Abstract:
This project investigates corporate governance practices in Pakistan, specifically focusing on the
flexibility exploited by public listed companies under the "comply or explain" approach mandated by
the Securities and Exchange Commission of Pakistan (SECP). The research highlights how this
approach allows companies to evade full compliance with the Code of Corporate Governance (CCG)
and opens avenues for agency conflicts, where majority shareholders often dominate decision-making
at the expense of minority shareholders. Through case studies of Suraj Cotton Mills and High-Noon
Laboratories, this project identifies critical shortcomings in board composition, related party
transactions, and audit committee independence, emphasizing how these gaps weaken corporate
governance. The research also draws comparisons with rule-based governance models used globally,
advocating for a more stringent enforcement mechanism in Pakistan. Recommendations include
increasing board independence, improving audit committee standards, and ensuring transparency in
related party transactions to protect shareholders' rights and restore investor confidence. The project
concludes that a hybrid model combining principles-based flexibility with rule-based rigor is essential
to mitigating corporate governance challenges in Pakistan. This solution aims to align managerial
actions with shareholder interests while fostering a transparent and accountable corporate environment.
