Ideas and Insights

Road to Governance: An overview of Corporate Governance in GCC

Corporate Governance is a framework of practices that helps the board of directors safeguard accountability, fairness and transparency in a company's relationship with all its stakeholders, including employees, clients, lenders, government and community.

It comprises all aspects of the company’s management, from action plans and internal controls to performance measurement and corporate disclosure. Stakeholders, especially investors and promoters, use Corporate Governance as a benchmark to determine the quality of a company’s management and the effectiveness of its governing board.

Global trends in Corporate Governance

Today, Corporate Governance has become the buzzword in boardrooms, academic roundtables and government policy formulation discussions around the world. There is a heightened interest in Corporate Governance in the past few years, primarily due to countries vying to present themselves as investor-friendly destinations. 

Recent studies point to the following trends in Corporate Governance around the world:

  • Growing similarities in governance practices across the globe
  • Shareholders taking a keen interest in influencing governance change
  • Governing boards advocating stronger governance practices
  • Greater focus on environmental, social and governance issues, primarily related to climate change and sustainability

Regional trends in Corporate Governance

As the Gulf Cooperation Council (GCC) countries progress to break traditional barriers and focus on improving depth of cross-border business relations, new codes or guidelines for Corporate Governance are being defined. Companies are enhancing Corporate Governance frameworks and implementing global standards to increase transparency, disclosures and create a favorable business environment for investors.

The need to embrace robust Corporate Governance frameworks is also highlighted by the fact that nearly 70% of the businesses in the GCC are privately held and/or family-owned enterprises. These businesses are typically characterized by centralized and subjective decision-making and therefore, to compete in an era of inter-connectivity and global businesses, they need to exhibit strategic and operational agility.

These family-owned enterprises also need to address the issue of family governance, which is different from Corporate Governance. Such companies need to increase board independence or establish an advisory board of directors. They should have robust governance policies to separate family concerns from business priorities and establish objective criteria for the participation of family members in the business, whether at junior or executive levels.

As a result of growing awareness and establishing Corporate Governance regulations, a beginning has been made. International investments have increased with more companies willing to establish operations in the GCC and companies in the region are expanding in other developed markets.



Disclaimer:
This article/ infographic has been compiled based on freely available information from secondary sources. While PKC Advisory has used sources believed to be reliable, the same have not been independently verified for fairness, accuracy, completeness or correctness. Accordingly, no representation or warranty, express or implied, is made and thus this article / infographic should not to be relied upon or used in substitution of independent due diligence and judgment.