Ratings agency says there has been a 'lack of progress' in strengthening management and governance practice since 2012
Lagging corporate governance continues to hold back companies in the Gulf from unlocking capital markets and cutting the cost of raising debt, according to S&P Global Ratings.
In a new report, the ratings agency said there had been a "lack of progress" in strengthening management and governance practice since 2012.
S&P Global Ratings analyst Tommy Trask said: "Our management and governance (M&G) scores, which are among the factors we use
to determine our credit ratings, suggest that governance standards among companies we rate in GCC countries still lag those of corporations globally."
He said just two companies (or 6 percent) of the 33 rated in the region have strong management and governance scores, compared to 9 percent for Europe, the Middle East, and Africa as a whole.
Trask added that while M&G scores normally correlate with ratings level, they are well below in the GCC region, indicating that they are lagging behind global peers.
S&P said it believes the main corporate governance weaknesses of Gulf companies are a lack of independence of the board, insufficient oversight and scrutiny of key enterprise risks, and weak transparency and disclosure practices.
"While corporate governance is a key focus area of many GCC corporations, we don't expect change to take place overnight," said Trask.
"Past experience shows that effective governance practices take time to take root in a given jurisdiction and will necessitate a cultural change in the way companies do business."