In 2008 in partnership with Standard & Poor’s, Hawkamah created the region’s first ESG Pan Arab Index assessing listed companies from 11 MENA economies. The tradable index comprising the top 50 companies in the region aims to give asset managers an additional layer of assurance when they invest in the region.

“If you want to attract investors you need to have certain reporting standards and if you are in an emerging market which is perceived to have weaker legal frameworks, the argument goes that you have to go the extra mile to instill confidence in your company,” says Peklar.

Van der Heyden agrees. “Weak governance regimes give few rights to investors and shareholders – and that invariably reduces foreign investments.  Of course the question is whether one needs foreign investors: if the answer is no, then the governance regime need not pay attention to the demands of foreign investors.”

Focus on collective decision-making

In 2013, Hawkamah is focusing its priorities in the boardroom, encouraging the move from “shareholder-centric to board-centric governance”.

In other words, a focus on collective decision-making where resolutions are based on what’s best for the long-term growth and sustainability of the company rather than what’s best for the short-term interest of individual shareholders. “It’s a very different dynamic,” notes Peklar. “But fortunately lots of companies are realising that corporate governance is not just window dressing or a mere compliance exercise, it’s really contributing to better strategic decisions.”

Meawhile a case being developed by INSEAD on one of Abu Dhabi’s major banks attests to the strong link between improved governance, better business decision-making, and stronger corporate performance.  “There is no question that good governance pays in the medium and longer term,” concludes Van der Heyden.