by Michael Connor
Even as political regimes in Tunisia, Egypt, Bahrain and Libya deal with ongoing pressure to change or adapt how they rule, a new study suggests that a “second wave” of corporate governance appears to be forming among financial markets in that region.
The Second Corporate Governance Wave in the Middle East and North Africa, by Alissa Koldertsova, a policy analyst for the OECD, reports that less than a decade ago, there was no Arabic term for corporate governance. Today, the study says, only three only 3 out of the 17 MENA countries and territories surveyed – Iraq, Kuwait and Libya – do not currently have any corporate governance code or guidelines.
Egyptian Stock Exchange
The first wave of corporate governance in the MENA region, according to the study, was driven in part by the drive to attract foreign investment, particularly by countries with no petrochemical resources. Another factor was the development of the financial sector in the region. A shift toward “market-based organization,” especially in countries such as Egypt and Syria “only accentuated the trend.”
It is “undeniable” that these governance practices have brought about “tangible results,” the study says.
“Corporate governance, or hawkamah in Arabic, is no longer a term that needs defining, nor is its business case unclear. Even from a family business perspective, the case for better governance needs less justification today than it did only five years ago. This is not to deny that market regulators and stock exchanges across the region continue to face challenges in enticing family-owned companies to list their equity. The reluctance of family-owned firms to open their equity to outside shareholders is perhaps a key factor stifling corporate growth and further development of the region’s capital markets.”
The paper suggests the second wave of corporate governance in the MENA region will focus on “implementation as opposed to awareness-raising.”
“It is impossible to foretell whether the second wave of corporate governance in the region will be as effective as the first. Regulators’ capacity to transparently monitor and enforce breaches of existing regulations, and to fine-tune them when necessary, will continue to be tested…Do regional regulators have the capacity to monitor companies’ compliance and to take enforcement action when necessary? What measures can be taken to further promote the capacity of relevant regulatory bodies?”
The full article is available for download here.
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