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"Management's role is to manage the company, the board's role is to govern that company. In that respect, effective boards provide their companies and the people that manage them with a tremendous resource, which takes the form of experience, expertise and knowledge, but also insight, foresight and hindsight," says Al-Morished.
The challenge, though, is daunting. Businesses across the region still have far to go. In 2009, the BDI ran a study of 200 publicly listed companies in the GCC and found that disclosure and transparency levels of most of the companies was low compared with standards in Europe, North America and Asia. For example, only about one-quarter of the companies disclosed the number of board meetings they hold every year, compared with 100 per cent of European and US companies.
Bad boardroom practice is endemic in many firms. According to a survey by Hawkamah, the UAE-based Institute for Corporate Governance, 42.3 per cent of companies in the region still combine chairman and chief executive officer (CEO) functions.
Growth in GCC public companies creates momentum
As the BDI's 2011 review of GCC board effectiveness, entitled A Life-long Journey, implied, change is evolutionary. "It takes time to hone the skills and develop the mindset of a truly effective leader, but you need a starting point," says Al-Morished. "You can build skills and open eyes in just a few days, and we see this all the time in the BDI workshops, which bring the best faculty [members] and practitioners from all around the world."
The pressure for change in Gulf boardrooms is insistent. The BDI forecasts the GCC will have 1,000 public companies by 2015, from about 725 in 2011, creating a momentum for reform that the region's business culture - still dominated by family businesses - will find hard to resist.
That driver for change is given added strength by the shifting global economic climate. Although many GCC corporates were shielded from the financial crisis that afflicted the European and North American economies, they cannot afford to hide their heads in the sand when it comes to adopting best corporate governance practice.
"Companies such as Sabic are not dependent on the local market; we are exposed to the global economy," says Al-Morished. "Our sales in Europe or the US can't be shielded by high oil prices. Here, the board can be helpful in challenging management to think outside the box." Sabic, with physical assets spread around the world, has made sure its corporate governance standards are as robust as any jurisdiction within which it operates.
All Sabic subsidiaries have audit and remuneration committees and independent directors, as well as separate CEO and board chairman posts.
"All our publicly traded affiliates have one-third of board members as independent - that is, not from Sabic. We bring in some members from diversified backgrounds, some from a financial background, some from universities, some from the legal profession," says Al-Morished.
The results are immediately obvious, he says.
Staff
