The capital is aiming to attract 3.9 million visitorsAugust 4, 2015 9:00
Best practises of corporate governance
Over a decade of proper ethical implementation brings success to Dubai, reports DMCC’s executive chairman Ahmed Bin Sulayem
April 15, 2014 2:43 by kippreport
DMCC has enjoyed 12 years of unprecedented success, becoming the largest free zone in the UAE, growing and attracting new economic sectors to Dubai and building a diversified work and residential community. Hard work of DMCC’s management teams and Dubai’s business-friendly, open market environment have allowed us this opportunity. The road ahead can bring 12 more years of success and development if we continue to work hard and Dubai remains a heaven for new businesses to come and compete. Bureaucracy must make way for growth and efficiency in order to sustain Dubai’s growth engines. At DMCC we achieve this through People, Partner and Place – our success is made possible through our strong belief in these values.
Over the years, the success and failure of businesses have been attributed to economic conditions, successful strategies, competent human resources and sufficient capital. Behind all of these elements, corporate governance acts as an invisible hand that provides a framework for the modus operandi of businesses.
The concept of corporate governance is graphically exemplified in nature in the way complex and highly organised systems are developed. Whether it’s a beehive or an ant colony; in nature, animal ecosystems work on the basis that different members of the system have distinct responsibilities that contribute to the growth and development of the colony. Animal colonies may be self-governed based on their instinct; corporate governance is the way in which we regulate behaviour of a system such as a company.
The OECD has stated the principles of corporate governance “involve a set of relationships between a company’s management, its board, its shareholders and other stakeholders… corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.”
Some of the biggest corporate scandals that have occurred in history are directly linked with poor corporate governance. Recent problems include:
Now precious metals have also entered the fray as accusations mount regarding manipulation of the London price fix. Unlike bees or ants, humans do not seem to have an instinctive drive to do what they are supposed to do; if there is an incentive to cheat, cut corners or ‘strategically synchronise bidding strategies’ then there is a chance we will enter into these activities. Good corporate governance practises help by protecting the interests and ethics of a company even from its own employees.
The London gold fix is not broken and regulators have not yet found or disclosed evidence of manipulation. However, media reports have referred to the gold fix as archaic, laborious and methodologically weak. These are the gaps or weaknesses in the market where DMCC tries to intervene and provide fit-for-purpose infrastructure to deliver improved solutions. The Dubai Gold and Commodities Exchange has announced the introduction of a cleared spot-gold contract in the coming months; this platform will provide all gold traders with an improved mechanism to access physical gold or get liquidity in the world’s busiest physical trading market. Gold miners and other entities still relying on the fix to settle their commitments should soon have a more transparent and accessible platform to support them.
In Dubai corporate governance is an important aspect of any business; the government has been continuously engaging with the public and private sector to push this to the top of executives’ agendas. In the Arab world the principles of ‘Halal´ (Islamic way of life) are applied to business, which, has made corporate governance a strong value in the boardroom. More broadly, emerging markets have recognised how there is a strong link between good businesses and good corporate governance. For DMCC it is a priority to see that entities within its free zone are capable of implementing good business practises based on sound fundamentals.
DMCC established the first UAE Kimberley Process office in the Arab world allowing the responsible trade of rough diamonds to be possible in the UAE. The Dubai Diamond Exchange (DDE) was setup in 2004 providing a global governance framework and arbitration mechanism for diamond traders in Dubai. DMCC is also the owner of the Dubai Good Delivery (DGD) standard, which since 2005 accredits all aspects of a refinery’s operations including areas such as due diligence, and health and environmental practises. Since 2010 DMCC has been training companies on the implementation of current AML and CFT policies while developing a broader framework for responsible sourcing, which was rolled out in 2012.
Good corporate governance creates a transparent business environment that stimulates positive performance, increases market confidence, generates high returns and profitability of companies and, in turn, leads to higher productivity and economic growth.