Establishing sound corporate governance is the route to attracting sustainable sources of foreign investment and a raft of other competitive advantages according to global management consultancy Hay Group, which has published a new report on the subject. Hay Group supports the view of Hawkamah, the Dubai-based Institute for Corporate Governance, in that the region is still overlooked by global investors despite its promising growth prospects.
Marginalisation of companies in GCC markets by some international investors is attributed in large part to a perceived lack of sound corporate governance, meaning investors feel they do not receive the protection and transparency they require. In order to build trust in the integrity of GCC markets, companies need to instill good practices that go beyond a 'box-ticking' exercise according to Richard Lamptey, Head of Executive Reward at Hay Group:
"Without the liquidity of 2007 and 2008, companies are increasingly looking further afield for investment. Strong corporate governance provides the reassurance that investors need in order to make that investment. Elsewhere in the world corporate governance is integrated into the investment process and regional organisations need to take this on board if they are to operate at a truly international level."
Lamptey, who contributed to Hay Group's report 'Corporate Governance - taking the pulse', says that corporate governance is an opportunity for companies to make their business more attractive in many ways:
"Corporate governance is fundamental to the way an organisation manages itself. Sound governance is an opportunity to make a business more attractive to investors but also to engage the Board, build brand integrity and gain a competitive advantage. A Board whose activity is open to public scrutiny is a Board that is going to be active, meeting regularly, driving the business and providing direction to the CEO.
An engaged Board that can mentor the CEO and provide guidance on how the strategy will be delivered is a great source of support to the senior team. In this region we don't often come across that close relationship between CEO and the Board but we are starting to see signs of it as stronger governance takes shape."
Corporate governance also filters through to the wider workforce and helps to build the employer brand according to Hay Group. Open, honest and transparent communication has been pushed up the corporate agenda in the next 18 months:
"If the whole business has a clear vision of where the company is going and the Board is openly acting with integrity it helps to build trust with employees. The Board directors should not underestimate the influence they have over corporate culture and this is a key finding in our report." said Lamptey.
As well as culture, Hay Group's new global report on corporate governance says that acknowledging the diversity of boards internationally is important. Lamptey added: "Businesses tend to survive because they are different from their competitors, but it is not only differences in products that matter, so do structures, strategies and ownership. A single regulatory approach cannot accommodate all of them."
Lamptey concluded: "Regional governments are increasingly recognising the need for robust corporate governance and it is encouraging to see the Abu Dhabi Stock Exchange leading the way with its recent disclosure of executive pay. New levels of interest in the topic have prompted Hay Group to incorporate Non-Executive director pay and Board practices in our annual Gulf Executive Compensation report for the first time."
About Hay Group
Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 84 offices in 48 countries, we work with over 7,000 clients across the world. Our clients are from the public and private sector, across every major industry, and represent diverse business challenges. Our focus is on making change happen and helping organisations realise their potential. For more information, please visit www.haygroup.com/uae.
For further information:
Miss Joanne Rogers
M: +971 50 554 1663
E: joanne.rogers@haygroup.com
© Press Release 2012
