Corporate Governance in the Middle East
By: JOHN H. STOUT
As a representative of the Center for International Private Enterprise, or CIPE, an affiliate of the U.S. Chamber of Commerce, John Stout recently participated in corporate governance meetings in the Middle East, namely in Bahrain, Jordan, Oman, and Tunisia.
Recent interactions in the Middle East clearly revealed the importance of governance, with people recognizing both international governance principles and how such principles fit within their individual cultures. Board functions, board and management relations, and directors’ responsibility to act in the best interests of the company they serve (rather than of those who elected them) were all apparent principles.
Although the degree of the region’s awareness of basic governance principles is high, the state of compliance with key corporate governance principles is mixed. Various consulting organizations write governance codes for countries as though they apply equally to all corporations. Many principles do apply to all, but the bigger and more public organizations financed by international investors demand a greater degree of compliance. Differences in ownership patterns, development stage, size, and culture also play a role. As smaller, privately controlled companies require additional financing, their governance structures must incorporate the financing parties’ governance values. Above all, robust leadership at the highest level of the company is critical for successful governance in any size company.
Support from the public sector and political institutions with effective policies and regulations sets the tone for the kind of environment that fosters good governance, and ultimately growth, for the private sector. Partnership and dialogue about the rule of law, respect for private property, and fair resolution of disputes are necessary for effective functioning and change.
Fundamental to democracy is citizen participation, the freedom to assemble and the freedom to petition the government. A high level of interaction and dialogue between the state and the private sector on issues of concern increases effectiveness. Business organizations and business leaders must be able to share their positions with the government officials who respect their views. When the private sector advocates for legislative reform to improve the business environment and the country’s economy, and the government responds positively, governments in the Middle East and elsewhere are recognizing the positive benefit to society as a whole.
Governance is a journey, not a destination. With the participation and voices of the public and private sectors of all countries, in the Middle East and around the world, we all continue to grow together, positively affecting our companies and our countries.