Corporate Governance - Quantity Versus Quality - Middle Eastern Perspective. Saleh Hussain

do so inadequately and again only about the past. They give vague, general remarks about the operation of the board but very little about the actual process of such operations. For example, the reports fail to give the number of meetings the board and its committees held during the previous year, the percentage of attendance of the directors at those meetings and changes during the year in the composition of the board, i.e. resignations and new memberships. This is quality information that should be included in the reports. Such information will give the reader solid information on the governance practices within the company, thus providing the necessary guidance to make better decisions.

      •Another piece of important information that is absent in most corporate annual reports is the "Statement of Compliance with Corporate Governance Requirements". The regulators in some countries make such a statement mandatory and call for its inclusion in annual reports. The statement is signed by the Chairman of the board and the Chief Executive Officer of the corporate. The statement normally lists the corporate governance practices that the company complied with during the past year and any plans for future governance enhancements.

      •The related-party material holding in the company and large business transactions between the company and its related parties receive very little disclosure coverage. Only a minimum amount of detail is given making it difficult for interested parties to make quality decisions about future business deals with the company.

      CG Qualitative Issues and Social Responsibility

      The number of corporations around the world taking steps to establish social responsibility divisions or committees is on the increase. As often said and quoted: Corporations are social institutions, incorporated by society for the benefit of the society, and they have no business existing if they stop serving the society".

      These committees and divisions are fashionable, however, it is almost always the case that they believe "it is good to have" not "must have". With such thinking the noble idea of having them as part of the good governance of the company is completely shattered.

      Companies need to believe in the merits of social responsibility as responsible, corporate citizens for social responsibility is everybody's business. Look at the following questions that the corporations can ask themselves and decide why they need to address this very important element of good governance.

      •The purpose of establishing a social responsibility division or committee needs to be spelled out clearly in its charter. Some companies consider it a public relations and marketing tool to attract more business and gain acceptance by the society. There will be a big problem if it is looked at that way only. Society will soon understand such a purpose and shy away from showing interest in the concerned company. The purpose must have sincerity, reliability and a noble approach directed in an honest manner to the service of the society. Society expects to see the positive contribution the company makes to the life of its workforce and their family members and the social needs within the environment in which the company operates. Society will watch the actions taken by the company, not only intentions, and judge accordingly.

      •The membership structure of a social responsibility division must be carefully thought through. Is it enough to leave it to management to handle or does the board need to be represented as well? Will it be left only to senior management or will line management be involved? These questions about structure and their answers lead to a clear and workable structure.

      •The written charter of the division must specify the scope and services of the division and to whom these services will be provided - only to staff members or to their families as well? Any other stakeholders and society interest groups?

      •What is the role of social responsibility within the CG in the company? Is it fully supported by the board and shareholders? The more the board and shareholders support social activities in the company - the more its position is strengthened.

      •Large corporations have led the way in actually establishing a "social responsibility committee" as a board function, the same as other committees like audit, remuneration and nomination. The level of support becomes high, and the commitment and attention such a committee receives assist it to perform its duties satisfactorily. The membership of a board-level social committee should consist of board members, senior executives and representatives of societal interest groups. The voice of the committee should always have the attention of the board as it becomes an important business of that governing body.

      Questions about Qualitative Issues

      Clearly, we have seen that the qualitative issues relating to good corporate governance rest with the people who hold high the governance of companies and institutions and make the soundness and effectiveness of these companies their way of governing. It's their attitude to governance that prevails not their personal interests. Therefore, one can ask the following questions, answers to which will highlight the way corporate governance is regarded and, indeed, practiced.

      •Do I have any conflict with the interest of the corporate which I serve?

      •Do I have all the facts to enable me to make sound decisions regarding the affairs of the company? What did I do to ensure I get the right information and data to help me make the right decision?

      •Are the business decisions I am making on behalf of the corporate based on accurate facts?

      •Are these decisions in the best interest of the company?

      •Are our communications to stakeholders in all matters concerning the company made in a transparent way?

      •Will the decisions made result in the company being seen by all stakeholders as a good corporate citizen?

      •Will these decisions protect the assets and reputation of the company?

      CONCLUSION

      From what we have discussed we can state that CG quantitative issues are mostly requirements of law and regulation. Alone they are not enough. The worldwide corporate failures and financial disasters prove beyond doubt that they are not enough. Qualitative issues that deal with the competencies of human capital are the spirit and soul of the corporate entity.

      The qualitative issues are the basis for the leadership of corporations. Unless the leadership exercises these qualities, the success of corporations can be compromised.

      The board is the leadership of the company and enforces corporate governance good practices. Playing its role in the right way - in a qualitative manner - the board will lead the corporate from one success to another. The opposite is also true.

      The chairman of the board is the leader of the board. His qualities enhance the good practices of governance in the corporate. The CEO is the leader of management. Playing his role as an executor and facilitator, between the board and other management, ensures that the decisions and directives of the board are carried out in the way they are meant to be.