The Role of Institutional Shareholders Activism in the Corporate Governance of Pakistan

Syeda Saima Shabbir


This article aims at exploring the role of institutional shareholders’ activism in promoting good corporate governance practices in investee companies of Pakistan .The issue of shareholders activism was addressed exhaustively in the developed countries, particularly US and UK, after the occurrence of major corporate scandals like Adelphia, WorldCom and Enron. These major corporate scandals served as an impetus to the promulgation of the Sarbanes-Oxley Act 2002 which is “considered to be the most sweeping corporate governance regulation in the past 70 years and enhancing the long standing bandwagon for increasing the shareholder power”.Corporate scandals occurring in strong economies like US and UK also triggered suspicions and doubts in the corporate environment of developing countries. Pakistan being one of them also felt a need to provide the country with such a legislation and policies that could secure the rights and confidence of stakeholders. Therefore, in the year 2002, the Code of Corporate Governance (CCG) was issued by the Securities and Exchange Commission of Pakistan (SECP) “to establish a framework for good governance of companies listed on Pakistan's stock exchanges”.The Securities and Exchange Commission of Pakistan made it mandatory for all the stock exchanges to incorporate the provisions of the Code in their respective listing regulations, which was done accordingly. However, still the institutional shareholders owning major shares in the investee companies are contributing minutely towards ameliorating corporate governance environment in Pakistan partly due to their passive role and partly the non-efficacy of the Code and corporate laws.


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