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Leader
Biography

Mr. Hussain Dawood is Chairman of Dawood Hercules Chemicals Ltd., Engro Corporation Ltd, Karachi Education Initiative/Karachi School of Business and Leadership and the Pakistan Poverty Alleviation Fund, which is, globally, the largest World Bank financed social fund. He also serves as a member of the Boards of the Commonwealth Business Council, Pakistan Business Council,

Pakistan Centre for Philanthropy and Beaconhouse National University and is on the Board of Trustees of Karachi Education Initiative UK, London and Asia House, London. He is a member of Citizens-Police Liaison Committee & a Global Charter Member of The Indus Entrepreneurs (TiE) and the Honorary Consul of Italy, in Lahore. The Italian government in recognition of his contribution as the Honorary Consul of Italy in Lahore conferred upon him the Ufficiale Ordine al Merito della Repubblica Italiana on 3rd July 2008.

Mr. Dawood is the first Pakistani to become a member of the World Economic Forum in 1992. He was also among the limited people who attended the WEF Russia CEO Roundtable 2008. He has also attended the WEF Inaugural Annual Meeting of the New Champions in Dalian, WEF Middle East at Sharm-el-Sheikh and the Dead Sea and WEF Meetings in Malaysia and Singapore. He has participated in several International Programs including the SAARC Business Leaders Conclave, New Delhi; the India Today Conclave, New Delhi, and the Dubai Strategy Forum. He is a MBA from the Kellogg School of Management, Northwestern University, USA, and a graduate in Metallurgy from Sheffield University, UK.

Exclusive One On One Interview

Knowledge Center Staff: How do you view the current corporate governance landscape in Pakistan?

Mr. Hussain Dawood: In the global rankings of the World Economic Forum, Pakistan is 117th in terms of Board efficacy, 91st for reliance on professional management and 86th in terms of willingness to delegate authority. However, in my opinion, there has been considerable progress in the overall Corporate Governance landscape over the last few years. Based on my participation at the Forum I think some Pakistani Companies have developed a degree of sophistication that is more advanced than the practices in the West. For example, in the US the favoured model is the assumption by the same person of the offices of both the Chairman of the Board, and the Chief Executiveship. Our best companies have clearly and sensibly separated the two roles recognising their entirely differently responsibilities. In a company there are two most important organs - the Board and the Management. Each contributes significantly to the results achieved by the Company. Yet their roles are quite distinct. The Board is responsible, on behalf of the shareholders, to ensure profitable investments of their money. Some of the other responsibilities entrusted by stakeholders are the establishment a framework of governance that will allow Management to perform its tasks, rewards and compensation, oversight, auditing (both external and internal), major capital investments, declaration of dividends, increases in share capital, strategy, long term survival of the company, compliance with the laws, etc. Management's responsibilities within the framework of law and the mandate from the Board, include but not limited to, the earning of profit, security of the assets, establishment of an effective team, strategic planning and performance targets, development of the mission and vision statements, implementation of sound business practices to ensure proper delegation of authority commensurate with responsibility, internal control systems, reputation/brand management, etc. It is self evident that one individual cannot effectively perform both roles of oversight and execution without compromising the role of the Chairman to that of the CEO. However while we feel, in some aspects, we are ahead of the West there is much to be done.

Knowledge Center Staff: What have been the major areas of improvement over the last decade in how companies based in our country approach corporate governance?

Mr. Hussain Dawood: Within the Pakistan market there has been a increasing familiarisation with the concept of good corporate governance and, to a lesser extent, transparency. The process is as follows. Firstly, the acceptance that Corporate Governance and transparency are here to stay. Secondly, as Companies implemented these higher standards, their attitudes about the role of the Board, and the Directors, have changed. Thirdly, those companies that willingly adopted these standards have made their companies attractive to foreign investors. Fourthly, a stage that has yet to manifest itself, is the realisation that transparency and good governance actually adds substantial value to the market valuation of a company. Fifthly, the development of publically listed Holding Companies. Those groups who form Holding Companies will be the leaders in the documentation of Pakistan's economy. Documentation is the foundation for transparency and good governance. On this foundation rests reputation and brand. And a good brand/reputation adds enormous value to the market capitalisation of the corporation. In addition such a corporation can best attract the capital, both debt and equity, which would fuel its growth aspirations leading to further increase in market capitalisation. A good reputation for transparency and good governance makes the corporation an attractive joint venture partner for foreign collaboration. As a bonus such a corporation attracts the best human talent. Lastly, but not the least, documentation contributes significantly to the Government exchequer, and the international brand image of Pakistan. The setting up of Institutions such as the PICG, the increasing interest in the offering of courses in the Business and Management Schools, the involvement of the Stock Markets, professional bodies such as the ICAP, Pakistan Business Council, etc. in the revision of relevant Laws, has resulted in the widespread awareness and dissemination of relevant knowledge.

Knowledge Center Staff: What are the key governance challenges that companies face in Pakistan?

Mr. Hussain Dawood: The dearth of human capital is the biggest challenge. Systems are ultimately developed and manned by people. Unless we have more qualified human resources, good governance will always remain a challenge. in reality the greatest contributing factor to the development of a good governance structure, respected both internationally and locally, is the leadership and example set by the Government. The highest profile act is the appointment of reputable people as the CEOs and as Directors on the Boards of the State Owned Enterprises. Also the non-interference by the bureaucracy, the implementation of proper business processes for accountability and results are minimum requirements for their effective performance. Such decisions would enable the SOEs to become profitable, thus saving the Exchequer hundreds of billions of rupees. These savings, used for Human resource development, could put Pakistan on a trajectory to become a respected member of the international community.

Knowledge Center Staff: Given some recent examples of corporate debacles, what should Boards do that are different? What sort of changes do we need to see?

Mr. Hussain Dawood: The reasons for these international corporate debacles we see are the same as those that impacted the global Financial markets. Greed! Secondly, when the corporate managers join hands to enrich themselves at the cost of the company, their acts are criminal. The first requirement is to make them accountable for their crimes. Our problem is that we don't take action under the existing laws. We certainly don't need new laws. Thirdly, at this time we need to implement the Corporate Code of Governance fully and widely before we try to increase further regulations. After all, the quality of a Board is directly proportional to the. quality of its Directors.

Knowledge Center Staff: How should family owned businesses in Pakistan view corporate governance?

Mr. Hussain Dawood: If the family business is genuinely interested in increasing the value of their shares then they need to embrace any law, code, business process, or anything else which could significantly enhance their wealth. Each family business is as unique as the family owning it. Therefore the principle is the Institutionalisation of the business, whether manned by the family or non-family members. But the principle of institutionalisation can only be based on the concept of meritocracy, without which any business would flounder. The concepts of good governance and transparency facilitate the institutionalisation of the business. Therefore they are in the vital interest of family businesses.

Knowledge Center Staff: What should you recommend as a way forward for family owned businesses to instill strategies to improve corporate governance practices?

Mr. Hussain Dawood: Speaking form the heart, they should embrace the principles of good governance, transparency and institutionalisation with open arms. I am absolutely convinced this is in their vital interest, and the most assured way to progress their businesses, and their families. After all, family members too would appreciate full disclosure of information of their businesses.

Knowledge Center Staff: Thank You.

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