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Putting the pressure on progress for corporate governance

Putting the pressure on progress for corporate governance

Investors must push companies for better regulation and best practices, if corporate governance is ever going to move forward in the GCC.

April 13, 2011 12:31 by

  • “While organic and internally driven improvements in governance can go so far, we believe that only pressure from investors will provide for tangible and meaningful long-term change.”
  • “We believe that many GCC banks could have limited their losses if the overall oversight of their activities by the board were more sophisticated. Furthermore, losses in investment banks in Bahrain and investment companies in Kuwait were in our view attributable to an overreliance on the performance of the property or stock markets in the region in a time of economic boom. Both business models either failed to control or underestimated the risks taken by the banks in their activities.”
  • “Meanwhile, we take considerable comfort from the growing sophistication of insurance and other regulators in countries such as Saudi Arabia, Bahrain, Oman, Jordan, and Egypt where global best practice has been sought in the interests of prudential control of rapidly growing local insurance sectors.”

“A good example is Saudi Arabia, which we think may become a model for other jurisdictions if ever uniform insurance regulation is adopted across the GCC, as is often proposed. Insurers operating in the Kingdom have only recently started to be regulated, but the new regulator, the Saudi Arabian Monetary Agency, appears to us to have managed to jump straight to the forefront of both Islamic and supervisory best practice.”

  • “Strong corporate governance practices are not themselves indicative of superior creditworthiness. Nevertheless, we believe that weak governance practices can undermine credit quality.

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