How well developed is Dubai in terms of corporate governance standards?
A lot of work has been done on awareness and getting companies to understand what corporate governance is about. It's been important to educate the market that corporate governance is not just a bunch of controls, processes, and audits. It's not a box-ticking exercise, but is good for helping a business become more sustainable and efficient. And so, what we're finding these days is that companies are more focused on the implementation of corporate governance than corporate governance awareness.
How are UAE banks applying corporate governance specifically?
The focus seems more and more on implementation rather than just awareness. I see a big difference and a major improvement from a few years ago. But we're certainly not where the end goal should be—implementation is not where it ultimately needs to be. I think when it comes to banks, the central bank and the regulators play a very important role. The financial crisis has certainly shown us that in no uncertain terms. The banking sector is absolutely crucial and it's not just about the central banks and the regulators, it's also about how these banks are managed, how they're run, and how corporate governance is applied primarily in the board rooms. We believe that board members of banks play a crucial role and should go through corporate governance training, awareness, and risk workshops.
The 2013 Hawkamah Bank Corporate Governance Award was awarded to the National Bank of Abu Dhabi (NBAD). What is the significance of the awards?
The awards were launched in 2007 and the aim is really to recognize, support, and encourage governance practices in the banking sector. There's an independent jury of international corporate governance banking experts that basically assess each applicant against five areas of corporate governance, which cover commitment to good corporate governance, structure and functioning of the boards, the control environment and processes, disclosure and transparency, and shareholder rights. They conduct one-on-one interviews, encouraging and pushing financial institutions toward better corporate governance. This is leading in a good direction because it is good for the sector and for society.
The Hawkamah Institute aims to guide family business owners in instituting good corporate governance. How are family-owned business acquiring this knowledge and improving their corporate governance?
The majority of companies in this region are family-owned businesses. There's an interesting statistic that I always remember; 95% of family-owned businesses do not survive to the third generation. That clearly says something and we think that corporate governance and what it introduces is a major tool to help these companies survive. Family businesses are important and they're a bit more complex because of family elements; when you're moving to the next generation, it becomes a little bit more difficult. By the time you're in the third generation, where a lot of these businesses are at now, it becomes even more difficult. You get a mix of three generations and professional non-family members running what today have become conglomerates. Some family groups in the UAE, Saudi Arabia, Qatar, Bahrain, and Kuwait are huge conglomerates now; it's no longer a one-man shop. We're finding that we're often being asked to provide workshops on corporate governance awareness and the functioning of boardrooms, helping families overcome challenges. The UAE is already on the corporate governance journey and it has come a long way in the last 10 years. It's now more about implementation and making a push in specific sectors, with a special focus on banks. In Malaysia, for example, it became law that every single board member of a bank has to go through corporate governance and director development training.