Growing demand for greater transparency and disclosures thanks to Arab Spring
Dubai Corporate governance initiatives in the Middle East and North Africa region are expected to get a big boost from the Arab Spring that saw massive social and political changes across the region, experts said yesterday.
Announcing the agenda of the 6th Annual Regional Corporate Governance Conference, scheduled to be held in Dubai on October 31 and November 1, Dr Nasser Al Saidi, Executive Director of the Hawkamah Institute, said governance has acquired a new meaning for the region with the recent uprisings.
"The desire of people for greater transparency and disclosures from their governments is now acquiring a new dimension in terms of demand for greater accountability from public and private enterprises," said Dr Al Saidi.
Growing awareness of corporate governance in the region is expected to increase shareholder activism in the region, according to Alissa Koldertsova, Programme Manager for corporate governance, OECD (Organisation for Economic Co-operation and Development.)
"The first wave of corporate governance in the Middle East region occurred about ten years ago as part of efforts to attract foreign investments.
Second wave
"Now the region is experiencing the second wave largely driven by regional regulators demanding greater compliance. We will see greater impact of this when shareholder activism begins to drive the demand for governance," said Koldertsova.
According to Dr Al Saidi, greater investor participation is required to drive the governance standards in the region.
"Corporate governance reform in Mena, to date, has not been investor-driven. Much of this stems from a combination of facts such as the ownership structures of Mena companies [mainly family or state-owned], the ready availability of liquidity and financing from regional banks, and the relatively underdeveloped capital markets that are dominated by retail investors," said Dr Al Saidi.
The region is also generally overlooked by global long-term investors largely because of the region's poor track record in transparency, disclosure and reporting.
Regional asset managers such as the sovereign wealth funds have not exhibited governance vigour in their local investment processes and have mainly invested outside the region in order to diversify away from local risk.
"There is an urgent need for greater participation from institutional investors in the governance process. Discussions are already happening in the board rooms of these investment firms to demand more record in transparency, disclosure and reporting," Dr Al Saidi said.
"Currently much of the burden of ensuring proper implementation falls on the regional regulators, but investors, particularly institutional investors and SWFs must play a more active role," he said.
The improved awareness of governance and the risk implications of the lack of it have been prompting many regional firms to adhere to better governance practices.
"Our board is fully aware of the benefits of corporate governance. Now our efforts are focused on making it part of our corporate culture," said Mahmoud Ahmad Vice-President, Board Relations and Corporate Governance Corporate Affairs of du.
Regulatory initiatives by regional central banks and financial sector regulators in the region following the global financial crisis are expected to speed up the governance initiatives.
"There have been serious efforts by regulators to improve the risk management practices in the banking sector. Clearly, this is helping the overall governance standards," said Stephanie Williams, Corporate Governance, CSR and Compliance Officer at Bank of Sharjah.
© Gulf News 2011
