18 Apr 2022
What is corporate governance?
Corporate governance refers to all the processes, regulations, laws and institutions designed to govern how a company is managed, administered and controlled. Initially, corporate governance was designed to maximize the interests of shareholders (number of dividends and value of shares). But the various stakeholders who participate more or less directly in the company have also expressed their expectations. As a result, depending on the objectives governing the firm, its governance is called upon to regulate the relations between the many actors involved, stakeholders or constituent parties.
The main actors are the shareholders, who elect either the Board of Directors, which appoints the Management Board, or the Supervisory Board, which appoints the members of the Management Board, according to variable modalities, specific to the legal regime of the company concerned. Other stakeholders include employees, suppliers, customers, banks or other lenders, the neighbourhood, the environment and third parties – in the broadest sense – who may come into contact with the company because of its activities, behaviour or achievements.
How is corporate governance managed in the UAE?
The corporate governance code was released on 27 February 2020 and became applicable on 28 April 2020. The code states what is corporate governance in UAE, its requirements and the role, missions, rights and obligations for the stakeholders. This governance could be enacted structurally by the team of corporate lawyers, who are well updated with latest legal commercial reforms. The Public Joint Stock Companies (‘PJSCs’) listed on the Abu Dhabi Securities Exchange or the Dubai Financial Market are the companies concerned by this code. The code sets out the code of conduct and the roles of every stakeholder: the shareholders and general assembly, the board of directors, the board committees, the compliance officers conducting audits, and the group subsidiaries.
The main actors are the shareholders, who elect either the Board of Directors, which appoints the Management Board, or the Supervisory Board, which appoints the members of the Management Board, according to variable modalities, specific to the legal regime of the company concerned. Other stakeholders include employees, suppliers, customers, banks or other lenders, the neighbourhood, the environment and third parties – in the broadest sense – who may come into contact with the company because of its activities, behaviour or achievements.
Conclusion
In conclusion, the goal of corporate governance is to enable a system within a PJSC to improve its results. By performing better, such companies should see their share price go higher and improve the quality of their relationships with all stakeholders of the company.