Responsible Business Guide: A Toolkit for Winning Companies

RBG
Responsible Business Guide: A Toolkit for Winning Companies
RBF Pillar 3: Compliance and Disclosure
Allowing a group of persons to conduct business without exposure to individual liability
makes the incorporated company a most potent vehicle of economic activity. At the same
time, this privilege is regulated by laws requiring companies to demonstrate financial
transparency, fiscal prudence, and fiduciary trusteeship through a variety of disclosure
mechanisms.
Compliance Laws and Regulations
Regulatory or legal requirements relevant to corporate compliance and disclosure span a
wide range in Pakistan. 20 The term compliance, in this context, implies conforming to
specific laws, regulations, policy guidelines, or approved standards of performance prescribed
by the authorities. In practice this means a company providing specific data to the authorities
(or to courts in the case of dispute) that demonstrates a company has fulfilled its compliance
obligations consistently and completely.
In everyday business, compliance takes a number of forms, including placing revenue
stamps on attested documents, filing sales tax returns, reporting business data on outflows,
certifying adherence to quality standards for particular products, or signing disclosure
statements for banking or commercial transactions. Financial reporting is the most commonly
understood form of compliance among the business community, because it is the most
closely regulated under law. It includes tax reporting, fiscal controls, labor rights, employee
benefits, health and safety measures, and, more recently, corporate governance and social
investments.
In addition, for businesses dealing with overseas clients, there are international regulations,
particularly within the European Union and the United States, that typically require disclosure
of value, origin, and content, but are increasingly seen to address social responsibility,
environmental safety, and even fair trade and security. These aspects, like financial
accounting, frequently require the establishment of a compliance system within a company
that tracks the entire organization’s operations for specific compliance data at the processlevel
and generates information that can be reported under law. Such a system is often
used by companies to safeguard their internal processes against fraud or misappropriation
by employees or managers and to optimize business profitability by avoiding breach of law
and its costly consequences.
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