In this article, the ethical perception of seventeen high ranking executives from the UAE is analyzed. Specifically I assessed their perception of corporate governance and ethical practices within their respective companies and industries. Questionnaire responses revealed a high level of involvement with charitable organization, mostly the Red Crescent and Ramadan based charities. Responses also revealed that ethical systems varied widely in their structures and level of involvement. They went from very sophisticated to non existent. In some cases, there was neither a system to report misconduct nor actions taken against it.
All but two respondents indicated the presence of board of directors, with half of them comprising independent members. However, only four respondents indicated companies had a conflict of interest policy. There was a high degree of consistency when it comes to Worker Health and Safety standards adopted by firms, which is mostly due to the strict regulation of labor issues. All interviewees reported being aware of at least one type of misconduct within respective industries, which is probably a reflection of the quality of the ethics system in place. Cited the most were lies to customers and discriminatory practices -racial, gender, and age related. They were followed by payment or receipt of bribes, theft of confidential information, and sale of defective products. The implications of these findings are discussed and suggestions for future research are presented.
Key words: governance, corporate governance, business ethics, corruption, development, Foreign Direct Investment, Middle East and North Africa, Dubai, UAE.
The UAE is an emerging market that is going through deep changes socially, economically, and to a lesser degree politically. Economically, it has moved from a relatively undiversified, closed and inward-oriented economy to an outward oriented, open, and diversified one. Due to its phenomenal economic growth over a record period of time, the country has become a key focus for international corporations and more recently for personal and institutional investors.
This paper posits that this fast paced transformation and modernization of markets, infrastructures, and institutions was not followed by an equally diligent adoption of proper governance practices and business ethic standards. The UAE economy is characterized by a high concentration of ownership in the hands of government and/or families. The financial system is in most part bank-intermediated with very little reliance on capital markets to raise funds. Neither firms nor banks within this relationship-based system, as opposed to a market-based system, feel the need to develop corporate governance mechanisms, since the former are able to rely on banks for continued financing and the latter feel relatively comfortable under explicit or implicit government guarantees. This has led to a marginal role of institutional investors, and less incentives for disclosure and accountability. While this is true of most emerging markets, the UAE has the added feature of being a tax-haven. Under the Commercial Companies Law and the Commercial Transactions Code, all businesses must keep financial records but the legislation does not specify the exact nature of such records. Listed companies, which represent less than 0.1% of all companies operating in the country, are required to report on a quarterly basis but the extent of reporting is rather limited and in most part at the discretion of the reporting companies.
It is against this background that a questionnaire was designed targeting top executives within leading business organization in the country in order to get a first hand appreciation of their perception of corporate governance and ethical practices within their respective companies and industries. To the authors' knowledge, this is the first attempt to look at business practices within corporate UAE. …