| Unlike the case in advanced economies, where | | | | stock options to risk management, from the board of |
| Corporate Governance has in recent years dominated | | | | directors' composition to the decentralization of |
| the political and business agenda, only few Middle | | | | decision-making process. |
| Eastern publically-listed companies have Corporate | | | | Crafting and introducing into practice effective CG |
| Governance in place, albeit a number of governments | | | | policies are important, but encouraging the right culture |
| are considering enforcing it. This article highlights the | | | | is paramount. Senior executives need to set the |
| need for such important policies. | | | | agenda, not least in ensuring that board members feel |
| Corporate governance (CG) is a set of systems, | | | | at ease to participate in open and worthwhile |
| principles and processes, about how companies are | | | | discussion. After all, not all board members need to be |
| directed and controlled, it regulates the way boards | | | | finance or risk experts, however. The primary task for |
| manage the running of a company by its executives, | | | | the board is to understand and approve both the risk |
| and how board members are accountable to | | | | appetite of a particular company at any particular |
| shareholders and the company. This has a direct | | | | stage in its evolution and the processes that are in |
| influence on company's attitude, accountability and | | | | place to monitor risk. |
| responsibility, towards all stakeholders, including | | | | Considering the inverse relationship between innovation |
| employees, shareholders, and customers alike. Superior | | | | and conservatism, governance and growth, a good |
| CG plays a fundamental role in strengthening the | | | | CG can bring benefits to companies, but may impede |
| integrity and efficiency of financial markets. Inadequate | | | | growth. For example, strict CG policies may negatively |
| corporate governance however undermines a | | | | impact mergers and acquisitions deals as a result of |
| company's potential and at worst leads to financial | | | | the lengthening of due-diligence procedures, and |
| difficulties and even may results in fraud. | | | | compromise leadership's ability to make prompt and |
| Well-governed companies usually outperform other | | | | effective decisions. |
| companies and are able to attract new investors | | | | Fundamentally, there is a level of confidence that is |
| whose support can help to finance further growth. | | | | associated with a company that is known to have |
| To ensure transparency in corporate arena, good | | | | good CG. Transparent company's governance policies |
| principles of CG focus generally on publicly traded | | | | are crucial, as long as information is made readily |
| companies with the view to help governments improve | | | | available to investors and shareholders. Beyond this, |
| the legal, institutional and regulatory framework that | | | | the market can deal with the rest, designating an |
| relate to CG. Additionally, they provide practical | | | | appropriate risk premium to companies that have no or |
| guidance and suggestions for relevant entities such as | | | | too few independent directors or too aggressive |
| stock exchanges, investors, corporations, and other | | | | compensation policy, or cutting the costs of capital for |
| entities that play a part in the process of developing | | | | companies that adhere to conservative accounting |
| good corporate governance. | | | | policies. |
| Experiences derived from advanced and emerging | | | | CG is known to be one of the criteria that foreign |
| economies have demonstrated that no single | | | | institutional investors are increasingly depending on |
| framework for CG is adequate for all markets, as | | | | when deciding on which companies to invest in. As far |
| rules and regulations vary greatly from one country to | | | | as corporate transparency is concerned, too few |
| another, so the internationally recognized principles are | | | | companies are genuinely transparent in the Middle |
| not authoritarian or compulsory, but rather made as | | | | East, thus the regional leaderships, board of directors |
| recommendations that each country can amend to suit | | | | as well as CEO's, are encouraged to voluntarily design |
| their traditions and market conditions. | | | | good CG, that addresses the managements' concerns |
| Whilst corporate regulations may lead in part to | | | | over government regulation and strict internal |
| improve governance, which is mainly about how | | | | procedures and how it could adversely impact their |
| companies are directed and controlled, the prime | | | | ability to manage their business effectively. Investors, |
| responsibility for superior governance ought to lie within | | | | board members, and CEO's have to recognize the |
| the company rather than outside it. For example, the | | | | need for trade-off between enhancing corporate |
| balance sheet is the result of structural and strategic | | | | reputation and delivering growth. |
| decisions and activities across the organization, from | | | | |