Board sizes of UAE companies, in line with international standards - TNI Report

The top five families in the UAE represent roughly 17 per cent of total board seats, while the top 10 families represent 25 per cent, according to the latest report by The National Investor (TNI).

Looking at family influence by market of listing, a research report released yesterday found that power is twice as concentrated on the Abu Dhabi Securities Market (ADSM) as it is on the Dubai Financial Market (DFM).

According to the report, prepared by one of the largest investment firms in the region, the top five families of ADSM-listed companies own as much as 24 per cent of board seats, against a little less than 14 per cent in for DFM-listed companies. In the smaller Emirates with a lower number of incorporated companies, the report's findings are opposite to what it concluded for the larger Emirates, where the concentration of power is significantly higher.

There is no legal restriction to having multiple members from the same family sit on the board of a single company. ADSM again leads DFM in terms of power concentration within the hands of few families. In 50 per cent of cases, the report, which was released yesterday by TNI, found at least two directors from the same family on the board of the same company.

In the smaller, lesser populated Emirates with a less thriving economy than Dubai or Abu Dhabi, mainly Ajman, Umm Al Quwain, and Ras Al Khaimah, the TNI report found a high proportion of representation of the same family on the same board. A very notable 11 per cent of listed companies incorporated in Sharjah have five directors from the same family - indicating a very tight family control over these corporations.

Entitled 'TNI Market Insight: It's a family affair', the report's analysis spans 93 listed corporations in the UAE, and reviews the mandates of 569 board directors. 'On average, UAE companies have 7.6 board members with board sizes well clustered around the mean - a satisfactory number by any standard,' said the TNI report. Notable exceptions are Dubai and Ras Al Khaimah which have some occurrences of three-member boards.

Looking at sector clusters, financials, real estate and insurance were the most representative as they account for the largest number of companies. They also appear to have reasonably sized boards (seven to eight members, on average). However, there are instances of noncompliance with an occurrence of 13-member board in the financial sector. Telecoms, energy and healthcare seem to concentrate the highest number of board members (nine to ten, on average), with one instance of 14-member board in the energy sector.

The next thing the report did in analyzing board composition was to look at the aggregate total number of board members, and compare it to the total number of available board seats. The report revealed that there are 569 directors for 703 available seats in the UAE, an overall cross-membership level of 19 per cent. ADSM and DFM are at par with each other, with a ratio of approximately 84 per cent suggesting some 16 per cent cross-membership.

'There is no visible breach of the UAE compliance code - i.e. no director sits on more than five boards, and best-in-class behavior seems to come from the smaller Emirates (again!). Abu Dhabi and Dubai, although operating within the legal framework, remain compliance outliers and show the greatest proportion of multiple mandates,' the report pointed out.

The report concluded that board sizes of companies listed in the UAE are broadly in line with international standards and that there appears to be lower cross-memberships than expected. It also concluded that smaller Emirates are more compliant and that board composition looks fine.

The report mapped and presented what are believed to be the most influential families within the UAE public sector. It found that family influence is more fragmented than anticipated and that companies incorporated in Abu Dhabi concentrate more family power than those in Dubai.