SPECIAL EDITORIAL FEATURE

History and Significance of PSX
Top 25 Companies Awards

By Raeda Latif | April 2021

raedalatif

In order to honour and recognise companies that have met and exceeded certain quantitative and qualitative criteria, Pakistan Stock Exchange presents a highly regarded and prestigious award to highlight and celebrate their achievements. The companies achieving this distinction have excelled in both corporate governance and financial performance.

The objective of PSX Top 25 Companies Awards is not only to reward and recognise the listed companies meeting criteria of excellent performance, but also to set an example and benchmark for other listed companies to follow. At the same time, the award winning companies are highlighted to local and global investors, as these winning companies have achieved distinction on several grounds, such as dividend payouts, capital efficiency and corporate governance, to name a few of the factors against which these companies are selected.

The Top 25 Companies Award was established in 1978 and the very first awards distribution ceremony was held in 1980. Companies were awarded this accolade based on their notable contribution to the national economy and excellent returns to shareholders. Specifically, a criterion for winning the award was 30% dividend distribution. In 1989, this was amended to include turnover with a weightage of 25% in the criteria. The scheme underwent a change again in 1990 whereby until then there was 40% weightage given to Earning per Share (EPS) as well. This was replaced by Return on Equity (ROE) based on the justification that EPS gave advantage to those companies which have huge reserves compared to those which do not. Over time, the criteria for winning the award has evolved considerably, based on the developing and changing landscape of Pakistan’s economy, business, and industry. More importantly, the criteria for the award have developed over the years, based also on the evolving rules and regulations governing the capital market, business and industry of Pakistan and globally.

Much thought and deliberation goes into setting the standards against which the companies compete to win the award. For the companies which have been recognised this year for having won distinction for fiscal year 2019, there were several standards to meet. These standards included pre-requisites such as minimum distribution of 30% (including at least 15% cash dividend) for the year, trading of 50% shares in the total trading days during the year, and the company not being included in the Defaulters Segment of the Exchange within the year.

Furthermore, the companies were selected based on getting highest marks in categories such as Shareholders Return on Equity, Growth in Operating Revenue, Turnover of Shares, website maintenance and updating, announcement of half-yearly results within one month of close of financial year, compliance with the Code of Corporate Governance, more than one independent director in the Board of Directors and Corporate Social Responsibility.

Going forward, for selecting the winning companies for FY 2020, the pre-requisites include a shortlisting of top 1/3rd companies with respect to their Total Shareholder Return (TSR). Moreover, the criteria for FY 2020 include reporting on Sustainable Development Goals. PSX worked with the UNDP to simplify reporting on the SDGs for listed companies and, through these efforts, a minimum reporting framework was set for companies to report which includes six (6) goals and 32 indicators. This is a lighter version of the original SDG framework. A listed company will henceforth be required to report on at least two of the six SDGs in order to qualify for the PSX Top 25 Companies Awards. Other elements of the updated criteria include reporting on Diversity & Inclusion, Corporate Governance and Investor Relation activities.

The PSX Top 25 Companies Awards is a touchstone for all companies to follow and achieve. The listed companies that win these awards are not only amongst the best performing companies in Pakistan but are also comparable to the best performing companies internationally.