Introduction
The paper is about the aspects or principles of good governance. Five of these principles are identified and explained. One public listed company, Abu Dhabi Commercial Bank (ADCB) in the UAE that conforms to most of these aspects has been identified and supported by facts. The paper further analyses how Abu Dhabi Commercial Bank’s corporate governance policy adheres to UAE regulations, steps for improvement of the same are brought forth. Additionally, the research explains who fills the roles of CEO, Board of Directors as well as Audit Committee. The number of independent directors is brought to light. Finally, the paper identifies the performance of ADCB about its peers.
According to Ansoff,1965 corporate governance has been defined as all steps, traditions, policies, procedures, guidelines, laws that affect the manner with which an organization is managed. It has been thought to be a multidisciplinary subject. Similarly, the concept encompasses the association between and among the relevant parties or stakeholders that take part in ensuring that the organization meets its predetermined goals, missions, and values. Corporate governance is chiefly inclined in fostering accountability and transparency among other good things that will propel the organization to cut itself an edge in this competitive business world.
Five aspects of good governance
It is worth noting that trustworthiness, sincerity, high level of reliability, precision, answerability and transparency, outstanding respect, devotion to the organization as well as being focused on attaining results are integral for organizations and companies to be successful (Shleifer & Vishny, 1997). The principles identified as being vital in good governance that ensures that the previously mentioned elements are realized include the following;
Disclosure and transparency, this is a case where a company provides clearly and concisely the way the board, as well as t5he management, must be accountable to the shareholders. It also entails guidelines by which the company’s integrity in terms of financial reports is guarded. Additionally, this principle makes it a culture to release vital information to relevant shareholders at a given period and that the information is accurate (Ansoff, 1965).
Equality in the treatment of all shareholders is a key principle; this is where all issues concerning shareholders are at the heart of the organization and the latter will do all that is necessary to help the former exercise their rights. This has been achieved mostly by providing them with factual information and inviting them to AGMs.
Ethics and integrity; it is of significance for an organization to responsibly and rationally arrive at decisions. This will help such an organization to foresee risks and ultimately avoid going to the courts over issues that could be avoided by just making sound decisions. Development of the manner with which directors, as well as the management (the executive), will help them arrive at decision is paramount.
Having in mind that the interest of other stakeholders needs to be part of any organization is also of great significance. This will help the organization evade problems. Lastly, the tasks, responsibilities, and duties of the board when it has diverse skills as well as knowledge is also important when it comes to making key business decisions (Shleifer & Vishny, 1997). Similarly, they can be in a position to challenge decisions arrived at by the management that might plunge the organization into the dark.
UAE public listed company that conforms to the principles
Abu Dhabi Commercial Bank (ADCB) is one of the best performing financial institutions in Saudi Arabia. It is worth mentioning that the bank in 2009 was awarded a silver class category of Sheikh Khalifa Excellence Award as being one of the best performers in the department of finance. The award is usually given to companies that show superior and excellent organization in carrying out there day to day activities. Other awards include Best Retail Bank in UAE, the Gulf State, Most Innovative Islamic Finance Deals Awards, and more importantly Corporate Governance Award (Al Bawaba, 2009). All these awards and accolades do not come on a silver platter.
The bank has shown excellent disclosure and transparency through its annual general meetings, supporting the equitable and respectful treatment of its shareholders, having in place directors and executives that are well knowledgeable with diverse skills. In line with the principle of having in mind the importance of partnership as well as having in mind the interests of another stakeholder, the Bank is one of the Corporate Partner with Hawkamah is integral in trying to foster corporate governance in the entire financial sector in the region (Clarke, 2007).
Analysis of the company’s corporate governance principles
It has been brought forth that any organization that has policies that are contrary to the rule or law of the land will have of course very rough time in trying to run its business within that government’s jurisdictions (Al Bawaba, 2009). Thus like any other citizen, it opts to act within the rule of the land. This, the bank has perfected over the years by changing those policies that kept them at loggerhead with the government.
The bank did make some strides which included reorganizing the practices of its board, restructuring its management committee, improving its articles of association as required by the government, coming up with a Board Corporate Governance Committee as well as improving the disclosures in reports of the bank. All these efforts made are per government requirements. The only thing it needs to do is to form a close partnership with the government for further improvements (ADCB, 2010).
Filling roles of CEO, Board of Directors, and Audit Committees
Since it is the duty of the chief executive officer, senior management who ran the day to day activities of the bank or the organization with some oversight from the board of directors, these persons need to be on top of other relevant academic and years of experience, be persons of integrity, responsibility, and accountability (Clarke, 2007).
The number of independent directors opts to be one-third of all the directors. I have arrived at this ratio after going through the “Security and Commodity Authority Chairman’s decision No. 32/R for 2007 on Corporate Governance Code that was amended by the Ministry of Economic Decision No. 518 of 2009” (El Bakri, 2010)
Performance of this company
The bank in the third quarter reports of 2010 recorded a net profit of AED 325 million, which is on-record of AED 1,45o million. Similarly, the net interest margin stood at 2.44%, customer deposit went up by 17% against a gross loan of 4.4% the previous year, net interest income rose by 7.0% at AED 877mn, operating income went up by 36.0% at 575AED while pre-provision profit increased by 15.0% at 983mn. These statistics surpass those of any financial institution in Saudi Arabia (Abu Dhabi Commercial Bank, 2010).
Conclusion
From the review of the research concerning corporate governance, five principles come out as being integral in determining the success of the organization. ADCB is one of the outstanding public listed companies in UAE and has been depicted to be practicing almost all the five aspects of good governance making them receive various awards and accolades over the year. It is worth noting that this practice has propelled the organization to a greater height making huge profits and cutting itself an edge in this competitive business world. Those to fill the post of CEO, Board of directors, and audit committee in top of having specialized qualification in the respective fields need to have a lot of integrity, transparency, and accountability. Corporate governance is thus key to the success of any organization.
Reference
Abu Dhabi Commercial Bank (2010). “Abu Dhabi Commercial Bank Reports Third Quarter 2010 Net Profit of AED 325 million On-Record Revenue of AED 1,451 million”. Web.
ADCB, Long Live Ambition, 2010, “News Article”. Web.
Al Bawaba (2009). “Abu Dhabi Commercial Bank Partners with Hawkamah to Advance Corporate Governance Reform in the region”.
Ansoff, H 1965, Corporate Strategy. New York, McGraw Hill.
Clarke, T 2007, International Corporate Governance. London & New York, Routledge.
El Bakri, T 2010, “Corporate Governance-Increasing Regulation in the UAE”. Web.
Shleifer, A. & Vishny, W (1997) “A Survey of Corporate Governance”. Journal of Finance, vol.52 no.2, pp 737-783.
The Business Round Table 2002, “Principles of Corporate Governance”. Pre-Publication copy, vol.2 no.1 PP 1-32.
Zawya, 2006, “UAE’s public listed companies post Dh30bn net profit in 2005”. Web.