Interview: Maryam al-Suwaidi, deputy CEO, licensing, supervision, enforcement affairs SCA

It will also, she argues, help listed companies to enhance the transparency of and efficiency in their management and performance, which will be to the benefit of the shareholders, creditors and even the employees of the companies.

"This will lead to the development of investment opportunities of these companies and encourage the flow and the development of savings and maximise profitability," says Al-Suwaidi.

"Although corporate governance is new to the country and the region, the SCA ran rigorous awareness and training programmes to smooth the challenging task of introducing this new and elaborate concept," she says. "Listed companies were receptive, although from the companies side, this will lead to enduring extra costs to establish internal control and risk management systems, and to provide the qualified staff to help.

"Furthermore, finding independent and non-executive directors -- let alone the experienced ones in the respective industry - are challenges faced by most companies, as well as to reduce the dominance of the general manager on boards or vice-versa," she adds.

Development is a continuous process, with the corporate governance code constantly reviewed by the SCA to include new practices and to keep up to speed with international developments. The SCA is currently conducting a review programme with listed companies in relation to the code, disclosure requirements and other obligations.

"The most important principle of governance that needs momentum and proper application is the principle of conflict of interest," says Al-Suwaidi. "There is a need not only to state the importance of avoiding conflicts of interest, but to develop specific definitions of conflict of interest, a mechanism to measure it, and steps and procedures to be taken in such cases."

Measures such as the separation of chairman and CEO functions, and the accountability of boards to shareholders, are critical to the UAE financial services sector. "It is common practice to separate the CEO position from the board chair position. The corporate governance code has numerous articles on the composition of the board and the discharge of its responsibilities to help mitigate any conflicts or compromise at the executive and board levels," she says.

The recent financial crisis had pulled numerous corporate governance issues to the surface, says Al-Suwaidi. The SCA's actions have helped limit further damage. "Since many of our listed companies have international operations, they were not immune to the global financial crisis and its aftermath. The continuous cooperation and communication between regulators and the companies helped greatly in mitigating these issues and their effects in a proactive fashion. The occurrence of the financial crisis turned out to be a good opportunity to enhance corporate governance in listed companies and to start helping them to establish internal control and risk management systems."

The challenge now is for the region as a whole is to raise standards to the highest international levels. Cross-border cooperation is a key part of this effort.
"The UAE is an active member of the GCC Corporate Governance forum," says Al-Suwaidi. "Meetings are held at the GCC regulator level continuously to exchange ideas and to put forward an umbrella that would guide the individual regulators in writing, developing and implementing their respective corporate governance codes and goals."

The improvement in GCC corporate governance standards is tangible, says Al-Suwaidi, who in her capacity as a vice-chairman on local corporate governance think-tank Hawkamah's board of directors, is a regional leader in raising awareness in the field of corporate governance.

"For the first time in the GCC, you can find a lot of information about governance and directors through the governance reports that are issued by listed companies on a yearly basis and published on the SCA's website. Now, investors attend the companies' general meetings knowing ahead of time who to elect and what would be the remuneration of executives and board members."

Al-Suwaidi is confident the GCC region in general is moving strongly towards enhancing and developing the concept of governance. Moreover, she argues, great efforts have been made to apply corporate governance best practice in government institutions and entities.

"Not only are family businesses now more interested in applying it, but even not-for-profit organisations and cooperative entities are now looking at governance," says Al-Suwaidi. "There is a continuous development in the concept of governance in that it is not just about good governance and the avoidance of conflicts of interest, but is extended to reflect the success in achieving the positive goals for which the company was established."

This article is part of the GCC Board Directors Institute report, for more information please visit their website