By Fause Antelo Ersheid – Senior Corporate Governance Analyst & Researcher at the Abu Dhabi Center for Corporate Governance (ADCCG). Abu Dhabi – UAE
Corporate governance is a dynamic concept that constantly challenges companies and boards to stay in the know and remain up-to-date with the latest developments in the market. Companies today face a wide array of challenges from a variety of sources, some originate from how the markets function and operate, others are rated to the ever-changing local and global trends, whilst many are company-specific challenges related to market competition, strategy, staffing, etc. Regardless of the nature and source of the underlying challenges facing companies, all have somehow a direct or indirect impact on the overall governance of the organisation.
That said, company boards in the Middle East and North Africa (MENA) region are in some way reluctant to embrace training. In fact, for years consultants and governance professionals have tried to crack into this potentially lucrative market but often were unsuccessful. In this post, I will attempt to discuss the underlying causes that stand behind boards’ hesitation to undergo training and I will also touch upon ways to overcome such problems. Below are a number of explanations and pretexts that contribute to this unfortunate phenomenon in the MENA region:
- Many directors claim to be too busy to attend any form of board training. Although this is a common excuse amongst board members across the world, it’s a more serious issue in this part of the world as directors often justify their decision to dodge board training and development programmes by pointing to the fact that many serve on more than one board (multi-directorship) in addition to running their own businesses. I agree that many directors are busy, but still almost everyone can afford to dedicate a few hours a year for some form of director development training.
- Directors’ negative attitude towards receiving training. Some directors believe they have the required experience and knowledge that empowers them to carry out their duties effectively and therefore do not need training at all! There is no doubt in my mind that most board members are experienced and qualified individuals and that’s why they got elected or appointed to the board in the first place. In addition, training makes many directors uncomfortable, specially the seniors; because it might convey the wrong message regarding their competence.
- Board training and development regulation is not effectively enforced in the region. It’s rather sad but true that almost all countries in the MENA region do not enforce corporate governance regulation which requires directors to attend board training. Unfortunately, unless regulators get serious about the issue, directors will continue to ignore development and training programmes.
- Shortage of qualified training providers in the region. The market potential for director development and training in the region is huge and most of the demand for training is derived from professionals and executives, but sadly very little demand is generated from directors. Unfortunately, the relative shortage of competent training centres with qualified staff also contributes to exacerbate the problem. Most training programmes in the Pan-Arab region rely heavily on international experts to facilitate training. This particular strategy, however, is a double-edged sword; on the one hand, international experts have the knowledge and expertise to potentially transfer best practices across the region. Yet, some fail to localise their content and do not speak the local language (Arabic), which in effect curbs the potential benefit derived from the international experts. On the other hand, increased reliance on international experts unintentionally sabotages any efforts to build local capacity in corporate governance in the region.
- Improper understanding of board training needs. Unfortunately, many consultants and training providers in the region offer programmes that do not necessarily cater to board’s needs. In fact, most training providers offer general training programmes with universal content and promote it to the mass regardless of companies needs and directors circumstances. For example, most training programmes are inflexible in terms of timing, extending between 2-5 days and are delivered in English.
Now, what could be done to mitigate this board predicament? To overcome the aforementioned training obstacles, I call for actions at three different levels: the demand side, the supply side and the regulatory side.
The demand side:
In order to boost board training and maximise other directors’ involvement in and acceptance of training, the board’s chair must champion efforts and work in conjunction with the corporate secretary and the CEO to promote training in the boardroom. A suitable board training program and schedule must be devised and approved at the beginning of every year and the chair must follow up and lead by example by getting personally involved in all training activities.
The supply side:
Training providers can still rely on international experts in the short term despite my reservations about that, but within a few years, they need to develop local capacity in corporate governance to empower them to spearhead the training process on their behalf in the region. In fact, not every board member can fluently communicate in English and when facilitators deliver training in English, some directors might feel discomforted and even alienated.
In addition, content must be tailored to meet the company-specific needs. Speaking from personal experience, the great majority of study cases and examples used in training programmes organised in the region is imported from abroad which tend to estrange many attendees. There are many local success stories documented by the IFC and other international organisations that could be used for illustration purposes in training. Finally, training providers in the region have to take into consideration that directors are too busy and they cannot attend the standard 2-5 day workshops. In this case, I recommend organising 2-3 hour briefings which expose directors to the most critical business issues of the times. Then, if further in depth training is required this could be arranged.
The regulatory side:
No significant progress in board training will be achieved without the support of regulators. Therefore, regulators need to step up their enforcement efforts and make sure that board development is clearly reported and accounted for in the corporate governance annual reports. Moreover, regulators must get a better understanding of directors’ needs by means of carrying out specialised research to pinpoint any gaps and needs in board education. The outcome of such studies should be clearly communicated to all constituents and should find their place in the corporate governance code.
Corporate governance initiatives are fairly new to the MENA region; meanwhile many countries in the region are achieving important strides in the implementation of corporate governance across a wide array of sectors and industries. Despite directors’ hesitation to undergo training, in due time, along with increased awareness and well-designed program development, board training challenges will soon become a thing of the past.
About the Author
Economist, corporate governance analyst and a researcher (with over 15 years of experience) who’s passionately curious about corporate social responsibility (CSR), ethics and sustainability issues. Fause holds three academic degrees from the University of Miami: BA (Economics and Marketing), MA (Economics) and MBA (Corporate Finance and Investments) and is a regular speaker at local and regional economic and business focused conferences.
During the early years of his career, he was centered on economic research and analysis and hence managed to publish a number of papers in the areas of banking, national accounts, capital markets, labor economic, knowledge economy, macroeconomics, public finance, youth employment etc.
In 2008, Fause decided to commit to business sustainability aspects, mainly corporate governance and to raising awareness about transparency, the importance of providing timely and accurate disclosure, protecting shareholders’ rights and being accountable, amongst other things. During various roles at the Abu Dhabi Center for Corporate Governance, he has carried out corporate governance framework assessments and corporate governance gap analysis, advised high profile clients (public, and private sectors) on strategic corporate governance issues related to their company and reviewed local codes of corporate governance.
For more information on corporate governance and sustainability issues in the MENA region, Fause can be contacted by email: firstname.lastname@example.org