Corporate governance is the new buzz word among companies across the Middle East and North Africa (MENA) region as they step up their efforts to find credible independent members for their boards, amidst the rush for initial public offerings (IPOs) in many countries in the region, a new report said.
And it is not only the corporate biggies, but even startups across the region are also increasingly realising the need to have well known names as independent members on their advisory boards in order to be taken seriously by established funds for extending financing, the report by EMA Partners, leading global leadership search firm and consultancy, revealed.
“We at EMA Partners and GoodGovern have been witnessing a higher demand for reputable and credible board members for organisations that are hungry to build sustainable businesses going ahead,” Amarjeet Dutta, Partner at EMA Partners UAE, told Arabian Business.
“This is true for non-listed entities, ‘well oiled’ start-ups and even small to medium enterprises,” Dutta said.
Dubai road toll operator Salik, UAE hospital group Burjeel, money exchange giant Al Ansari and power and utility major Utico are among the latest ones on a long list of companies in the region which have either firmed up or are in the process of finalizing plans for IPOs.
The UAE government has also announced plans for listing of about 10 leading national companies, as part of its efforts to strengthen the country’s stock exchanges.
The EMA report, considered to be the first serious attempt to map the corporate governance practices among MENA companies, said: “It is perhaps unsurprising that nowadays we see a visible shift in which organisations acknowledge that corporate governance structure is no longer only a checkbox but a growing necessity.”
The report said the last 36 months have been the busiest months for companies going public in the Middle East, especially in the UAE.
“Going public is a massive undertaking in terms of establishing robust corporate governance and compliance systems.
“With growing institutional investment, there will be radical pressure on companies to achieve world-class status, especially by putting in place a good and credible corporate governance structure,” the report said.
The report said credible and truly independent company boards lead to ethical business practices, which leads to financial viability which are based on principles around sustainability, accountability, transparency, fairness and responsibility.
“The past 24 months challenged most organisations on business and human capital aspects, and it has been observed that companies who adhered to most of the above characteristics performed well and will continue to push the bar,” the EMA Partners report said.
Prioritizing risk management, laying solid foundations for supervision and focusing on long-term value generation are top goals for most companies.
“Good corporate governance helps companies in these areas, and thereby build trust with investors and the community, which acts as a catalyst for growth,” the report said.
The report also suggested that the board of directors should consist of a diverse group of individuals – those that have skills and knowledge of the business, as well as those who can bring a fresh perspective from outside of the company as well as the industry and not just comprise people who are familiar with the organisation.
The report also pointed out that countries such as the UAE and Saudi Arabia have been in the forefront in the region to frame guidelines for corporate governance in their respective jurisdictions.
In the UAE, rigorous new corporate governance standards for public joint stock companies were adopted in 2020, in accordance with international best practices, with the goal of promoting accountability, fairness, gender diversity, and transparency.
The Saudi Arabian Ministry of Commerce and Investment, in collaboration with the Saudi Capital Market Authority, has been active in developing and modifying corporate governance standards for both non-listed and listed firms.
“Other GCC member nations have also implemented similar exercises, but it appears that the UAE and Kingdom of Saudi Arabia regions are leading the charge toward establishing a world-class corporate governance system,” EMA Partners said.
While Middle Eastern authorities and governments have been implementing severe compliance standards, enterprises have been forced to play catch-up. while holding the fort without materially disrupting routine company operations, the report pointed out.
The MENA region has a total of 2172 listed domestic companies as of 2021, according to the World Federation of Exchanges database.
Follow us on
