Sept 10, 2007 (LBO) – Sri Lanka’s Central Bank plans to enforce tough new mandatory rules next year that include provisions to encourage ‘whistleblowers’, linking executive pay to performance and discouraging the practice of inter-locking directorates. The new corporate governance rules seek to separate the functions of the chairman, who must be one of the independent directors, and bank chief executives, as well restrict the number of corporate boards directors can serve on.
The chairman and chief executive officer should be separate and the chairman should be an independent non-executive director.
It has been common practice in the island’s companies, including banks, for the chief executive to also be the chairman, and for directors to serve on the boards of many companies, sometimes with conflicting interests.
The banking regulator has released the draft of the Mandatory Code of Corporate Governance for Licensed Banks, to come into effect on January 1, 2008, seeking comments from the industry and the public.
Directors and banks have been given a transitional period till June 30, 2008 to comply with the code.
It said the need for banks to follow a common code of corporate governance arose with developments in global corporat