Corporate Governance : Transparency & Conflict of Interest

Corporate Governance

Present Day Scenario & Needs
Transparency amidst board members and greater demand for individual accountability has become a must for Arab Companies as the economy is adopting a market based approach.

“Corporate Governance” the term did not exist in the Middle East & North Africa either in the government books or Arabic terminology as the areas primitively housed companies and enterprises which were owned by individual families or states.

In order to run modern day businesses few elements like transparency and conflict of interest were absent, as the companies carried out unorganized and self-restricted policies without adhering to the social elements.

To the positive side of things, in present day scenario 14 out of 17 economies present in the middle-east have adopted “hawkamah” a term which refers to “governance.” However the economies that are in transition on the political and economic fronts, the process of adopting corporate governance has not yielded positive results.

Mismanagement In The Times Of Crisis
Economists and Lawyers have mentioned that a change in the policies could have saved the country from the blemishes it has borne. In such critical times instead of focusing on the economy and financial stability, the main focus was emphasized on politics.

Nasser Saidi, the founder of Hawkamah Corporate Governance Institute and also a former CEO of the same, expects positive results post the establishment of Hawkamah, but is realistic in his approach as such social changes cannot take effect overnight and take time to deliver flourishing results. The countries of Asia, Latin America and Easter Europe are live examples of the amount of time it takes to implement corporate governance.

Changes on the surface levels can be experienced within 5 years whereas total implementation of the same could well take more than 10 years. It is necessary to garner these changes and adapt to them as whole unit and allow the roots of better corporate habits and policies to strengthen up. In this manner the corporate governance can be made stable and long lasting.

It is human nature as people instinctively revolt against changes even if they are meant for their own good. Adopting a harsh approach to the changing times will only add obstacles on the road to a more stable and flourishing economy whereas an adaptive and accepting approach will make the process take full effect in a shorter span of time.
Corporate Governance
The role of banking practices has been minimalistic or in fact using the term negligible would not be wrong. The need for more banking transactions is a vital part of transparent governance and business operations.

Raising Corporate Governance
As a small child is brought up instilling and imbibing the family norms and culture in him or her, similarly corporate governance needs to be dissolved in the country as a part of integral organizational culture. The success stories of various companies are inspirational to many organizations across the world. Becoming successful is not that easy, sustaining the success is what really makes up for huge enterprises. Reliability and stability are tagged as a part of the organization only if the company policies and corresponding performance are at par over a considerable stretch of time.

Strict adherence to Corporate Government or Hawkamah in case of Gulf companies is necessary to sustain and build upon the achieved success across the span over of years. Government support and initiatives is a key for implementation of Corporate Governance in any economy. As Hawkamah is a relatively new term for the companies trotting down different paths since previous generations, government have issued instructions and manuals in order to assist the companies for making the transition process easier to adapt to.

Installing corporate governance is a process and faulty procedures adopted by some companies to establish the same in hurried manner need to be corrected by the government.

Dominance Of Family Governance
Family dominance in decision making is a common practice observed in the companies from Middle-East & Latin Africa as major business entities are running in the hands of 4th or 5th generation of the families. Presence of cousins and other family members often act as a barrier to installing corporate governance as the need for transparency becomes a hitch among family members.

In order to remove such hitches, inclusion and presence of third parties who are not afraid to share their views or counter the word of the chair helps to achieve more profitable decisions and also eliminates redundancy and thumb rule oriented business thinking where the word of the chair is the end of a discussion.

Thus, in order to ensure correct and effective growth of corporate governance organizations need to move out of the protective shades of dominant family governance. Newer ideas are needed in accordance to the changing dynamics and realms of business and corporate governance allows space for the same.

Hawkamah Strikes Chords Deep Within
Corporate governance bodies like Hawkamah Institute provide maximum support to the companies trying to instil the same within their work culture by providing in-depth analysis, research assistance, technical assistance and training. These tactics help the companies to correctly adopt corporate governance and incorporate it as a part of the routine process. The success of such assistance by Hawkamah has been linked with various reforms brought about in the political and economic policies of the UAE.

In order to attract investors in present competitive market scenarios, use of new age techniques like presentations, impressive stationeries and corporate identity is a must have. Investment amounts and investor/shareholders interests go hand in hand in direct proportions.

ESG Pan Arab Index was brought into existence in 2008 and it aims at attracting the investors and bringing maximum profitability to the leading 50 organizations listed with the index. The growth has been prominent and is encouraging for other companies to list themselves with the index.

Approach Shift
There are growing emphasis on the need to shift the approach of the organizations from shareholder oriented to board of directors oriented. This approach promotes the healthy decision making which companies interest in mind and not the interest of individual shareholders. Short term success orientation creates a blind vision towards the changing dynamics of business and the challenges which may surface in the near future.

The focus is to promote a healthy board room atmosphere, surface transparency among the shareholders and allow the organizations to expand in a systematic manner.