Academic journal article ASBM Journal of Management

Corporate Governance in the Middle East: Meeting Points for the Advancement of Social Citizenship

Academic journal article ASBM Journal of Management

Corporate Governance in the Middle East: Meeting Points for the Advancement of Social Citizenship

Article excerpt

Introduction

Good corporate governance is essential for modern, well-managed corporations. Many Middle Eastern enterprises have reached a stage in their corporate life where improving transparency, professionalizing board practices, and reinforcing shareholder rights have become crucial to their future growth and competitiveness.

Recent interactions in the Middle East clearly revealed the importance of governance, with people recognizing both international governance principles and how such principles fit within their individual cultures. Board functions, board and management relations, and directors' responsibility to act in the best interests of the company they serve (rather than of those who elected them) were all apparent principles.

Fundamental to democracy is citizen participation, the freedom to assemble and the freedom to petition the government. A high level of interaction and dialogue between the state and the private sector on issues of concern increases effectiveness. Business organizations and business leaders must be able to share their positions with the government officials who respect their views. When the private sector advocates for legislative reform to improve the business environ-ment and the country's economy, and the government responds positively, governments in the Middle East and elsewhere are recognizing the positive benefit to society as a whole.

Governance is a journey, not a destination. With the participation and voices of the public and private sectors of all countries, in the Middle East and around the world, we all continue to grow together, positively affecting our companies and our countries.

Corporate Governance has been practised for as long as there have been corporate entities. Yet the study of the important crucial subject is less than half a century old. Indeed, the phrase 'corporate governance' was randomly used until the 1980s. The 19th century saw the foundation laid for modern corporation: this was the century of the entrepreneur. The 20th century was the century of management: the phenomenal growth of management theories, management practices, management consultants, management institutions, management teaching, and management gurus, which all simultaneously reflected a pre-occupation with different styles of management. Now the 21st century promises to be the century of thinking on the subject of governance: As the focus swings to the legitimacy and the effectiveness of the wielding of power over corporate entities worldwide. Governance issues arise whenever a corporate entity acquires a life of its own, and the basis of ownership of an enterprise is separated from its management. A much quoted comment by Adam Smith shows that he understood the issue of corporate governance, "The directors of companies, being managers of the people's money than their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartners frequently watch over their own" (Smith 1776).

New Concepts of Corporate Governances

Overall, corporate governance continues to evolve. The metamorphosis that will determine the bounds and the structure of the subject has yet to occur. Present practice is still rooted in a 19th century legal concept of the corporation that is totally inadequate in the emerging global business environment. Present theory is even less capable of explaining coherently the way that modern corporate organizations are governed and worked. The recent financial crisis prompted by the securitization of sub-prime mortgage loans in the United States, which led to the collapse, takeover and, in some cases, nationalization of banks and other financial institutions around the world raised some fundamental corporate governance issues.

There are few questions rise up in my mind:

* Where were the directors of these failed institutions, particularly the independent directors who were supposed to provide checks on overenthusiastic executives? …

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