return on investment but at the same time the situation is reversed, it becomes a weakness at that point the lenders demand a redemption of their loans. It has significantly remembered that the primary duty of directors is to balance the interests of the various stakeholders when they distribute cash to shareholders and they are predictably weakening the position of the creditors. In this case, lots of financial engineering had the long

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term effect of reducing the organization’s funds to a level at that it was unable to pay suppliers what was due and not to mention condemning its employees to unemployment. If this happened within a short time, it would be unlawful but when it is spread over a period of months, it is within the law. It might be difficult to raise considerations of morals or ethics but there is no doubt that it gives capitalism a bad name that could have ramification. In this concluding part of the writing, it can be termed that the SFM is a n application of “Corporate Finance” that involves to define a sequence of steps that covers the full range of a Organization’s finances from drawing objectives, identifying resources, analyzing data and making financial decisions in order to tracking the variance between actual and budgeted results and identifying the reasons for this variance. Considering this approach, financial management has a long-term horizon though there has several uncertainties as well as unlawful doings like financial engineering. By contrasts, the SFM has short-term goals may occasionally need to be sacrificed to meet longer-term objectives. To draw conclusion, common example is that a loss-making organization trims its asset base on either factory closures or headcount reduction in order to reduce operating expenses. Here, such actions have a detrimental effect on near-term results because of restructuring costs as well as other temporary items that positions the organization to achieve durable profitability.

Sources 1.

Management Concept Style (2011) “What Is Strategic Financial Management?” available at: < http://belletristicimpressions.blogs pot.com/2012/03/what-is-strategic -financial-management.html > [accessed on 12 April 2013]

2.

David Allen CBE (November 2011) “Strategic financial management: not only…but also” available at: < http://www.cimaglobal.com/Thoug ht-leadership/Newsletters/Insight-e -magazine/Insight-2011/Insight-Nov ember-2011/Strategic-financial-man agement-not-onlybut-also/ > [accessed on 12 April 2013]

3.

CimaGlobal (December 2011) “Strategic financial management: two aspects of financial management”, available at: < http://www.cimaglobal.com/Thoug ht-leadership/Newsletters/Insight-e -magazine/Insight-2011/Insight-Dec ember-2011/Strategic-financial-man agement-two-aspects-of-financial-m anagement/ > [accessed on 13 April 2013]

4.

CimaGlobal (February 2013) “Strategic financial management and corporate failure”, available at: < http://www.cimaglobal.com/Thoug ht-leadership/Newsletters/Insight-e -magazine/Insight-2013/Insight-Feb ruary-2013/Strategic-financial-man agement-and--corporate-failure/ > [accessed on 15 April 2013]

» About the Author Foundation Level Student, ICSB

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STRATEGIES FOR BETTER TIME MANAGEMENT - Rahat Mahmud

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he term Time Management is a misnomer. You cannot manage time; you manage the events in your life in relation to time. You may often wish for more time but you only get 24 hours, 1,440 minutes or 86,400 seconds each day. In addition, time is evenly distributed among everybody. No matter, how big you are, how rich you are; you cannot buy a second!!! How you use that time depends on skills learned through self-analysis, planning, evaluation, and self-control. Much like money, time is both valuable and limited: it must be protected, used wisely, and budgeted. People who practice good time management techniques often find that they: •

Are more productive,

Have more energy for things they need to accomplish,

Feel less stressed,

Are able to do the things they want,

Get more things done,

Relate more positively to others, and

Feel better about them.

Finding a time management strategy that works best for you depends on your personality, ability to

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self-motivate and level of self-discipline. By incorporating some, or all of the strategies below, you can more effectively manage your time.

SET PRIORITIES

Managing your time effectively requires a distinction between what is important and what is urgent KNOW HOW YOU SPEND YOUR (MacKenzie, 1990). Experts agree that the most important tasks usually TIME aren’t the most urgent tasks. However, Keeping a time log is a helpful way to we tend to let the urgent dominate our determine how you are using your lives. Covey, Merrill, and Merrill (1994) time. Start by recording what you are categorize our activities into four doing for 15-minute intervals for a quadrants in their Time Management week or two. Evaluate the results. Ask Matrix: urgent, not urgent, important if you did everything that was needed; and not important. While activities determine which tasks require the that are both urgent and important most time; determine the time of day must be done, Covey suggests that we spend less time on activities that are not important TIME MANAGEMENT STRATEGY (regardless of their urgency) in THAT WORKS BEST FOR YOU order to gain time to focus on DEPENDS ON YOUR activities that are not urgent but important. Focusing on PERSONALITY, ABILITY TO these important activities SELF-MOTIVATE AND LEVEL OF allows you to gain greater SELF-DISCIPLINE. control over your time and possibly reduce the number of when you are most productive; and important tasks that do become analyze where most of your time is urgent. devoted – job, family, personal, recreation, etc. Identifying your most One of the easiest ways to prioritize is time-consuming tasks and to make a ‘’to do list’’ list. Whether you determining whether you are need a daily, weekly or monthly list investing your time in the most depends on your lifestyle. Just be important activities can help you to careful not to allow the list-making to determine a course of action. In get out of control and do not keep addition, having a good sense of the multiple lists at the same time. Rank amount of time required for routine the item on your ‘’to do ‘’ list in order to tasks can help you be more realistic in priority (both important and urgent). planning and estimating how much You may choose to group items in categories such as high, medium and time is available for other activities.

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low, number them in order, or use a color coding system. Keep in mind that your goal is not to make off the most items; rather you want to mark off the highest priority items (Mackenzie, 1990). Having a prioritized ‘’to do’’ list allow you to say ‘’no’’ to activities that may be interesting or provide a sense of achievement but do not fit your basic practices.

USE A PLANNING TOOL Time management experts recommended using a personal planning tool to improve your productivity. Examples of personal planning tools include electronic planners, pocket diaries, calendars, computers programs, wall charts, index cards and notebooks. Writing down your tasks, schedules, and memory joggers can free your mind to focus on your priorities. Auditory learners may prefer to dictate their thoughts instead. The key is to find one planning tool that works for you and use that tool consistently. Some reminders when using a planning tool are: 1.

Always record your information on the tool itself. Jotting notes elsewhere that have to be transferred later is inefficient.

2.

Review your planning tool daily.

3.

Carry your planning tool with you.

4.

Remember to keep a list of your planning tool and refer to it often.

5.

Synchronize electronic planners with your computer and recharge the batteries in your planner on a regular basis.

6.

Keep a backup system.

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GET ORGANIZED Most people find that disorganization results in poor time management. Professional organizers recommended that you first get rid of the cutter. A frequently used method is to set up three boxes (or corners of a room) labeled “keep”- “Give away”“Toss”. Separate the cutter by sorting items into these boxes. Immediately discard items in your “Toss” box. Your “Give Away” box may include items you want to sell, delegated, or discontinue so find a method to eliminate these items such as a yard sale, charitable donation, or gifts to friends or family members outside your home. With the cutter gone, the next step is to implement a system that allows you to handle information (e.g. tasks, papers, e-mail, etc) less, only once, when possible. Basically you have 5 options for handling information: 1.

Throw it away, delete it, or otherwise get rid of it.

2.

Delegate it; give it to someone else to do, file, or respond.

3.

Act on it yourself. Then throw it away or file it.

4.

File it temporarily until it needs action or until additional information is received. Follow-up; a “tickler” file can be useful for holding temporary information.

5.

File it permanently where you can easily find it later.

SCHEDULE YOUR TIME APPROPRIATELY Even the busiest people find time for what they want to do and feel is important. Scheduling is not just recording what you have to do (e.g. meeting and appointments), it is also making a time commitments to the things you want to do. Good scheduling requires that you know yourself. Using your time log, you should have determined those times during the day when you are most productive and alert. Plan your most challenging tasks for when you have the most energy. Block out time for your high priority activities first and protect that time from interruptions. If you know you will have waiting time or commuting time, schedule small tasks such as writing a letter, jotting down a shopping list, reading or listening to educational audiotapes to capitalize on the time loss. Try to limit scheduled time about 3/4th of your day, leaving time for creative activities such as planning, dreaming, thinking, and reading. DELEGATE: GET HELP FROM OTHERS Delegation means assigning responsibility for a task to someone else, feeling up some of your time for tasks that require your expertise. Delegation begins by identifying tasks that others can do and then selecting the appropriate person(s) to do them. To need to select someone with the appropriate skills, experience, interest, and authority needed to accomplish the task. Be as specific as possible in defining the task and your expectations, but allow the person some freedom to personalize the task.

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« Occasionally check to determine how well the person in progressing and to provide any assistance, being careful not to take over the responsibility. Finally, don’t forget to reward the person for a job well done or make suggestions for improvements if needed. Another way to get help is to “buy” time by obtaining goods or service that save you a time investment.

AVOID MULTI-TASKING Recent psychological studies have shown that multi-tasking does not actually save time. In fact, the opposite is often true. You lose time when switching from one task to another, resulting in a loss of productivity. Routine multi-tasking may lead to difficulty in concentrating and maintaining focus when needed.

should reward yourself for a time management success. Take time to recognize that you have accomplished a major task or challenge before moving on to the next activity. SOURCES •

Beckwith, S. (2006, July).Unleash your PDA’s Power. Black Enterprise, 36(12), 66.

Covey, S.R. Merill, A. R., & Merill, R. R. (1994). First Things First: To live, to love, to learn, to leave a Legacy. New York: Simon & Schuster.

Dodd, P. & Sundheim, D. (2005). The 25 best time Management Tools and Techniques: How to Get More Done Without Driving Yourself Crazy. Ann Abor, Mi: Peak Performance Press, Inc.

Morgenstern, J. (2004). Time Management from the Inside Out. New York: Henry Holt and Company.

STAY HEALTHY STOP PROCRASTINATING You may be putting off tasks for a variety of reasons. Perhaps the task seems overwhelming or unpleasant. Try breaking down the task into smaller segments that require less time commitment and result in specific, realistic deadlines. If you’re having trouble getting started, you may need to complete a preparatory task such as collecting materials or organizing your notes. Also, try building in a reward system as you complete each small segment of the task.

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The care and attention you give is an important investment of time. Scheduling time to relax, or do nothing, can help you rejuvenate both physically and mentally, enabling you to accomplish tasks more quickly and easily. Learn to manage time according to your biological clock by scheduling priority tasks during your peak time of day, the time your energy level and concentration are at their best. Poor time management can result in fatigue, moodiness, and more frequent illness. To reduce stress, you

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» About the Author • Senior Executive, AFC Capital Ltd. • Foundation Level Student, ICSB

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Leadership & Management -Unboss! - ISHRAT JAHAN RIMI ACS hat is Leadership? Actually an effective leader knows very well that what and what not to do. “A good leader is someone who genuinely cares about their employees. A good leader has no greed or avarice, and envies no one. Their job becomes the stepping stone for others. A good leader is a mentor and above all else must have integrity, honesty, direction and vision.”

the help of the members of your team. You deal with programmes, process, events and eventualities. All this is done through the exercise of leadership. People are the most important resource available to you as a manager. It is through this resource that other resources are managed.” - Michael Armstrong

To build leadership platform, we must understand and embrace the mindset of leadership. It’s really up to us. Choosing to lead can allow us to make a difference in the world. Be Worthy of Followers

“I am accountable for my behavior and for assessing the impact it has on The Leadership Platform others”. Followers choose leaders more than leaders choose followers. • Self-Leadership The most effective leaders, quite One must be culturally and politically The foundation of leadership starts simply, are those whose folloers aware, as well as sensitive to people’s from self-leadership because until we choose them.Ten qualities-Socially personal lives without being nosy. lead our self effectively, we simply skilled, Connected, Fully present, Passionate, Self-aware, Motivated, can’t lead others. What I personally look for in Trustworthy, Accountable, people, in leader, are those who Challenging, Organized will TIME MANAGEMENT STRATEGY have hustle, drive, ambition, make worthy of followers. THAT WORKS BEST FOR YOU common sense and street smarts. Sounds simple! Not DEPENDS ON YOUR Cultivate Culture really. I also look for people who PERSONALITY, ABILITY TO want a career, not a job-anyone Culture develops and persists SELF-MOTIVATE AND LEVEL OF can get a job. The younger you for a reason, and that’s actually SELF-DISCIPLINE. are when you figure this because at some point it was out-the better off you’ll be! found that a particular - Peter James Rose approach worked. Make the Leadership CEO-Expeditors International of Choice Washington, INC A tree is magnificent combination of “A leader is best when people barely strength, beauty, and durably. The What managers do know he exists, when his work is done, tree’s root system resembles the “ As a manager you are there to get his aim fulfilled, they will say: we did it culture of a business. From its culture, the organization can derive its things done through people. You are ourselves.” – Lao Tsu engaged in a purposeful activity The best leader will inspire his strength and sustenance. However, involving others. But you are followers. He/ She will lead, yet people like the hidden root system, an concerned with defining ends as well will not feel that they are being led. organization’s sometimes-invisible as gaining them. You decide what to do Leadership is not a position or a culture can make the organization-or and then ensure that it gets done with ranking. Leadership is a state of mind. its leaders-immobile.” Culture” is that

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ÂŤ it define the way people within it understand and experience the world socially. Culture encompasses everything from our language to our religion, our food, our legal systems, our dress, our moral percepts, the way we share wealth and resources, and the way we assign different roles in society based on age, gender, and education. Balance Thought and Action The successful leaderbalances whiat needs to be done today with what needs to be done toprepare for tomorrow. We depicit these two aspects of pur work with a pair of images: the boot, representing the active work of today, and the sandal,represting the reflective work that engages our higher thinking in pursuit of our vision tomorrow. â&#x20AC;˘ Leadership of Others Relationships in the business world

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are full of richness, complexity, challenge, conflict, and nuance. The leader who leaps into these relationships with courage, care, and positive intentions will find his work more than half done as a result. One by one, the leader reaches out and creates relationships that are honest, that probe the depths of understanding, that explore the heights of mutual accomplishment, and that create growth for everyone involved. Understand Motivation Leaders create a motivating environment to maximize performance and results. The world is challenging. Especially in developed countries, the fundamental contract between employee and employer has evolved as these societies have become more affluent. Because the basic needs of most people are met, and because most qualified employees have many choices of where to work, the role of leaders in motivating people has become both

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more challenging and more exciting. No longer are most people willing to work just for the paycheck. No longer are people satisfied with simply doing as theyâ&#x20AC;&#x2122;re told. People want more. The enlightened leader understands how to effectively motivate people who want growth, opportunity, and challenge in the workplace. Build Influence Leader seek to teach and influence rather than control. Influence is the art of working with people to develop the understanding and support needed to enact change. Influence involves the hard work of developing ideas, refining them, selling them, and then selling them again. The moon is tiny compared with Earth, and hundreds of thousands of miles away. Yet its essential influence on life on this planet is undeniable. Without the tides, life here might never have developed the way it did. It considers the same situation in business world.

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Connect with Meaning True leader seek authenticity and depth in his/her relationships. Even the most mature leader will encounter individuals with whom they cannot forge a meaningful connection.this may result from a lack of maturity or integrity on the part of the other, or a significant difference of philosophy or vision. When our best effort to create a meaningful connection doesn’t work, both parties have choice to make. The relationship may best be ended rather than tolerarted. In relationships, as in all matters of business, we must consistenltly maintain a difficult balance:while we hold ourselves accountable, we also must hold others accountable. Sometimes problems occur that we didn’t create or cannot solve. But if our relationships are built on the platform of our own self-leadership, we can more easily decide when we have done what we can and can do no more. Leadership Language Communication overlays every aspect of leadership. Leaders get things done by communicating clearly, consistently, and repetitively about what’s important. Effective communication “turns on the lights” and enable productivity. Two-thirds or more of a leader’s day is spent in communication with othersconversation, facilitation, or written correspondence. To become a better leader, it only makes sense to focus on skill development on what spent most of day doing.

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• Leadership of Teams Without a solid foundation of self-leadership, and without the ability to enter into productive, deep, and honest relationships with others, we’re not able to move forward and lead groups or organizations. No matter how broad our responsibilities, or how many people report to us, our leadership of ourselves and our leadership within the context of one-to-one relationships is where success starts. Create Shared Vision Any disconnection or discontinuity among a group of people reduces effectiveness and increases the chances of conflict and dysfunction. The role of the leader as the “master electrician”who connects the wires. Connecting the wires means that the team has strong sense of its purpose and values, and it connects with and supports the goals of others within the team and within other stakeholder groups. Creating shared vision means that we are direct the positive energy of people in the directon that serves the team. We understand the personal perspectives and aspirations of the people in the team, and we create common ground between what individuals want and what the team needs. Expect Accountability Clearly in a team everyone has to pull their weight. Expect Accountability means how accountability works, about how it flows from a “contract” and about how as a leader set the

foundation for an accountability culture. Many leaders complain about not “getting what they want” from their employers. Leader needs to understand that establishing an accoutability cullture is a result of strong leadership and explicit expectations. Develop a Process View A business is a complex engine in which the gears have to mesh effectively. Enlightened leadership means understanding that most people will perform effectively in strong process environment. “Processes and systems” as foundational to healthy accountability. In order to get what we need from these processes, we have to be observers, analysts, objective critics, and ultimately change agents. Leaders need to do the work in a way that leans toward success. It is about balancing our focus on individual performance with an equal enthusiasm for and curiosity about-the structures and systems that partner with the people to produce the work. Your Leadership Legacy As a leader our primary responsibility to lead organizational and professional development in our organization. A leader’s job is in large part to develop other leaders, and we propose a system in which our organization will develop the leaders it needs. Constant learning mode of the

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« leader, and we must continue learning every day for the rest of our career. Unbossing Organizations meet the challenges of a new business world. Today, knowledge, purpose and collaboration – rather than hierarchy, competition and a bottom line-only focus – make the difference between success and failure. Traditional management structures form such a solid foundation of the conventional view of the world of work that it is difficult to examine them, much less imagine living without them. But if we want to take a different approach – one that is beginning to sound less radical, that does not rely on creating winners and losers, and that gives our firm a purpose beyond our bottom line –try “unbossing.” This collaborative

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management method relies on shared passion, adult responsibility and sharing work within and outside of an organization. This theme recommends this insightful – if optimistic – overview of tomorrow’s management techniques to managers, academics, start-up entrepreneurs and those seeking new, more effective methods. For decades, senior executives viewed hierarchical management as the only way to run an organization. Changes in the world of business and the world at large render such outdated management concepts a hindrance. As established companies grow, employees are increasingly disenchanted. Employees are educated, come from different ethnic groups, and more of them are women. Today’s workers have different

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expectations of and seek meaning in their jobs, and are reluctant to accept orders without understanding them. Management theorists argue that lower prices create a competitive advantage. This belief drives companies to become larger, to automate and to increase “outsourcing.” When businesses put undue emphasis on profitability, the result is an unhealthy work ethic that strains people and the environment. “The most important shift in thinking is about profit, the very foundation of business.” Now, “quite simply… downgrade profit slightly. Make purpose your first priority, profit your second.” » About the Author Foundation Level Student, ICSB

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Development Resources from Bangladesh Capital Market - Masih Malik Chowdhury FCA, FCS

O

ptions for Resources for Development

Resources are needed to foster economic growth for a take off to sustainable development. In Bangladesh we have entrepreneurship and human resources at home and abroad which are enormously driving up the economy. Our natural resources are also available. These resources can be tapped from various sources. These among the domestic means are Public borrowings, Tax, VAT, Import & Customs duties, other fiscal means, Bank finances, Stock market, Private sector borrowings & savings. The external means are Foreign grants, loans from multilateral and bilateral agencies & foreign direct investments.

BANK FINANCE IS VERY EXPENSIVE WITH OVER 16% EFFECTIVE RATE OF INTEREST. THIS MEANS HIGH COST OF FUND LEADING TO HIGHER PRODUCT PRICES. AS A RESULT ULTIMATELY THE CONSUMERS SUFFER. THUS CAPITAL MARKET CAN ENSURE LESS COSTLY PRODUCTS. MANY LACUNAE OF CAPITAL MARKET HAVE BEEN REMOVED. TO ATTRACT NEW INVESTMENTS.

Government’s Role in Capital Markets for Economic Development Households are net savers, and their savings are used by entrepreneurs to invest. The rate of investments in a particular economy to a large extent depends on the savings rate of the households which, are channeled into investments depending upon the return on

Figure 1 Financial Intermediation and Economic Growth

From amongst these sources the domestic savings mobilization should be relatively easier. In context of development budget in Bangladesh, there is only a meager deficit of less than 2% of GDP to be financed by external means. A properly functioning stock market can easily harness the resources making up for the shortfall quite well. january-march 2014

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ÂŤ investments. Introducing an efficient, competitive financial sector between the dispersed households and entrepreneurs would result in a situation as depicted (Fig 1) above. Transaction costs associated with funneling savings into investments are reduced. Transaction costs associated with the trading or liquidation of assets are also reduced, so that household savings remain highly liquid. Information on returns on investment is efficiently gathered, enabling selection of efficient investments. Markets are generated for diversification of risks by households and firms. As the line emanating (Fig 1) from the financial intermediation back to the savings box indicates, the higher returns for investors can be made possible by an efficient financial sector which in effect have ambiguous effects on the savings rate. The role of the government is evident from the (Fig- 1) where it enters the diagram twice. In the upper part, the government's role as a saver and investor is depicted. The lower part depicts its role as the provider of an overall regulatory and macroeconomic climate for the economy. The government taxes households, firms and the financial sector to finance its own expenses. If these expenses are primarily aimed at the development of infrastructure or human capital, the government may efficiently add to the capital stock of the nation and boost up economic growth. It is likely that some of these socially productive investments would not be undertaken by private companies. However, a wasteful government may allocate resources

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for nationally unimportant and less priority projects. It would thereby waste resources through inefficiencies and procrastinations in implementations that otherwise could have been productively invested. Stock markets and Economic Growth: General Empirical Evidence Atje and Jovanovic (1989) compared the impact of the level of stock market development and banking sector development on economic growth .They observed a large effect of stock market development as measured by the value traded divided by GDP on subsequent development, but they could not find a similar effect for bank lending. In their conclusion they noted

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presented are without exception positive. The small number of countries used in the analysis makes the standard error of these correlations rather high; namely 0.23. Nevertheless, the evidence broadly confirms that stock market development is positively associated with economic growth. It explored the link between capital market integration and economic growth. They argued that investment projects in segments of capital markets are likely to have higher discount rates because the required rate of return on equity is linked to the local market volatility & provided new empirical evidence to suggest that the openness of the economy is positively correlated with economic growth.

Figure 2 Stock Market Development And Economic Growth Stock Market Development Measure

Rank Correlation

Number of Stock

412

Market Capitalization

341

Value traded

335

Turnover ratio

203

Market Capitalization/GDP

249

Value traded/GDP

360

â&#x20AC;&#x153;It is even more surprising that more countries are not developing their stock markets as quickly as they can as a means of speeding up their economic developmentâ&#x20AC;? They computed the rank correlation (Fig- 2) between different stock market development measures and economic growth. If the ranks according to economic growth were to completely correspond to the ranks according to stock market development, the rank correlation would be one. The rank correlations

Role of Capital Market in Economic Development: Some Examples Brazil: The rank correlations confirm that stock market development is positively associated with economic growth. Brazil ranks relatively low; that is, the Brazilian stock market seems relatively well developed, although for the first three measures this in primarily due to its size. Compared with size of the economy, the Brazilian stock market appears to have ample room to act better for its economic growth.

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Romania: Correlations Between Capital Market Development and Economic Growth: The Case of Romania a Research Paper written by Laura Obreja Brasoveanu et.al of University of Economics, Bucharest, Romania published in 2009 considering quarterly data for the period 2000-2006, observed that the link between capital markets development and economic growth has received much attention. The paper examined the correlation between capital market development and economic growth in Romania using a regression function and VAR models. The results showed that the capital market development is positively correlated with economic growth. It suggested that financial development follows economic growth, economic growth determining financial institutions to change and develop. It concluded that there are dependence between economic growth and capital market development for Romanian case. Authors noted that there is a feed-back effect between capital market trade volume and economic growth. Nigeria: In the paper titled - Does stock market Promote Economic Growth in Nigeria authored by Tokunbo Simbowale Osinubi, et.al., University of Ibadan, Ibadan Oyo State, Nigeria- in 2006, the author observes that the stock market is a common feature of a modern economy. It is reputed to perform some necessary functions, which promote the growth and development of the economy. This study examined whether stock market promotes economic growth in Nigeria. Using the data, from 1980 to 2000, the results indicated that there is a positive relationship between growth and all

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the stock market development variables used. The results of the study established positive links between the stock market and economic growth. It suggests for the pursuit of policies geared towards rapid development of the stock market. It concluded that the stock market promotes economic growth is not in doubt. It serves as an important mechanism for effective and efficient mobilization and allocation of savings, a crucial function, for an economy desirous of growth. Singapore: Ramin Cooper Maysami et.al. of University of North Carolina in their research paper titled, Relationship between Macroeconomic Variables and Stock Market Indices: Co Integration Evidence from Stock Exchange of Singaporeâ&#x20AC;&#x2122;s Stock Indices from 2000-2009 found that the relationship between macroeconomic variables and stock market returns is, by now, well-documented in the literature. The study concludes that the Singaporeâ&#x20AC;&#x2122;s stock market and the property index form co integrating relationship with changes in the short and long-term interest rates, industrial production, price levels, exchange rate and money supply. At

the same time it noted that the relationship between macroeconomic variables and stock markets, though widely documented, is not universally shown or accepted. Capital Market: As Engine for Economic Growth by Geert Beakert et.al. a paper in 1999 of National Bureau of Economic Research, Cambridge, MA 02138, explored the links between financial markets and economic growth with a special emphasis on the stock market and capital market integration. It comes at an opportuned time given the recent interest among the investment community in emerging markets and the enthusiasm of a number of countries to launch capital markets for the first time. They stressed upon the role of regulators in making financial markets an engine for economic growth. Bangladesh Economy: GDP & Investments Savings investment gap is wide in developing & LD countries. This gap has been causing hindrance in cycling investment for sustainable economic growth. The banks being is heavy dearth of funds, the cost of fund has

Figure 3 GDP, GNI, Per Capita GDP and GNI at Current Market Prices Item

2008-09 2009-10

2010-11

2011-12 2012-13

GDP (In Crore Tk.)

614795

6947324

796704

914786 1037987

GNI (In Crore Tk.)

670696

758928

869217

1004723 1142479

Population (In Crore)

14.42

14.61

14.97

15.16

15.36

Per Capital GDP (In Tk.)

42628

47536

53238

60350

67577

Per Capital GNI (In Tk.)

46504

51959

58083

66283

74380

Per Capital GDP (In US$)

602

687

748

772

838

Per Capital GNI (In US$)

676

751

816

848

923

Source : Bangladesh Bureau of Statistics (BBS)

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ÂŤ been escalating constantly upwards. This is causing price instability & difficult living cost. The GDP growth has been between 6+ since recent year. The stock market can be a feasible place for mobilizing micro level savings to allrart investment and transform it into economic growth. Accordingly Bangladesh either through stock market or PPP or other means can have its own growth engine ignited from enormous potential of savings mobilization. The only thing to remember is less than 2% of GDP is the recurrent external finance projection to in FY 2013-2014 ADP. So this small percentage can easily be replaced by channeling savings through stock market for economic growth. Investment in relation to GDP during years to FY 2012-2013 is depicted below wherein share of private sector is very high. Thus the government can easily adopt placing measures to harness the huge scopes prevailing from private sector investment for furthering economic growth.

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Figure 4 Investment as Percent of Gross Domestic Product (GDP) FY

Total

Public

Private

2008-09

24.37

4.70

19.67

2009-10

24.41

5.01

19.40

2010-11

25.15

5.64

19.51

2011-12

26.54

6.50

20.04

2012-13

26.84

7.85

18.99

Figure 5 Savings as Percent of Gross Domestic Product (GDP) FY

Total

National Savings

2008-09

20.09

29.57

2009-10

20.10

30.02

2010-11

19.29

28.78

2011-12

19.26

29.18

2012-13

19.25

29.51

Savings & GDP in Bangladesh The table below shows Bangladesh Savings as percentage of its GDP up to FY 2012-13. Persistently high lending interest rate add high cost to production making industries unfeasible. Again with dollar

& euro etc. on consistent gain, the costs are constantly escalating leaving people lives into havoc of sorrows & horns. The financial institutions can be in liquidity crunch for many reasons. In this situation stock market is the easiest means for investment towards economic growth & industrialization at lowest fund cost

Figure 6 Trading Operation in Dhaka Stock Exchange Year/month end

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No. of listed IPO Issued securities capital (with mutual (crore Taka) funds & bonds)

Market Capi talization (Core Taka)

Turnover Value (crore Taka)

All share price index

2006

310

12

11,843.70

31,544.62

6,506.93

1,609.51

2007

350

14

21,447.00

74,219.59

32,282.01

3,017.21

2008

412

12

37,215.60

104,379.90

66,796.47

2,795.34

2009

415

18

52,209.90

190, 322.81

147,530.08

4,535.53

2010

445

18

66,435.97

350,800.58

400,991.27

8,290.41

2011

501

14

87,890.50

261,673.05

156,091.21

5,257.61

June -11

490

7

80,936.70

285,389.22

90,248.26

6,117.23

June -12

514

9

93,362.96

249,116.29

51,302.19

4,572.88

April -13

5 22

10

96,648.53

216,657.73

66,470.76

3,618.49

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in the hands of efficient & honest entrepreneurs. The gap between lending rate and deposit rate in Bangladesh also reveals enormous scope for funds to be invested at lower fund cost through stock market. For domestic savings mobilization stock market activation through broad based participation by a regulatory framework could be a much simpler means than any other means like FDI etc. All we need are accountability of entrepreneurs in IPOs with commitment for upward economic transformation & regulatory efficacy. Capital Market in Bangladesh (Economic Survey 2013) Although capital markets of different countries of the world collapsed in the face of global recession, the capital markets of Bangladesh remained quite buoyant in 2010. It was corrected later. Market capitalisation of the Dhaka Stock Exchange (DSE) was Tk. 2,49,116 core June 2012 & indicating keen interests of the investors in the capital market. It was Tk. 2,16,657 crores on April 2013 and Tk.266,840 crores on January 7,

2014.Given the growing number of ordinary investors in capital markets, limited supply of securities and investorsâ&#x20AC;&#x2122; expectations for more profit at times made the market volatile. Nevertheless, various steps have been taken to maintain market stability and to establish a transparent and vibrant capital market Dhaka Stock Exchange (DSE) In June 2012 the number of listed securities in DSE stood at 511 which was 490 in June 2011. The total turnover of DSE from January to June 2012 is Tk. 51,302.19 crore. Due to downtrend of the market, market capitalization of DSE went down to Tk. 2,49,116.29 crore in June 2012 which was Tk. 2,85,389.22 crore in June 2011. DSEâ&#x20AC;&#x2122;s all share price index has also declined due to the same reason and reached 4,572.88 which was 6,117.23 in December 2011. Bangladesh can avail resource from Capital Market Investment in Bangladesh scenario is changing fast. New Index has been taken by CSE & DSE, CDBL, Mutual Funds, Institute of Capital Market, new

Price Index

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Apr-13

Jun-12

2011

2010

2009

2008

2007

General Share Index

Price Index

8000 6000 4000 2000 0 2006

400,000 300,000 200,000 100,000 2005

Crore (Tk)

Figure 7 DSE Market Capitalization & General Price Index

amendments in Insurance & Bank acts are augmenting effectiveness of regulatory framework for an efficient capital market management and regulation. Moreover the recent demutualization of stock exchanges through an act of parliament is going to expedite a wider and investor friendly capital market. It is thus expected that capital market will soon become the first option for entrepreneurs from current dependence on Bank Finances. Bank Finance is very expensive with over 16% effective rate of interest. This means high cost of fund leading to higher product prices. As a result ultimately the consumers suffer. Thus capital market can ensure less costly products. Many lacunae of capital market have been removed. to attract new investments given that NCB managements have demonstrated poor performance in financial management resulting into more Non Performing Loans. The Government has also taken a number of initiatives to address the turmoil of the capital market and regain the public confidence. Steps have already been taken regarding the augmentation of capital through private and public placement for the private and public limited companies. Necessary refinement and correction have been made in Merchant Banker & Portfolio Manger Regulation to ensure further transparency, accountability and expeditious functions of the merchant banks. A compulsion for the sponsors and the directors of the listed companies has also been made to hold 30 percent and 2 percent of shares of the company respectively. It is expected that these initiatives will bring back stability in the capital market.

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« The last budget put on record a more 1.82% of GDP from external sources. The market capitalization on January 07 at Dhaka Stock Exchange was Tk. 2,66,840 crores which was close to USD 34 billion. Our GDP on revised base year was $148 billion. Investors are having keen interest in capital market under a stringent regulatory frame work. We can direct financing investment through capital market and the sooner we do so is the better for the economy. References 1.

2.

Stock Markets & Development: Raymond Atje & Boyan Jovanovic Journal of European Economic Review Vol # 37, No. 2-3, 1993 Correlation between Capital Market & Economic Growth: The case of Romania

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- Laura OBREJA BRSOVEANO PhD - Delia CATAMARA PhD (Candidate) - Andreea SEMENESCU PhD (Candidate) - Victor DRAGOTA PhD University of Economics, Bucharest , Romania (2009) 3.

Does Stock Market Promote: Economic Growth in Nigeria - Tokunbo Simbowale Osinubi Deptt. Of Economics, University of Ibadan & University of Lagos, Nigeria

4.

Bangladesh Economic Review 2008 to 2013.

5.

DSE & CSE Annual Report & Publication.

6.

Relationship between Macro Economic Variables and Stock Market Indies: Configuration Evidence from Stock Exchange of Singapore’s All Sector Indices (Journal Penguruson 24 (2004) 47-77.

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- Ramin Cooper Maysani - Lee Chuin Howe - Mohammed Atkin Hamzah 7.

Capital Market : An Engine for Economic Growth (The Brown Journal of World Affairs, Winter/Spring 1998 33-53) - Geert Bakaert Standard University, Stanford CA, 94305 - Campbell R Harvey, Duke University, Durham NC27708, National Bureau of Economic Research Cambridge MA 02138

8.

Ministry of Finance Budget Speech 2013

» About the Author Managing Partner, Masih Muhith Haque & Co. Chartered Accountants

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INSIDER TRADING – HOW TO COMBAT THIS MENACE EFFECTIVELY? - Bipul Kumar Bhowmik FCS

I

NTRODUCTION

Insider trading is a malpractice which seems to pervade the stock markets all over the world. Insider trading is like a great betrayal enacted by some unscrupulous stock market functionaries in connivance with some corporate executives including directors and persons closely connected with the affairs of the company such as bankers, portfolio managers, trustees, merchant bankers, solicitors and auditors. This is because these functionaries are in the know of some very price sensitive information about the joint stock companies which are listed on the stock exchanges and on the basis of this information price manipulation is triggered in such way as to give them the maximum advantages. This exercise is definitely detrimental to the interest of all those are not so privileged to possess this information. Ultimately, it is the common investor who bears the brutal of this unethical practice. Insider trading is a malady which came into existence with the emergence of stock markets but it did not invite so serve condemnation earlier due to its casual nature. With the growth of corporate sector and

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by corporate insiders and their associates of confidential price sensitive information that they have obtained by virtue of their position to make a profit or avoid a loss by dealing in the securities of the relevant company. According to Regulation 2(f) of Securities and Exchange Commission (Prohibition of Insider INSIDER TRADING – THE Trading) Regulations 1995, “insider CONCEPT trading means buying and selling or In a company, if those who are likely to transferring by any other means of possess information, which is not any security by any insider or the available to investors generally basis of price-sensitive information”. regarding securities of the company, The possession of such privilege information places them in a far better position than others in ACCORDING TO REGULATION 2(F) the market to evaluate the OF SECURITIES AND EXCHANGE investment risk involved. COMMISSION (PROHIBITION OF Instances are not rare where INSIDER TRADING) REGULATIONS insiders have taken advantage 1995, “INSIDER TRADING MEANS of trading on certainties BUYING AND SELLING OR whereas the rest of the market TRANSFERRING BY ANY OTHER could at best speculate. MEANS OF ANY SECURITY BY ANY Information regarding any INSIDER OR THE BASIS OF proposed bonus issue or rights PRICE-SENSITIVE INFORMATION. issue of convertible or non-convertible debentures or viz. directors, statutory auditors, cost about the working results of a auditor, financial accountant, tax and company or about any proposal for management consultant or advisor, merger, amalgamation or takeover of legal advisor or solicitor and company companies and/or acquisition of new secretary, take advantage of the technology and new products etc. are information and deal in the shares and of tremendous significance to or stock of the company thereby earning anybody dealing in shares profits, their trading is known as debentures of the company and any of insider trading. In other words, the this information will have significant term ‘insider trading’ means the use impact on the securities of the increase in the number of stock market functionaries, the malady got more and more deep rooted which prompted the regulatory bodies to initiate measures to curb this practice in order to protect the interest of unwary investor.

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« concerned company or companies as the case may be. Any person who has prior information about such matters cannot only make money from the share market but also multiply his money manifold or at best can save himself from an impending loss. Leakage of such inside information can benefit an unscrupulous person on the one hand and can harm genuine investors on the other hand. Besides, such information may create swings in the stock market much to the detriment of the gullible investors. INSIDER TRADING - A CLOSER LOOK AT THE BANGLADESH SCENARIO What do we see at present It is very difficult to express opinion on the extent and magnitude of insider trading in Bangladesh. Whatever is generally talked about or known represents, perhaps a very small percentage of the actual happenings. The menace of insider trading was hither to not so much visible in Bangladesh. If these dealings were there, they are treated as part of stock market functioning and no efforts are made to combat this malpractices. Even in the reported cases no effective steps seem to have been taken. The Securities and Exchange Commission (SEC) of Bangladesh which was constituted on 8th June 1993 to promote orderly and healthy development of the securities market and to provide adequate investors protection, formulated regulations the Securities and Exchange Commission (Prohibition of Insider trading) Regulations-1995 for controlling insider trading. Regulation 4 prohibits dealing, communication or counseling

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on matters relating to insider trading. Regulation 5 states that any insider who deals in securities or communicates any information or counsels any person dealing in contravention of the provision of Regulation 4 shall be guilty of insider trading. BSEC can do inquiry/investigate as per the provisions of regulation 6 in a case where a person is found guilty of insider trading. The Regulations do not contain any specific provisions prescribing for contraventions of the provisions thereof. Any contravention of the regulation is considered as an

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offence under the BSEC Act and the person committing an offence will be on conviction punishable under section 18 of that Act. This section provides that whoever contravenes or attempt to contravenes or abets the contravention of the provisions of the Act or any rules or any regulation made there under, shall be punishable with imprisonment for a term which may be extend to five years or with fine not less than Taka five lac or with both. At the time of inspection or investigation whoever fails to produce necessary paper and documents or failed to cooperate with the Commission, the Commission may

BSEC’S FIRST STEP AGAINST INSIDER TRADING ACTIVITIES IN BANGLADESH In Bangladesh, BSEC firstly move against insider trading activities by Jamuna Bank. The Bangladesh Securities and Exchange Commission (BSEC) fined three persons and four companies a total of Tk. 1.30 million (13 lakh) for their involvement in insider trading (source: bdnews24.com, dated 26th June 2007). The BSEC also imposed a two-year freeze on about 0.7 million (7.0 lakh) shares of Jamuna Bank, purchased by the people-two of them sponsor shareholders of the bank and the four companies in breach of rules (source: The Financial Express, dated 26.06.07, page 7 & 8). This is the first time move by the capital market regulators in its history against insider trading, a scam by corporate insiders such as directors and key employees. The BSEC said the accused had prior information about the dividend announcement – a situation that created “unusual transactions.” Illegal insider trading generally refers to the buying or selling of a security by a shareholder by misappropriating nonpublic information about the security. Insider trading violations may also include “tipping” such information to others. The then Chairman of BSEC said to news agency, “It’s an eye-opener. We’ll go for tougher actions next time involvement in insider trading. I hope it will create awareness among all market players of the consequences of violating corporate rules”. The BSEC action followed an inspection last year, which found the seven persons and businesses misappropriating nonpublic information (Source: The Financial Express, dated 26.06.07, page 7 & 8, Dhaka, Bangladesh).

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circumstances suggesting that there has been a contravention of the Regulations. The BSEC's Regulations on insider trading appear to have been made in a hurry and haste. They are overdue comprehensive review and revision for they are inadequate to effectively deal with the menace of insider dealing. There is indeed a need to have a separate statute on this subject. If not, at least the BSEC Act should be amended to insert a Chapter dealing with the subject, backed by more teeth to BSEC. But what really is required is to deal harshly with those who are responsible to spread the evil of insider trading. Corporate governance codes alone cannot eradicate this plague, not surely in our capital market;

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cautioned such person in writing or it may impose fine not less that taka one lac and for continuous default a fine of Taka 10,000 per day for each day of default. What do we expect in near future In the context of miss-happenings, as mentioned, to combat strongly it is high time for the Government to take stern measures against insider trading in stock exchange by amending the Companies Act-1994, stock exchange listing regulations and BSEC Regulations as far as applicable. A careful analysis reveals the following certain hidden loopholes to be attended more explicitly: •

The BSEC may appoint an inquiring/investigating authority where it has ordered inquiry/investigation under this Regulation. Before ordering an inquiry/investigation the BSEC must form an opinion that it is necessary to inquiry/investigate and inspect books of account, other records and documents of an insider for any of the aforesaid purposes. Such formation of the opinion must be based on "written information in its possession". Thus, to be in possession of written information leading to the formation of the opinion is the sine qua non for ordering an inquiry/investigation. An inquiry/investigation may be ordered to be conducted by an inquirer/investigator, either suo motu i.e., upon its (BSEC's) own knowledge or information or upon receiving a complaint of facts which constitute contravention of the Regulations, if SEC is of opinion that there are

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To include a provision that if it is provided that a deal by an insider in the company’s share has resulted in one party taking advantage over the other by misusing the information relating to the company, then he should be liable to reimburse the loss caused to the other party with whom the insider has dealt and the company in whose shares he has dealt;

To prevent the direction of the company from buying or selling the shares of the company for a period of one month prior to the publication of the company’s annual accounts and one month after the accounts have been adopted; and

To extend these provisions to

statutory auditors, financial accountants or financial controllers, cost accountants, management accountants, chartered/company secretaries, legal advisors or solicitors who would generally have access to price sensitive information. •

The Regulation gives a very implicit definition of an insider. The public servants and the officials of BSEC have not been included in the definition of an insider explicitly. Though such persons may also have access to the price sensitive information before it is made available to public.

The Regulations provide penalty provisions for a person who may be proved guilty of insider trading. But the procedure provided in the Regulations may take a long time in establishing whether a person is guilty of insider trading. The loss which the insider has caused to other investors not possessing such information can’t be made good until he is proved guilty.

These Regulations do not contain any provision for discloser with a view to combat insider trading. Fuller, fair and adequate disclosure, which has been widely advocated in literature, can prove to be one of the important measures to check this evil and discourage people from indulging in such practices. BSEC can also take into consideration the policy issue of bourses with a view to ensure common alignment of goal congruence.

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« •

Listing regulations of DSE and CSE provide only a minimum mandatory standard. Listed companies are expected to consider the particular circumstances of the company in determining the appropriate action regarding the disclosure of the relevant information. Nonetheless, the rules address when and how listed companies should disclose price-sensitive information and other issues and situations related to the dissemination of price-sensitive information. The guidelines regarding price-sensitive information pursuant to the Listing Regulations reflect the fundamental principles of transparency, fairness and responsibility and of good corporate governance generally. It should be noted that these recommendations serve as guiding parameters only and are not obligatory; ultimately, listed companies must use their own judgment when revealing price-sensitive information to the market. Therefore, directors or management of listed companies who may have questions regarding price-sensitive information should always seek independent advice or consult with the Stock Exchange as soon as practicable. The definition of 'insider' under the Insider Trading Code is very wide which is not contemplated by the BSEC's Code. It need not include persons who are not directors/officers/designated

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employees of the Company. The definition of 'insider' as given in the BSEC Regulations need not be adopted and incorporated in the Code because that definition is very wide and covers many people who are not (and not expected to be) covered by the Code. For example, if under the company's Code all insiders are required to report certain details relating to the company's securities to the company, this will be almost impossible to be implemented and, moreover, the Code doesn't apply to outsiders. The Code is for the company's directors, officers and few selected employees (called 'designated employees') who are expected to be governed by the Code. INSIDER TRADING – HOW FAR DIRECTORS ARE CONCERNED Insider trading, as it involves misuse of confidential information, is unethical amounting to breach of fiduciary position of trust and confidence. Being fiduciaries towards the company, directors must act bona fide in the interests of the company and must not exercise their powers for any collateral purpose. Further a director must not place himself in a position where his duty to the company and his personal interests conflict and he must not profit from his position as a director. This is equally true about company officers. The objective of the Securities and Exchange Commission (Prohibition of Insider Trading) Regulations 1995 is to prevent and curb the menace of insider trading in securities. In particular, the Regulations render insider trading a criminal offence in certain

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circumstances, punishable under the BSEC Act. In a White Paper (a classic exposition of the concept of insider trading) prepared on the Conduct of Company Directors (1977, UK) observed the inside trading and directors obligation in the following manner: "Insider dealing is understood broadly to cover situations where a person buys or sells securities when he, but not the other party to the transaction, is in possession of confidential information which affects the value to be placed on those securities. Furthermore the confidential information in question will generally be in his possession because of some connection which he has with the company whose securities are to be dealt in (e.g. he may be a director, employee or professional adviser of that company) or because someone in such a position has provided him, directly or indirectly, with the information. Public confidences in directors require that such people should not use inside information to further their own interests. Furthermore, if they were to do so, they would frequently be in breach of their obligations to the companies, and could be held to be taking an unfair advantage of the people with whom they were dealing." INSIDER TRADING - COMPANY SECRETARY'S ROLES Company Secretaries of listed companies are in almost all cases play the role as compliance officers under the insider trading regulations. There are several compliances of administrative nature that a company secretary has to ensure compliance with in order to get the regulations

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implemented in the company. The company secretary can also play role for creating awareness among the people in and outside the company who have or likely to have access to unpublished PSI to make it known to them the BSEC Regulations and deter them from pampering in insider trading or tipping insider information to other people. Induction to the insiders who are connected with the company (directly or indirectly) comprehensively about the BSEC Regulations and consequences of breach is an important duty of company secretary as a compliance officer. Company secretaries can facilitate in selection of e-mannerism to announce company’s stand for or against unpublished PSI in the eve of digital corporates in Bangladesh. They also can facilitate to take initiatives to conduct awareness session jointly with BSEC and bourses, real-time basis as well as eventually among the present and potential investors on how to handle and response to such activities. However, company secretary has onerous obligations in the matter of preventing insider trading by company directors, officers and others, in terms of disclosure and reporting.

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CONCLUSION Insider trading is a systemic way of hoodwinking the common investors by the misuse of inside information by the privileged few. It not only involves taking a secret, unfair advantage of the inside information for persons gain, but also gives rise to potential conflicts of interests in which the company's best interest may wrongfully take second place to the insider's self-interest. So it is an evil by which any stock market is infected to cause grave damage to the common investor. It erodes the confidence of the investor and undermines its credibility. Only a prohibition on insider dealing which needs to be enforceable effectively in practice and any exception or infringements that allows to be effectively sanctioned can guarantee the well-functioning of the capital markets in the best way possible. It will also be the powerful and encourage compliance with the rules by all market actors on a lasting basis. However, certain measures outlined here need to be initiated so far applicable to curb insider trading, with a hope that anti-insider trading Regulations will be made more significant in light of these measures as BSEC gains maturity to combat this menace effectively.

So, insider trading is menace for the healthy growth of the securities market in an economy. Till 1994, there were no specific measures available in Bangladesh to check insider trading. However, it is heartening to note that now BSEC has made Regulations for curbing this malpractice. Since BSEC has just initiated certain measures to curb insider trading, it is hoped that anti-insider trading Regulations will be made more significant as BSEC gains maturity. REFERENCES Chandratre, Dr. K.R., “Insider Trading: Duties of Insiders and Company Secretary”, Chartered Secretary (ICSI), February 2011, P: 154-160 Chander, Dr. Subhash, “Insider Trading-A Menace to the Growth of the Securities Market”, Anmol Publishing Pvt. Ltd., New Delhi, 1995, p. 29-36. Manne, Henry G., “Insider trading and the Stock Market.” New York: The Free Press, 1999. Seyhun, H.N. “Insider’s Profits, Costs of Trading, and Market Efficiency.”, Journal of Financial Economics 16 (June 1999): 189-212

» About the Author Fellow Member, ICSB

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Whistleblowing Policy: An effective tool to fight against corruption - Mohammad Khasru Noman ACS A whistle-blower is someone who attempted to communicate the reports unethical or illegal behavior on problem internally and has received the part of his colleagues or superiors no response from management. on the job. Whistle-blowers can be employees, suppliers, contractors, Most employees remain silent, clients or any individual who somehow typically out of fear of losing their becomes aware of illegal activities positions. Others choose to risk their taking place in a business either professional (and personal) well-being through witnessing the behavior or and come forward with the truth. They being told about it. The whistle-blower seek to make a difference by “blowing is not responsible for investigating the the whistle” on unethical conduct in activity or for determining fault or the workplace. corrective measures; appropriate management officials are charged with WHISTLE BLOWING REFERS TO these responsibilities.

THE ACT OF A PERSON BRINGING ATTENTION TO PEOPLE SUSPECTED OF WRONGDOING. TYPICALLY, THE WHISTLEBLOWER IS ALSO A PART OF THE ORGANIZATION. THE WRONGDOING MIGHT BE FRAUD, CORRUPTION OR A VIOLATION OF SAFETY.

Whistle-blowing refers to the act of a person bringing attention to people suspected of wrongdoing. Typically, the whistle-blower is also a part of the organization. The wrongdoing might be fraud, corruption or a violation of safety. The whistle may be blown internally (such as to others involved within the organization) or externally (such as to law enforcement agencies). Whistle-blowing takes place when a government employee, company employee or independent contractor goes public with claims of illegal or unethical business practices or activities within his company. Many times, the whistle-blower has

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Promotion of whistle-blowing culture By promoting a whistle blowing culture within the organization, employees will feel comfortable speaking up when necessary. Here are some guidelines for promoting a whistle-blowing culture: • •

• Objectives of whistle-blowing policy • •

To let employees know the organization is serious about adherence to codes of conduct

Create and publicize a whistle-blowing policy. Emphasize communications about bans on retaliation for whistle-blowing activities. Top Management must demonstrate the inclusion of whistle-blowing in the culture. The organization’s commitment to whistle-blowing must be emphasized and promoted. Follow through with a complete investigation after a whistle-blowing event. Discuss with employees their personal thoughts on topics to make sure everyone has a similar mindset.

To encourage employees to bring ethical and legal violations they are aware of to an internal authority so that action can be taken immediately to resolve the problem

Key components of whistle-blower policy

To minimize the organization's exposure to the damage that can occur when employees circumvent internal mechanisms

A whistle-blower policy elaborates the procedure by which an employee lodges a complaint about an unethical or unlawful behavior by a colleague or

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supervisor. The general standard is that the behavior should be reported if the employee believes it is in violation of a clear mandate or public policy regarding health, safety, welfare or environmental protection.

Reporting Responsibility It is the responsibility of all directors, officers and employees to comply with the Code and to report violations or suspected violations in accordance with the Whistle-blower Policy.

Definition Confidentiality The definition of whistle-blowing must emphasize the objective of reporting any type of suspected or actual wrongdoing detected within the organization to internal or external

The policy must protect the confidentiality of the reporting person and allow for anonymous claims.

A key component of an effective whistle-blower policy is that it is independent. The policy cannot just be to report the problem to your supervisor. There also needs to be an independent review system, perhaps something along the lines of an ombudsman who reports directly to the board of directors of the organization. Openly Communicate Whistleblower Policy and Training for All The introduction or modification of a whistle-blower policy must be communicated at a workplace so employees on all levels are aware of it. It should be communicated by email or printed copy to every employee and posted in all public places as well as published in the employee handbook and new employee orientation materials. Training should emphasize the need for transparency and the prohibition of retaliation. Policy Against Retaliation Another key component of a good whistle-blower policy is a strong no-retaliation component that has penalties for retaliation--penalties that are enforced. Without an enforceable no-retaliation policy, rank and file employees will not buy into the system as they feel vulnerable for speaking out.

sources in accordance with the terms of the policy. Individuals Covered The policy must define individuals covered under the policy, such as any employee, customer, contractor, vendor and persons with direct knowledge about the company.

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Process Whistle-blowers as Allies The policy must provide procedures for reporting claims to certain designated persons, such as the compliance officer of the company. Establish an Independent Whistleblower Review System

A good whistle-blower policy should be conceived of and designed around the idea of whistle-blowers as allies, not adversaries. Looking at whistle-blowers as allies and making a relatively small investment in procedures to protect them enables

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ÂŤ organizations to improve transparency, empower employees, discover unethical or illegal practices as early as possible and enhance legal compliance. Compliance Officer The Organization's Compliance Officer is responsible for investigating and resolving all reported complaints and allegations concerning violations of the Code and, at his discretion, shall advise the Executive Director and/or the audit committee. The Compliance Officer has direct access to the audit committee of the board of directors and is required to report to the audit committee at least annually on compliance activity. The Organization's Compliance Officer is the chair of the audit committee. Accounting and Auditing Matters The audit committee of the board of directors shall address all reported concerns or complaints regarding corporate accounting practices, internal controls or auditing. The Compliance Officer shall immediately notify the audit committee of any such complaint and work with the committee until the matter is resolved. Acting in Good Faith Anyone filing a complaint concerning a violation or suspected violation of the Code must be acting in good faith and have reasonable grounds for believing the information disclosed indicates a violation of the Code. Any allegations that prove not to be substantiated and which prove to have been made maliciously or knowingly

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to be false will be viewed as a serious disciplinary offense. Handling of Reported Violations The Compliance Officer will notify the sender and acknowledge receipt of the reported violation or suspected violation within definite working days. All reports will be promptly investigated and appropriate corrective action will be taken if warranted by the investigation. Get Endorsement Management

From

Top

Top management, starting with the CEO, should demonstrate a strong commitment to encouraging whistle blowing. This message must be communicated by line managers at all levels, who are trained continuously in creating an open-door policy regarding employee complaints. Assess the Organization's Internal Whistle blowing System Find out employees' opinions about the organization's culture vis-Ă -vis its commitment to ethics and values. For example, Sears conducts an annual employee survey related to ethics. Some questions are: Do you believe unethical issues are tolerated here? Do you know how to report an ethical issue? Advantages of whistle blowing Public Safety One of the principle reasons to blow the whistle on illegal or unethical activities is to protect the public,

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colleagues or others from risk. The more immediate and the more significant the risk, the more important to take action efficiently. When companies engage in activities that could cause physical or mental harm to people, or environmental damage, many believe it is your duty to make those activities known. Moral Responsibility Blowing the whistle out of a sense of moral obligation is generally regarded as the best reason to do so. If you are attempting to protect the public or fulfill a sense of moral duty, you are likely justified. If revenge against your organization is the motive, you may not have a good motivation for action. Disadvantages of whistle blowing Retaliation One of the primary disadvantages of blowing the whistle is the potential retaliation you face from management and colleagues. Some protections may be in place to encourage whistle-blowing, but those offer little support when you show up at the office each day to a sense of resentment and hate from your co-workers. Conflicts of Interest For many potential whistle-blowers, the conflict of interest between serving one's company, co-workers and friends and protecting the public is very real and challenging. You must weigh the possible damage to your working relationships and your career against the merits of blowing the

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whistle in a given situation. Many people feel a sense of loyalty to their company that prohibits whistleblowing. Others simply are too burdened by the thought of making bold accusations against an employer.

The act was hailed as a groundbreaking piece of legislation. But the Challenges remained. Whistle-blowers were afraid to come forward, since the law did not protect them.

must exercise sound judgment to avoid baseless allegations. An employee who intentionally files a false report of wrongdoing must be subject to discipline up to and including termination.

Barriers to a successful internal whistle blowing program

They kept up the advocacy, lobbying politicians and civil society members to plug loopholes in the act. In response, the government amended the rules and, in 2011, the landmark whistle-blower protection act was passed.

However, given the prevalence of corporate misconduct in the recent past, like Hallmark scandal, Destiny scandal and Capital market scandal etc. in Bangladesh, the requirement of an effective and time-befitting whistle blowing Policy and whistle-blower protection Act is inevitable. Thus both the government and private sector should come forward and extend their utmost assistant and cooperation in this regard.

• • • •

A lack of trust in the internal system Unwillingness of employees to be "snitches" Misguided union solidarity Belief that management is not held to the same standard

Whistle blowing in Bangladesh In the early 2000s, some NGOs ad Social Workers were at the forefront of a civil society movement to persuade parliament to pass a right to information law. Despite the setback, they played a leading role in holding consultations to cobble together a coalition of rights activists, anti-corruption campaigners, media personalities and civil society members. Their advocacy bore fruit in March 2009, when the Right to Information Act as finally passed by parliament.

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Conclusion Whistle-blowers, those individuals who call attention to possible wrongdoing within their organizations, are the subjects of much controversy. Some say that whistle-blowers are noble characters, willing to sacrifice personally and professionally to expose organizational practices that are wasteful, fraudulent, or harmful to the public safety. Others suggest that whistle-blowers are, by and large, disgruntled employees who maliciously and recklessly accuse individuals they feel have wronged them in order to attain their own selfish goals. The truth, as is often the case, probably lies somewhere between these two extremes. So the employee

References www.whistleblower.org www.whistleblowersecurity.com www.whistleblowers.gov www.sec.gov/whistleblower www.pachamama.org/.....policies..... www.afdb.org/...policy..../ www.asianaccess.org/.../policies/... www.aibs.net/...AIBS_whistlebl... » About the Author • Associate Member, ICSB • Deputy Manager-Administration, BADC

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Knowledge Bank Compiled by Itrat Husain FCMA, FCS Legally speaking Bench A term used to denote the seat of the judge in a court room or the judge himself. It is also used as a collective term for all the judges in a court. Business Judgment Rule A judicial doctrine which shields corporate officers and directors from personal liability for actions taken in good faith and with reasonable care. Certificate of Good Standing A certificate issued by a state official as conclusive evidence that a corporation is in existence or authorized to transact business in the state. Corporate Kit A Corporate Kit is a binder usually containing essential items for the routine maintenance and administration of a corporation or limited liability company. Corporate Seal A Corporate Seal is a device made to either emboss or imprint certain company information onto documents. This information usually includes the company's name and date and state of formation. Dissenters Right A right granted to shareholders that entitles them to have their shares appraised and purchased by the company if the company enters into certain transactions the shareholders do not approve of. Fraudulent Conveyance A contractual misrepresentation of the nature, quantity, or existence of transferred assets. It is denoting potential risk for sellers and lenders. Fractional Share Ownership in a company in an amount less than a full share. Fair Disclosure The release of all material, market-influencing information to the public at the same time. Good Standing A corporation is said to be in good standing when it has remained current with the necessary reports and fees required by the regulatory jurisdictions under which it operates. Quotations Humility and courtesy are acts of piety -Hazrat Muhammad (SAW) Kindness is a mark of faith; whoever hath no kindness hath no faith - Hazrat Muhammad (SAW) Donâ&#x20AC;&#x2122;t worry when you are not recognized, but strive to be worthy of recognition - Abraham Lincoln Ethics in business is extremely important; your reputation is all you have in life - Sir Freddie Laker You must be the change you wish to see in the world - Mahatma Gandhi

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March 25, 2014

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Profile for ICSB Bangladesh

ICSB Journal January-March 2014  

ICSB Journal January-March 2014  

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