The capital market in Bangladesh has long been blamed for not effectively modernising itself in different areas, including: market development, effective monitoring, surveillance, and trade facilitation.
Experts are often puzzled about how much of this is because of complexities in a delayed policy and regulatory framework and how much is because of stock exchanges' inefficiencies.
Keeping the debate aside, it is apparent that the second part – stock exchanges as the actuating agent of development – has failed to keep up the pace with demand.
After the new commission took office at the Bangladesh Securities and Exchange Commission (BSEC) last month, it had several meetings with bourses to clear the deadlock for which the stock market could not run virtually. It stayed shut for over two months.
The Dhaka Stock Exchange (DSE), the country's premier bourse, itself has had a significant wake-up call at its worst time of financial hardship in decades. It seems, now, to be addressing many long-standing issues that have become hurdles to progress.
The exchange successfully secured a strategic partnership with the Shenzhen-Shanghai stock exchange consortium in 2018 – following its demutualisation in 2013.
Since then, the market has been bearish, and revenue from daily transactions has fallen drastically.
The exchange is still deprived of revenue from its assets worth over Tk800 crore in the new iconic building and the stake at the clearing and settlement company formed two years ago.
Investments over the last decade in market development and IT infrastructure have yet to pay off – although they are costing the exchange around half a billion taka a year for maintenance.
To finance developments and pay dividends, the premier bourse has almost halved its reserve fund from over a thousand crore taka a few years ago.
On top of that, the tax exemption scheme is over in the outgoing fiscal year.
Staffing: The greatest wake-up call
Jobs at the DSE are secured like a government job – plus the exchange employees have yet to face a qualification and performance-based treatment.
Additionally, the employees here enjoy a lucrative private sector pay structure. The exchange pays its top officials as high as banks or large groups of companies do in Bangladesh.
Even office staff, drivers and cleaners enjoy nearly double the pay structure compared to their peers in the private sector.
"However, the worst thing is the teams at the DSE are not delivering as they should and that needs to be addressed. The staff of the DSE bears the exchange's legacy of pre-demutualisation poor processes of recruitment, assignment, promotion that lacks a push for performance," a member shareholder of the stock exchange told The Business Standard.
"Everyone is criticising high salaries at the DSE. However, I oppose that because quality service from qualified executives and professionals must be appreciated. The main problem at the DSE is we are paying a large number of employees who do not deserve the posts – let alone their high salaries," said the second generation member seeking anonymity.
When contacted, Md Eunusur Rahman, chairman of the DSE board, told The Business Standard, "The board believes that there is significant room for improvement in staffing and we have got a committee to look into the matter."
In the first week of June, the DSE formed a five-member board committee, headed by its independent director Salma Nasreen, to assess its staffing and examine relevant matters – including the allocation of manpower, reviewing the pay structure in terms of who delivers what and finding areas where contractors would be sufficient.
The committee is also scrutinising the process of recruitment and administrative approvals for awarding financial facilities to employees alongside checking how temporary posts of three C-level officers turned permanent with the same high pay structure.
The committee was scheduled to submit their report in 15 working days and sources at the DSE said the report may be submitted to the board any day.
Salma Nasreen and Kazi Sanaul Hoq, managing director of the exchange, also a member of the committee, both declined to comment on the matter.
Stock market expert Professor Abu Ahmed, observed, "Before demutualisation, the exchange was a club of members and influential ones competed, using nepotism, to recruit for the exchange. Those employees are most powerful within the organisation despite their lack of quality."
The absence of an effective process for recruitment, appointment, promotion, and performance assessment allowed a large number of incapable people to enter, grow and carry on at the DSE.
They would not even earn one-fourth [of what they earn], had they not been blessed by the DSE and worked for other private sector employers, said a former executive chief of the exchange.
"I tried to wake them [the poor performers] up, but later gave up – learning that they lack the traits and knowledge," he said, maintaining his anonymity.
"A wrong interpretation of the Demutualisation Act appeared became a barrier to overhauling the DSE's staffing. The Demutualisation Act mainly instructed the exchange not to disrupt staffing during the transformation. However, it never meant to block performance-based treatment for the departments," he added.
The Business Standard has obtained some of the DSE's internal documents that reveal nearly two dozen DSE executives – working in posts ranging from entry level to deputy general manager – are from extremely poor academic backgrounds.
Some of them have third classes in academic records, some are dealing and even leading technical tasks to develop a stock market with unrelated college degrees from the social sciences and history. Some of them later managed to come up with private university degrees under question.
One had joined as a typist and the exchange has now rewarded the employee with a post of deputy general manager to lead a significant department.
"If the committee investigates things well, they will find them to be the epicenter of the DSE's inefficiencies," said the exchange's former top official.
The exchange adopted a modern recruitment policy in the late 2000s and the recruitment of some batches, onwards, have rewarded the DSE with some talented graduates in finance, accounting and other relevant disciplines from top universities of the country.
However, they are suppressed within the organisation and frustrated. A number of them have already left theDSE and the remaining ones kept their fingers crossed for a qualification and performance based appreciation.
One of them told The Business Standard, "Some of our team leaders created barriers to our career growth; we would need an additional decade to reach their positions compared to what they had needed."
The exchange created posts for deputy managers and senior managers in 2017.
"The DSE had offered concessional housing and car loans to employees and it stopped as soon as the general and deputy general managers had availed theirs. It is an example of how the young employees are deprived and the seniors are exploiting everything," said the DSE officer.
"The exchange is spending way more on its staff than its peers in this region in terms of revenue per employee. The DSE must identify performers and non-performers," he said.
Another business graduate from the University of Dhaka – who has been stuck in general services departments for years while some social science majors lead capital market functions – said, "I am happy that the board addressed this and I hope they will come up with assessment plans at the exchange. There is a long way to go."