Report raises concerns over listed companies failing to provide clear corporate governance policies
The study, by compliance consultancy firm The Red Flag Group, looked at information released by UAE listed companies and scrutinised how they adhered to generally held corporate governance standards. These included the publication of codes of conduct and information on compliance officers. According to the findings, 61 percent of companies in the UAE polled had failed to mention whether they had a designated Chief Compliance Officer, while only one in ten companies had committees that took care of compliance issues.
Companies from Dubai and Abu Dhabi were failing to provide all this information, and fell well short of companies listed in cities like Singapore, London and New York. Although some work had been done toward improving compliance issues, more should be done, according to Red Flag’s chief executive Scott Lane.
He told the Financial Times in April: “UAE companies have adopted compliance to some degree, appointing compliance officers, but there is a lack of clarity on their roles, and they are not very senior. Compliance is still about ticking boxes.”
In the report, Lane says it is through good corporate governance that shareholders confidence will return: “The findings of this report suggests that companies are unaware of the importance of openly disclosing compliance measures. It appears that the Code of Conduct, for example, is viewed as an internal document.
New anti-corruption rules
Red Flag’s study comes as the UAE’s State Audit Bureau sets about drafting new anti-corruption laws to improve the reputation of their domestic companies on a global stage. Lane adds that companies should seize this opportunity to address their corporate governance failings: “In light of the imminent anti-corruption legislation, there is an even greater emphasis now being place on the need to form and implement proactive and engaging compliance programs. These will, in turn, help the companies gain a competitive advantage by instilling confidence amongst stakeholders.”
Lane adds that compliance can offer companies in the UAE an advantage, and should be seen as more than just adhering to strict regulations. However, companies were not realising this quite yet: “They are yet to use compliance as a competitive advantage, to build ethics into their reputation as something of real value.”
International companies, and certainly those from the US and Europe, are following stringent compliance rules in order to avoid the sort of corporate scandals that have harmed reputations. Such is the concern that these companies now insist on their global partners to abide by similar standards. Lane adds: “European and US firms now expect their suppliers to follow the same standards so their agents do not tarnish their reputation.”