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Pressure is growing on Gulf businesses including family-owned firms and listed company boards to align their governance practices with global standards with “fresh perspectives”, according to a new study.
Governance can be improved if boards align with global best practices and focus more on diversity, independence, strategy and risk management, as well as digital transformation, The GCC Board Directors Institute (BDI) said its seventh Board Effectiveness Report.
The report, which surveyed board members across the region, showed that family-owned firms and listed company boards need “fresh perspectives”.
Nearly one in five (18 percent), believe not enough time is spent on strategic planning.
“They need to bring in highly skilled people in strategy, digital technology, risk management and sustainability. The report also highlights the need to develop effective strategy, with 18 percent of respondents believing boards fail to devote enough time for strategic planning.
“Diversity, independence and a limited pool of suitable directors are also areas that lag behind other markets,” the BDI said in a statement.
However, the report found that many respondents, 61 percent, believe their board navigated the COVID-19 pandemic successfully, versus 22 percent who said they failed to manage it well, but learned valuable lessons.
Environmental and social issues will take higher priority moving forwards, with 88 percent agreeing that sustainability will help their board create long-term value. But, one in five respondents claimed environmental, social and corporate governance (ESG) is not usually discussed in board meetings.
The BDI recommended that companies should hire more diverse board members, make strategy a board priority, set up regular board and CEO evaluations, and remain agile when it comes to sustainability and ESG policies.
Markus Wiesner, regional managing partner, Heidrick Consulting for Asia Pacific, Middle East, and Emerging Markets, at Heidrick & Struggles, which produced the report in collaboration with the BDI, said: “Almost three-quarters of respondents shared that they do not have a formal succession planning process in place.
“Apart from grooming the incumbents, succession planning for boards will provide the opportunity to address diversity concerns, not just in terms of gender and ethnicity but in terms of experience as well.
“Bringing in new directors with different backgrounds will enhance board discussions and problem-solving by adding fresh perspectives, thereby improving their effectiveness,” he said.
(Writing by Imogen Lillywhite; editing by Seban Scaria)
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