NUML UNIVERSITY OF MODER LANGUAGES

ISLAMABAD

Department: Management
Sciences

Name of Assignment: Concept Statement

Full Name: Areeba Naeem

Roll No.: 368 Sections: Mcom-3
Subject: Entrepreneurship DOS: 17/04/2021

Submitted to: Syed Zaheer Abbas Kazmi

Q. What role is each of the rainbow friends playing?

There group was named as rainbow and such name actually represents there cause of association.

R = Rasheed A= Afzal I= Iqbal N= Naseem B= Basit O= Omar W= Wahid

1. Rasheed:

 He was an executive vice president in an investment bank.

 He was responsible for making investment in the equities.

2. Afzal

 After graduation he joined the spinning mil in Faisalabad.

 His family acquired a significant interest in the holdings of the chemical company but these
holdings were not as much significant to be elected on the company board.

3.Iqbal:

 He works in an brokage firm which is situated in Karachi.

 He was highly specialized in two things:
i. Issuance of financial reports for various listed companies
ii. To determine the position of the listed companies.

4. Naseem:

 He was working in a news paper as the business editor.

 He was very interested in the financial reports of the various listed companies.
 He was responsible for holding shares in the various companies.

5. Basit:

 He was now a director with Chaudhry chemicals ltd, one of the major chemical companies in the
country specializing in production & chemicals.
 His father was the chairman of the company
 Basit served as the director of finance and chairman of its audit committee.
 His family owned 52% of the shares of CCL.

6. Omar:

 He was working in insurance company.

 The insurance company hold 7.2% of the issued shares off CCL.
 He was the general manager of finance and looks after the investments , particularly in the listed
companies.

7. Wahid:

 He was the poet among the group and had no interest in shares and investments.
 He acted as the proxy for his cousin who had 1.8% of the issued shares.
Q. Can these friends bring a significant change in the governance of CCL ? How ?

 Rasheed and Omar:

As they both belong to an investment and an insurance company so the both promised that they
will get their respective employers to exert pressure on the CCL board to improve its governance.

 Afzal:

He actually offered to gradually increase its shareholdings in CCL and to try to become a vocal
shareholder and may be a regular director on its board.

 Iqbal naseem and waheed:

They actually undertook to use their pens for bringing about a positive change in the conduct of
CCL board.

Q. Would u call rainbow a shareholders activist group? Why?

The seven friends met after fifteen years with no idea that they were going to meet each other of this spot
and have such an important common ground to talk about.Each friend in the acronym plays a distinct role
in the CCL.

They have their own personalities and interests that guide them in their outlook towards a business THE
SHAREHOLDERS wanted a truly corporate culture at the company which he felt could come only if
there were professional truly independent non-executive directors on the board. Everyone put their efforts
to the growth of CCL.

 Q. Which of the friends will in your opinion, be more effective ? why?

Basit is more effective because He was now a director with Chaudhry chemicals ltd, His father was the
chairman of the company The second reason is his family owned 52% of the shares of CCL.Also Basit
father was sacrificing the long term benefits for the sake of benefits.
 FINANCIAL DEMOCRACY

How it can be tweaked to liberate family controlled companies

The peoples’ democracy treats all people as equals and therefore gives each individual one vote, the
corporate entities do not treat all its members as equals: the voting right is not assigned on the basis of
one member, one vote; it is assigned to members on the basis of one vote per share.

For example, it has been reported that around 72% of all shares listed at the London Stock Exchange are
held by institutional investors. These institutional investors do not run the companies that they have
invested in; but they do have an interest in ensuring that their investments are profitable, safe and
sustainable. This motivates them to take due care in exercising their voting rights. A non-performing
board can lose several members at the election time.

The situation in developing countries different. Investors in developing countries generally have no long
term interest in listed companies. Most of the listed companies are controlled by either families or closed
groups of friends. These people hold a majority of the company’s shares

The real voting power in the west rests outside the company whereas in developing countries like
Pakistan, the real voting power lies with the internal shareholders. This is the most of the corporate
governance problems in developing countries. For example, if a board dividend payout only from the
point of view of the controlling family, the interest of other shareholders will be unfairly damaged.
Family controlled companies are able to get 100% of directors elected by using their 50% votes, primarily
due to disinterest of, and lack of unity among, minority shareholders.

The only way of voting rights system can work is if it is made mandatory for directors to be elected not
by (of say 75% votes).

Most corporate governance experts believe that presence of independent non-executive directors is the
key to improving the performance of the corporate boards. If we can somehow take the power of electing
controlling families system so , we can expect an instant move better corporate governance.

The big question however is who should be given the power to nominate these INEDs?

 Companies should be asked to “elect” no less than 50% of their independent directors who should be
rotated every two to three years. This version is exists in Singapore and is quite successful there.
 This management board shall comprise of all executive directors. All these directors (including the
chairman of the company) can be elected on the basis of one vote per share.
 The members of the supervisory board should be elected on the basis of one vote per shareholder

Once they get the real power to elect INEDs, they will start attending the AGM and exercising their right
to vote. When they lose their right to elect the entire board, they will start paying attention to the interest
of all stakeholders. And if the elected INEDs do not owe their place in the board to the internal
shareholders, they will be more likely to act independently – and being in the majority at the board, they
can make a real difference.