The Middle East is bursting with potential when it comes to attracting international investment to the region and promoting business growth, however the need for stronger corporate governance is still prevalent.
There is a common and continued perception that the Middle East is lacking significantly where transparency and accountability is concerned. Five Arab countries were listed in the bottom ten of Transparency International’s 2013 Corruption Perceptions Index. But is it merely perception, or is it in fact a reality?
There is clearly a long, complex path ahead, but the inherent need for stronger corporate governance in the region is not a new discovery. We are in a nascent period of change. The UAE, one of the most globalised economies in the Middle East, topped the Arab world in Transparency International’s Index, ranking 26th out of 177th, with Qatar following closely behind in 28th. Therefore progress is well in-hand.
Naturally, a robust regulatory framework is essential to raise standards of corporate governance. Government regulations must be aligned with ethical conduct, and stringent penalties introduced to alleviate wrongdoing. But strengthened regulations alone won’t ensure that these best practices are adopted, as we have seen even in the most developed markets in the world.
This is where businesses must step up. Private Sector leadership, where business leaders voluntarily work beyond minimum requirements, and entrench an ethos of good governance into their organisations and to those with whom they engage, is key. If well-known businesses can promote best practice when it comes to transparency and accountability, and can demonstrate the inherent value that strong corporate governance has to business, then others will follow. In essence, companies need to first appreciate that good corporate governance inevitably leads to greater success, which will ultimately be reflected in their bottom line.
Transparency leads to increased accountability which in-turn leads to greater levels of trust all along the value-chain. This trust is absorbed by suppliers as well customers forming a greater affinity with these companies, their products and services. Transparency also boosts loyalty among employees as they grow to admire and respect the organisation for which they work. Greater transparency internally will result in greater external transparency, which will naturally lead to increased stakeholder confidence, in turn helping the business to attract capital, customers, business partners, and employees.
If a company can clearly see the business benefits, there is no reason for them not jump aboard the corporate governance bandwagon. It makes perfect business sense. And that’s how most corporate decisions are viewed – from a business perspective.
It won’t always be smooth sailing through to the finish line, and we must all appreciate that positive change takes time and effort. However if best practice transparency and accountability can continue to be embraced across the Gulf Region to help inspire a change of attitude towards corporate governance throughout the Arab World, then we can at least begin paving the way towards a more sustainable economy for the millions of future business leaders of our Region.
As featured in Khaleej Times – Series on Though Leaders, on 9th July 2014.