A culture of good corporate governance and enhanced financial transparency is essential for emerging economies in the Middle East, says Dubai-based international accounting expert Abbas Ali Mirza, Partner, Deloitte Middle East, and current chairman of UNCTAD’s Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR).
As the role of the private sector in Arab economies evolves, greater corporate transparency is required to allow governments, companies, investors and entrepreneurs to react to underlying economic problems more proactively.
Good corporate governance guidelines and practices are also needed to boost investor confidence and further enhance the credibility of regional bourses leading to lower capital costs and increased foreign direct investment (FDI), which is disproportionately low in the Arab world.
“Lower capital costs, increased attractiveness to FDI, and greater financial stability and long-term growth: these are all powerful reasons why corporate governance really matters,” says Abbas Mirza, author of a respected book on International Financial Reporting Standards, titled “Wiley: IFRS 2005”, and the chair of the World Accounting Summit, which will be held under the patronage of the United Nations Conference on Trade and Development (UNCTAD) in Dubai from May 29 to June 1.
Accountants from over 190 countries, including presidents of global accounting bodies and international standard setters, are expected to attend this first-of-its-kind global accounting summit at the Jumeirah Beach Hotel.
High-level speakers and world-class accountants who will address the event include: Graham Ward, President, International Federation of Accounts (IFAC); H.E. Abdulaziz Rashed Ibrahim Al-Rashed, Chairman of the Board, GCC Accounting and Auditing Organisation (GCCAAO); Dr. Habib Al Mulla, Chairman, Dubai Financial Services Authority (DFSA); and Piet Hoogendoorn, Global Chairman, Deloitte
Deloitte’s Abbas Ali Mirza adds: “Enhancing compliance and financial disclosure processes, and ensuring greater independence and accountability of board members, top the list of lasting changes investors expect in emerging economies. The post-Enron accusations have been replaced by more constructive initiatives to strengthen corporate governance. The Sarbanes-Oxley Act, although a US vehicle, has global implications; it has ushered in a new age of accountability requiring even greater corporate transparency.”
Since corporate governance provides rules for board directors and safeguards for stakeholders, it is essential that the regulators monitor compliance through an independent authority. Regulatory agencies around the region need clear-cut corporate governance rules and regulations that should be made mandatory for listed joint stock companies. Furthermore, compliance with these rules of corporate governance and their proper implementation need to be strictly enforced.
Although protecting investors is not an easy task, enacting laws to enforce high standards of disclosure, transparency and corporate governance will minimise investor risk. While corporate laws and regulations may not completely insulate investors against corporate fraud, it sends a message to investors that steps have been taken to protect innocent investors from unscrupulous financial conduct. A good code of corporate governance requires proper implementation and monitoring, says Abaas Ali Mirza.
According to some commentators, corporate governance is not only vital to the private sector in the region. Applying corporate governance practices to government-owned companies in the region will further enhance their credibility; it will also help governments with privatisation efforts and accelerating economic reforms.
“It is clear that the need of the hour is a change in the approach to corporate governance and financial architecture. But corporate laws cannot legislate ‘integrity’ or ‘corporate conscience’. We also need competent, knowledgeable people, acting honestly and being prepared to speak out and challenge when required,” said Mirza.
