Date of Award
Master of Private Law
DR. Abdullah Hasan
Jassim Ali Salem Al Shamsi
Dr. Kamaran Husain
Due to the recent upheavals and deteriorating global economic outlook, a healthy reevaluation and attention is being focused on the role of corporate governance in global economic and legal debate among policy makers and experts. The urgency has been expedited by the global financial crisis of 2007-2008 ("Financial Crisis") which had negative impact on all corners of the globe. The United Arab Emirates ("UAE") was also affected by the Financial Crisis, albeit in a limited and manageable manner than many other countries around the world.
As a result of the Financial Crisis and its impact, UAE responded with measures to contain and deflect future crisis by focusing on preventive measures to dampen and lessen both foreseeable and unforeseeable negative impacts to local economy.
Among the main responses was the setup of the Center for Corporate Governance by the Abu Dhabi Chamber of Commerce and Industry, to benefit local companies and institutions to enhance their corporate structures and maintain confidence to match the international best practices. The aim has been to encourage the regional companies, particularly those which operate in the UAE to adopt and achieve the aims of the 2030 Economic Vision, international competitiveness, transparency, inward and expansive investments, and economic sustainability.
The importance of Corporate Governance lies on the big role that it plays in boosting investor confidence in the market, stabilizing corporate performance, and generally elevating the economic and legal status and profile of countries in the global arena. Although the UAE is considered a relatively young country having recently celebrated its 40th national day, its proportionate economic weight is considerable and well respected. Therefore, the challenges for young or emerging nations, especially those aspiring to play weighty roles in international economic activities, as the UAE does, dictates that we explore and understand the role of corporate governance, the efforts required to be exerted in the development of corporate governance practice, the required legislations, the likely benefits, and the sophistication and the desired levels of our economic and social progress as a result of adoption of rules from among the best practices, whether internally derived or imported from outside our environment.
The general title of the paper, "The Rules of Corporate Governance in Public Companies in the UAE", was chosen to reflect an attempt and effort to 'jump start" academic and professional debate, discussions, research, commentary, and further studies in this critical and vital area for our economic progress and expected wider and significant global role for the UAE.
Secondly, despite the importance of the subject matter, the available Arabic library resources relevant to this critical topic and practices in the region, and especially the UAE, is lacking. The detailed and great works on the subject matter, mainly from the US, Europe and other advanced countries have yet to be translated and made available in Arabic. Translated works would enable us to make even more serious attempts to craft and adopt our own best practices suitable and commensurate with our social environment, background, and culture, but at the same time maintaining high standards by combining the West's best practices with our own rules and practices derived from among our lifelong social, cultural, and religious practical experiences.
Thirdly, the overwhelming and powerful roles and activities the ever present corporations play in our daily economic and commercial lives have become critical, unavoidable, and essential as they affect major aspects of our social, political, diplomatic, and economic progress in relations with each other, regionally, and globally. Due to their roles and functions, corporate activities and presence in societies are connected with local community developments, progress, and benefits, thus making it essential that their set up, operation, and functions are controlled in a manner that benefits all stakeholders by being transparent and just their operations and the way they are managed.
It is also well known that developed countries with strong economies early on realized the seriousness of applying adequate corporate governance rules to stimulate and enhance interest in local and foreign investments in their markets and industries which in turn have had positive effects on their financial, economic, political, and military strengths in the global arena.
Best corporate governance practices have inevitably meant increased inward investments in the local country's economy due to investors' reliability and confidence in the structure and transparency of their investments in the companies or the countries' general economic activities and outlook.
Therefore, the adoption of best practices of corporate governance for countries seeking to raise their economic activities to the level of advanced and developed countries is not a matter of choice but rather is necessary. It is and shall remain an essential passport to becoming a global power or even a regional economic power, and therefore: a political, diplomatic, military, and influential power player.
The operative practice of advanced and developed countries such as the US, Britain, France, Germany and now the so called BRICS countries (Brazil, Russia, India, China, and South Africa) have shown that enforcement of strong rules of Corporate Governance have become main requirements to attract the largest number of possible investors and shareholders because it is viewed that such jurisdictions are likely to have the legal capacity to maintain market and corporate transparency and judicious fairness in their economic activities and services. After all, good governance in organizations, based on openness, clarity, and honest accountability enhances public trust and civic engagement.
On the other hand, when we view the matter of corporate governance including openness and accountability in most of the Arab and Islamic countries, we are, in most cases, resigned to the fact that the legal requirements for and the enforcement of corporate governance are disappointingly weak and fraught with examples of events, situations, and actions of board and management malpractice, non-transparency in the board composition or decision making, violations of fiduciary duties of those who are trusted with management of public assets, corruptions, failures or bankruptcy of otherwise viable companies, which continue to transpire without adequate legal repercussion or meaningful penalties for those who violate the blind civic trusts granted to them.
Another sign of weak or ineffective corporate governance rules in the Arab and Islamic countries relates to the issues associated with the makeup or composition of the board of directors of public corporations, undertaking of fiduciary duties and responsibilities, inadequate or delayed release of annual reports, toleration of or failure to effectively eradicate corruption, non-transparent conducts and activities related to corporate affairs, and basically general failures to sustain or forcefully promote good corporate values, profitability, honesty, fairness, shareholder interests, and social responsibilities.
Therefore, in order for these Islamic and Arab countries to achieve similar level of corporate governance activities, or even exceed those of the so called developed countries, we must adopt honest, complete, fair, and socially recognizable best practices for our corporate trustees, their enforcers, and those who deal with them.
There is no one specific or unified corporate governance system that fits all jurisdictions, or their social values, or cultural nuances. There is no solution in carbon-copying any one of the developed countries' model that would satisfy our cultural and economic requirements, nor would wholesale adoption of certain market and corporate rules and regulations resolve our unique civic expectations, responsibilities, social environment, and most importantly, our basic inseparable religious practice and duties on matters of commerce and economy.
In light of these facts, it is not surprising that most of the aspects (if not all) of best practices of corporate governance enumerated in this paper may be derived directly from Islamic principles and practice, and Teachings of the Prophet (PBUH) associated with human relationships, trading, commerce, dealings, compact, contract, and economic activities. These principles and activities involves adherent to and strict compliance with fairness in contract, taking responsibilities of what belongs to others, fiduciary responsibilities, honesty in dealings, openness and not to revoke our promises, accepting and embracing personal liabilities during lifetime and hereafter, and other similar principles derived from other sources including those from the advanced countries, BRICS, IMF, OECD, and others which are compatible and essential to honest dealings.
Therefore, societies such as ours may opt to apply and fulfill the principles of best corporate governance practices that are directly sourced from enumerated religious practice and faith along with compatible international best practices. The solution for achieving a uniformed, complete, transparent, and fair corporate governance principles and practice reside in adopting the readily available general tenets of our faith associated with best human values and behavior including steadfast stand against all forms of: corruptions, unfairness, excessive materialism, selfishness, greed, cheating, misleading action or misinformation, circumventing personal accountability, illicit gains, betrayal of or trampling on the rights of others, and similar disdainful acts.
Hamad AI Ameri, Salama Hmoud, "The Rules of Corporate Governance in Public Companies in the UAE" (2012). Dissertations. 68.