New Board Effective Report reveals growing pressure on GCC boards to align with global standards
The GCC Board Directors Institute (GCC BDI) has released the findings of its seventh Board Effectiveness Report. The new report, which has been produced this year in collaboration with Heidrick & Struggles, surveyed 113 board members from Bahrain, Kuwait, Oman, Saudi Arabia and UAE to identify the latest trends in board effectiveness, any underlying gaps and recommendations to effectively address any shortcomings to make private and public sector companies more competitive. The findings suggest that 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 findings indicate that family-owned firms and listed company boards need fresh perspectives. 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.
Jane Valls, Executive Director at GCC BDI, said: “We continue to provide support to GCC boards as Gulf countries share a growing awareness of the need to implement best practices that promote greater transparency, independence, diversity and oversight. This report signifies our commitment to provide practical and pragmatic solutions for the future. We are confident that the coming years will bring about positive change as board directors adapt to a competitive, dynamic and ever-evolving business landscape with new opportunities.”
The report also details lessons learned by boards which operated through the Covid pandemic: 61 percent of the survey’s respondents thought their board navigated the pandemic successfully, while 22 percent said they failed to manage it well but learned valuable lessons. Environmental and social issues will become a bigger priority moving forwards, with 88 percent agreeing that sustainability will help their board create long-term value. It comes after one in five respondents claimed environmental, social and corporate governance (ESG) is not usually discussed in board meetings.
To help board directors build and sustain effective governance, GCC BDI has recommended several ways to improve standards: 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.
According to Richard Guest, Partner-in-Charge of Heidrick & Struggles’ Middle East & North Africa, “the region is going through an enormous amount of change and this is likely to accelerate. Boards therefore need to be ready and fit for purpose, and good corporate governance is the foundation stone.”
The team at Heidrick & Struggles added that 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.