Kalpo's Blog

Agency Problem in Bangladesh Agency problem is very common in Bangladesh. It might be inherited in our culture. Most of the young people interested in govt. jobs are looking for secured a job with less challenges in daily work life. They don't want a goal oriented or target driven work environment. Though there are many exception, like defense. law enforcement, local administrative jobs etc. National private companies have mixed job environment. Many organizations are still in primitive stage. They pay the least amount to employees when labor union is very uncommon. Practice of good corporate governance and tools of agency problem reduction is getting evolved in leading group of companies. There is a long way to go in this issue. Agency Theory Under the Principal-Agent theory there is a trade-off between incentives and risk sharing. Managers are motivated to work hard through “high powered” incentives. They are also protected from risk through “low-powered” incentives. For example,...

The edifice of corporate governance includes, among others, board composition, relationship between the board and the management, internal control mechanisms, independent audit committee etc. The OECD principles of corporate governance cover six key areas of corporate governance – Ensuring the basis for an effective corporate governance framework; The corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities. The rights of shareholders; The corporate governance framework should protect and facilitate the exercise of shareholders’ rights. The equitable treatment of shareholders; The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for...

Corporate governance is relatively newer idea in Bangladesh. It became an area of huge interest worldwide after collapses of few giant firms. Ill practice in accounting is one of the main sources of bad corporate governance which ultimately hamper the investors’ interest. Corporations are republics. The ultimate authority rests with voters (shareholders). These voters elect representatives (directors) who delegate most decisions to bureaucrats (managers). There is widespread evidence that good corporate governance is associated with greater firm performance. It is positively correlated with operating performance, market valuation, and dividend payout. the direction of causality is likely to flow from corporate governance to performance rather than the other way round. Numerous studies also find that more specific governance attributes, such as board structure, are associated with higher firm performance. Bangladesh is an emerging economy. The stock market of Bangladesh is said to be re...