Despite investment activity at the Pakistan Stock Exchange now being dominated by institutions rather than individual investors, their presence and influence remain largely absent at the board level of listed companies.
In smaller markets, institutions with a longer-term presence often exert significant influence on company boards, particularly regarding dividend policy. Pension funds, which dominate some markets more than mutual funds, typically require a consistent income stream and therefore play a substantial role in shaping a company’s dividend policy. This influence, however, is entirely absent in Pakistan.
Aside from large companies in basic industries—which often belong to corporate groups and require dividend streams for other investments or to manage intra-group cash flow—most listed companies continue to build asset bases in both listed and unlisted equities, showing little regard for the interests of small shareholders.
In fact, why should any listed corporate entity, primarily engaged in manufacturing textiles, cement, or similar products, continue to hold and expand its investments in listed and unlisted shares of other companies, both within and outside its group? Even if these investments are intended to nurture other entities, they should not remain on the company’s books indefinitely.
The lack of institutional influence reflects a broader governance issue within Pakistan's corporate landscape. Independent directors and external stakeholders, who could serve as counterbalances to entrenched family ownership, are often sidelined. This dynamic not only stifles transparency but also hampers the ability of companies to adopt globally recognized best practices in governance, such as fair treatment of minority shareholders and clear accountability measures.
Owners remain entrenched, and their grip has only tightened with the introduction of share buybacks. This trend does not bode well for the corporate sector, which has failed to evolve beyond its family-dominated structure.