Karachi Stock Exchange: Board Chairman Versus the Board of Directors

Abstract

The events described in this case took place in the year 2010 at Karachi Stock Exchange. Mr Zubyr Soomro, the Chairman of the Board of Directors of KSE, was elected out of the minority pool of independent, non-broker members nominated by the apex regulator, Securities and Exchange Commission of Pakistan (SECP). He found himself caught in a sticky siutation with the board’s elected members over replacing a financial instrument called badla financing or carry-over transaction (COT) with margin financing. Due to pre-existing governance issues within the board, this disagreement turned into a huge conflict leading to demands for the removal of the chairman. The conflict started when Mr Soomro voiced his concerns about the hefty risk inherent in badla financing due to the way it was implemented. The elected brokers who were a majority in the board felt quite strongly that the chairman had gone beyond his authority to intervene in this matter. As the broker community came together to pressurize the chairman to vacate his position, Soomro deliberated the avenues available to him and shortlisted two possible routes. He could either go public with his narrative, using the media to carefully construct a narrative that would point out the pitfalls in badla or he could proceed with a dignified resignation from his post.