UAE corporate governance codes aim to curb abuses of power

The introduction of corporate governance regimes around the world was a response to high-profile and well published corporate disasters. In the US you had the likes of Tyco, one of the better publicised corporate governance failures. Italy had Parmalat, India had Satyam, and in Australia there was HIH. No country was immune. One of the common components in all of these cases was the existence of a CEO who over time came to believe that he was the company, and the company was his.

Lack of monitoring

Another common feature of these corporate governance failures was a lack of systems to monitor the exercise of power by CEOs and CFOs. Often these CEOs felt they were getting nothing more than what they deserved. They had built up the company and therefore felt they were entitled to take what they wanted. The obligations that the CEO and the company owed to the shareholders were considered of minor import.

Prior to the implementation of corporate governance codes in the UAE, the emirates were just as susceptible to corporate governance problems as the rest of the world. There are three sets of corporate governance rules in the UAE. One code was issued by the Securities and Commodities Authority (SCA) and regulates companies listed on a UAE securities exchange (Ministerial Resolution No. 518 of 2009 Concerning Governance Rules and Corporate Discipline Standards).

The governance rules do not include the Dubai International Financial Centre, which has its own corporate governance regime in relation to companies listed on NASDAQ Dubai. The third corporate governance regime was implemented by the Central Bank of the UAE (note that one of the exceptions to the application of the governance rules is in relation to entities that are regulated by the UAE Central Bank).

Michael Dalby is a senior associate at Al Tamimi & Company