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Dubai Small and Medium-Sized Enterprises’ Governance Report

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Updated: Nov 5th, 2020

The last several decades could be characterised by the blistering rise of the small and medium-sized enterprises (SME). Peoples desire to obtain additional incomes and their focus on self-fulfillment results in the increased importance of this very sphere. Especially topical this tendency becomes for states characterised by the high paces of the evolution of their economies. The growth of SME sector is an extremely beneficial factor that creates the basis for the further rise of the financial power of the state and its becoming an influential actor at the international level (Sharma & Khana, 2014). However, it should also be supported by the creation of a specific environment that could stimulate its growth and foster relations between entrepreneurs and government as the main actors responsible for the enhancement of this very sphere (Veldman & Willmott, 2016). For this reason, at the moment the organisation of this very environment is one of the most important governmental tasks.

As for the UAE, it could also be characterised by the tendency towards the rapid evolution of SMEs and their becoming important contributors to the countrys growth. Besides, in Dubai SMEs are organised in the way similar to the one chosen by the Western countries and which is proved to be efficient (Onica, 2014). At the moment, these enterprises belong to the private sector and act in accordance with the main laws regulating this sort of relations within the state. Moreover, there is also governmental support like in other developed states. However, according to the latest statistics, only 16 per cent of small businesses in Dubai have corporate governance (Parmar, 2011).

It is one of the important aspects needed to help banks or outside investors to use additional investing and contribute to the rise of the sector (Parmar, 2011). It is obvious that the given situation is unacceptable as the absence of the unified approach complicates the further evolution of the sphere which now guarantees stable annual incomes and contributes to the empowerment of the UAEs economy by making it less dependent on oil. In this regard, there is an initiative that focuses on the alteration of the situation in the given sphere and introduction of new rules and limitations aimed at the improvement of corporate governance within the Dubais small and medium-sized enterprises.

Considering the above-mentioned information, Dubai suggested nine pillars of corporate justice based on the most efficient international approaches and experiences. Besides, corporate governance is focused on preserving the balance between the most crucial spheres of the functioning of any organisation which are economic, social, cultural, individual, and personal ones (Sharma & Khana, 2014). It is a voluntary framework which is expected to improve relations between the most important actors within SME and contribute to its increased efficiency. For this reason, 75% of SMEs in Dubai consider it very important for their functioning (Dubai SME, n.d.).

That is why there are nine pillars of the corporate justice suggested to entrepreneurs at the moment, and the first one outlines the necessity of the adoption of the above-mentioned corporate governance framework along with the description of the roles of partners, shareholders, directors, and management. This pillar creates the ground for the fair and organised cooperation between business partners and shareholders as it outlines their obligations and responsibilities. It is obvious that it also fills previously existing capability gap preconditioned by the lack of the structured approach and improved comprehending of the main duties. For this reason, its importance could hardly be overestimated as all participants of the process should be clear about their rights and expectations. The first pillar outlines these rights and encourages people to involve in the process.

The second pillar delves into a succession planning process proclaiming that it should be aligned with the companys main objectives to guarantee its gradual evolution and rise (Dubai SME, n.d.). One should realise the fact that succession planning is an integral part of the strategic planning and its guarantees preservation of certain corporate values and goals. However, statistics show that 60 percent of Dubai SMEs do not have a succession plan (Parmar, 2011). Moreover, they do not recognise the importance of the process.

For this reason, the introduction of this very pillar could help to fill the existing gap and improve the current situation. Succession planning is important both for long and short term perspectives. In case one of a company top managers leaves, the rest a team should perfectly realise the peculiarities of the chosen course and be ready to follow it. For this reason, the significance of this very pillar becomes obvious. It creates the basis for the stable evolution of numerous companies and the preservation of the basic corporate values. Moreover, the improved succession might also guarantee strong bonds between various SMEs which appear in the course of their interaction. That is why the focus on this aspect should be considered a good attempt to improve the situation in the sphere.

The next pillar is focused on the establishment of a timely, open, and transparent flow of information about the most important aspects of performance, including the financial one. The main shareholders should be able to access any data they need and analyse one or another aspect of the companys functioning. Only under these conditions, the given sphere will obtain another stimulus for growth. Moreover, the given approach to the organisation of a companys functioning guarantees that all shareholders will be treated equally with no exceptions. Moreover, the companys performance could also be discussed in terms of a special meeting between all actors impacting its evolution. One should admit the focus on the transparency introduced by the given pillar. It tends to eliminate opportunities for frauds or cheating by making the most crucial information available. Any shareholder could monitor the performance and admit violations. It is an extremely important amendment which fills the previously existing gap in relations between different companies or shareholders and contributes to the improved outcomes.

The fourth pillar introduces the necessity of setting up a board of directors which will analyse the companys main showings and ensure its further growth. It is obvious that the given recommendation comes from the tendency towards the increase in the size of different companies and organisations. Small firms could make crucial decisions using a sort of advisory board or discussing it with three or fewer managers. However, the given pattern is not appropriate for larger companies with increased responsibilities and the level of incomes. In such a case a formal board with independent and competent members should be created to make the most important decisions which should be preconditioned by the precise analysis and strategic planning (Onica, 2014). The given pillar promotes the rise of professionalism of workers and contributes to the increased final outcomes as the above-mentioned board will obviously be more efficient. That is why we could admit the great contribution to filling the capability gap and introducing new and outstanding framework.

Speaking about the importance of this very director board and the role it should perform in the functioning of a certain company, we should mention another pillar which outlines the necessity of a clear mandate for its board of directors to be able to analyse the operational performance of the business and evaluate the most crucial strategies. In other words, it is important to know how to evaluate the efficiency of the given board and its contribution to a companys rise. This pillar obviously fills the capability gap as it determines the main conditions and terms needed to evaluate the role of the board and examine its functioning (Sharma & Khana, 2014). In case turns out to be inefficient it should be disbanded, and a new one created. The given pillar suggests a framework for the creation of an efficient director board which could also be replaced. It is a great step to the provision of equal conditions to shareholders and the improvement of the basic aspects of companies functioning.

Maintenance of credible books of accounts is another crucial point touched upon by one of the suggested pillars of corporate governance. The global financial reporting standards are constantly changing to increase the efficiency of companies functioning and to improve the transparency of relations between shareholders, managers, and entrepreneurs. Moreover, there are numerous cases of frauds when a knowingly false financial statement is suggested (Veldman & Willmott, 2016).

Besides, the practice that presupposes that books of accounts will be annually edited by an external auditor will obviously contribute to the significant improvement of the sphere. New standards of financial reporting will be more efficient and will leave no chances for any misunderstandings. At the same time, it will contribute to filling the capability gaps and provisioning of equal opportunities for different entrepreneurs. The independence of the audit function if one of the key factors of the evolution of SME which is now cultivated in the majority of Western states characterised by the improved functioning of the given sphere (Veldman & Willmott, 2016). For this reason, we could conclude that the adherence to the given pillar might create the basis for the fair cooperation between shareholders and other actors.

An aligned mechanism of internal control is key for a good business. For this reason, the creation of an internal control framework and introduction of the practices of regular risk reviews are another aspect outlined by the suggested pillars. Companies should be ready to introduce a formal process to control risks and mitigate their negative impact (Dubai SME, n.d.). Only under these conditions, their functioning will be supported by the efficient risk mitigation strategy and any company will be able to accept a set of measures introduced to act in terms of crisis or other complicated situations. One should realise the fact that the importance of this regulation tool could hardly be overestimated as companies should be ready to align the internal control and find its weak aspects that should be improved. It is the key to their successful functioning and gradual improvement. Moreover, the introduction of this very mechanism helps to perform a better assessment and find points that might result in a companys collapse.

It is also crucial to recognise the basic shareholders needs to be able to meet their requirements and organise the companys functioning in the most appropriate way. The fact is that numerous companies have a specific mission statement that remains unclear and does not outline the most crucial areas of their evolution and rise. However, it is crucial to have formulated policies as they are the main aspect of the further rise. For this reason, consideration of the main shareholders needs becomes an important feature of the functioning of any SME as it guarantees extra benefits and incomes that will come from the improved cooperation between the main actors responsible for this companys rise.

Finally, the last pillar of corporate governance focuses on the peculiarities of family-owned businesses and the complex structure of companies organised according to this structure. According to statistics, the UAE is characterised by a great number of family-owned companies that contribute to the increase of its financial power (Abu Dhabi Commercial Bank, n.d.). For this reason, it is crucial to establish a model of efficient communication between family members and the company. Only in case, this model is introduced, efficient management is possible. Moreover, there is also the unique necessity of the creation of a specific family council needed to institutionalise cooperation in large families and foster the efficiency of its cooperation with the company.

Altogether, we should say that the given nine pillars introduce the most important principles of corporate governance in the UAE and outline the basic aspects of the cooperation between shareholders, managers, and other significant actors. The suggested code tends to size the most crucial elements of business relations in the country and introduces regulations that could help to make these relations more transparent, efficient, and equal. Investigating the given issue, we should also say that the suggested framework is designed to fill capability gaps and provide equal opportunities for all agents. For this reason, the importance of the document formulated by Dubai SME could hardly be doubted.

However, there are still spheres that could be improved as we could observe numerous risks related to the functioning of any organisation and its cooperation with other ones. Yet, to emphasise openness and integrity in relations and minimise risks we could state that the model that presupposes the demonstration of intents should be accepted. It will help to outline the terms of the would-be cooperation, to determine the methods that could be used when trying to achieve a certain goal and define expectations peculiar to every party. The demonstration of intents could be accomplished during a special meeting of the main companies shareholders and managers. To make it more powerful, a special document could be signed. It is not a unique practice and several other states obviously explore to achieve above-mentioned integrity and transparency in relations (Veldman & Willmott, 2016).

In conclusion, we should say that nine pillars to corporate governance suggested by Dubai SME become an important initiative that creates the basis for the further evolution of the given sector and fills capability gaps by creating a new and more efficient environment in which companies should function. The agency explores the most efficient experience and practices used by other countries and tends to introduce the framework for the efficient cooperation between shareholders, managers, directors, etc. Hence, there are still several ways to improve the current situation and attain improved results.


Abu Dhabi Commercial Bank. (n.d.). A catalyst for change – good corporate governance can supercharge your business. Web.

Dubai SME. (n.d.). Web.

Onica, M. (2014). The internal audit – key pillar of corporate governance. , 207-213. Web.

Parmar, N. (2011). The National. Web.

Sharma, J. & Khana, S. (2014). Indian Journal of Corporate Governance, 7(1), 14-38. Web.

Veldman, J., & Willmott, H. (2016). Human Relations, 69(3), 581-603. Web.

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IvyPanda. 2020. "Dubai Small and Medium-Sized Enterprises' Governance." November 5, 2020. https://ivypanda.com/essays/dubai-small-and-medium-sized-enterprises-governance/.


IvyPanda. (2020) 'Dubai Small and Medium-Sized Enterprises' Governance'. 5 November.

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