The Securities and Exchange Commission of Pakistan (SECP) Tuesday issued basic guidelines for performance evaluation of board of directors, chief executive officers and chief regulatory officers of companies.
The SECP has issued SRO 301 (I)/2020 to implement these guidelines.
Under the guidelines, the performance evaluation of CEO shall be carried out by all the directors based on feedback of the regulatory affairs committee.
Keeping in view the size, complexity and structure of the SRO, the board can formulate its performance evaluation framework in the light of these guidelines, the SECP added.
For the performance evaluation of the board of directors, the board needs to act on a fully informed basis in the best interest of the institution and its stakeholders.
It has overall responsibility to approve and oversee implementation of the company's strategic objectives.
The SECP has issued some of the specific issues/questions that should be considered in performance evaluation of a board.
The board may adopt both quantitative and qualitative techniques, while carrying out the process of performance evaluation.
These may also include informal bottom-up appraisals including the management's perspective on the board's effectiveness, the SECP said.
The chairman shall discuss the results/findings in the final report with the board.
FREQUENCY OF EVALUATION
The board shall annually evaluate performance of overall board, the CEO and the CRO, whereas the same shall be undertaken (facilitated) by an external independent evaluator at least once every three years.
Subsequent to the performance evaluation process, the identified issues, weaknesses and challenges need to be addressed adequately through a proper action plan.
The chairman and the nomination committee shall also formulate the requisite strategies and action plans to address the identified challenges/issues.
Final report containing the results/findings and strategies/plans to address the issues shall be shared with the SECP, the commission added.