“One should not be too harsh, things are changing, but more effort and time will be required. Governance is an answer to a question, or to a set of questions – and one ought to know and be clear on what these questions are, and how they can best be answered, including what contribution must be made through changed regulation.”

“So far in the Gulf, a lot of changed banking regulation has been discussed – but then, somehow, banks were exempted from particular regulations.  This is one area where it will be useful for a clearer governance regime to exist.”

Governance is a cultural process

The trend towards more stringent corporate governance in the Middle East predates the economic crisis. It began in the early 2000s in response to an evolving financial sector, a shift towards market-based economies, international competitiveness and, in the case of family entities, a desire to shore up succession planning and create strong sustainable companies for future generations.

 “Successful companies want to internationalise,” insists Leonardo Peklar, Hawkamah’s current CEO, noting corporate governance is the noblesse oblige of the business world.

“Some people still understand corporate governance as a window dressing; they would like to do it as fast as possible but that never works. It’s a process, you have to embed it, anchor it in your culture.”

Capital market regulators and private sector-backed regional initiatives like the Hawkamah Institute and the Pearl Initiative have been instrumental in moving corporate governance across the Middle East and North Africa, from a vague idea into practice. They promote awareness and provide a “how-to” guide and a platform where companies and regulators can share ideas and their experiences implementing policies in the boardroom and workplace.

Family governance

For family businesses, the case for better governance is gaining traction as companies move into the third or fourth generation – a period when problems start. In the Middle East around 45 percent of companies still maintain a family-only board and with dozens of cousins involved there is great complexity in the algorithm of running the business.

Families have always looked with concern to demands for more board “independence”, notes Van der Heyden. “The challenge is to make families firms - whether they are European, Singaporean or from the Gulf - understand that having outsiders who are not afraid to speak their mind leads to better business decisions.”

The introduction of very basic policies relating to dividends, employment of family members, investments, conflict-resolution and boardroom composition will give companies a much greater chance of sustainability, adds Peklar.

Influence runs deep

The Hawkamah Institute provides analysis, research and technical assistance to family firms and other companies and governments looking to introduce better corporate governance policies as well as providing training programmes and workshops to put governance concepts into reality. The Institute’s influence is deep. Its white papers and annual conferences have, on at least two occasions, coincided with the release of pivotal laws influencing corporate governance: legislation on board composition requirements in the United Arab Emirates and the introduction of a corporate governance code in Qatar.