Corporate governance key to instituting stock market

Yemen Observer: http://www.yobserver.com

Corporate governance key to instituting stock market

Posted in: Front Page
Written By: Faisal Darem
Article Date: Feb 9, 2008 - 12:14:25 AM

Top officials, businessmen and organization representatives discuss the establishment of good business guidelines. YO Photo/ Abdulaziz Omar

Corporate governance is an essential condition to the establishment of a stock market, attracting major investment and developing national reserves which will lead to combating unemployment and reducing poverty, said Dr. Yahya al-Mutawakel, the Minister of Industry and Trade, during the launch of a corporate governance conference held last Wednesday. The conference was organized by the Yemeni Businessmen’s Club and the Center for International Private Enterprise (CIPE) in cooperation with the Global Corporate Governance Forum and Hawkamah, the Institute for Corporate Governance.

Good governance involves improving the performance of governmental authorities, private sector and non-governmental organizations (NGOs) in order to improve the income levels of the country’s citizens, al-Mutawakel said.
The role of the private sector is fundamental in achieving socio-economic development. Thus, the Ministry of Industry and Trade established 232 companies with a capital of $60 billion during 2007 and 184 companies with capital of $10 billion in 2006, al-Mutawakel said.

This conference represents a positive initiative by the private sector which reflects their keenness to enhance their role in development in general.

Yemen adopted a reform agenda during the 1990’s which focused on legislative reforms. These reforms represent the legal basis for good governance. The government issued a financial disclosure law and established the anti-corruption authority as tools to support good governance. It also joined the international transparency initiative in terms of oil industries to enhance good management and good governance.

The participants in the conference recommended working on applying the rules of corporate governance to the public authorities and the private sector, in particular family businesses, which will encourage their development and prevent financial collapse.

They recommended that government bodies apply corporate governance rules and work on training board members and executive directors in either the public or private sector. They also recommended that government act to promote awareness of corporate governance to companies to enhance economic stability and development.

A working team was formed during the conference to follow up the recommendations that were made. Corporate governance rules are a necessary requirement of globalization and free market policies in addition to internal and external investments, said Ahmed Bazara, Chairman of the Yemeni Businessmen’s Club.

Corporate governance depends on good governance and transparency for all stakeholders, which is the way to attract local and foreign capital.

The finance world is in need of corporate governance rules to avoid the crisis that happened to the Asian stock markets. Bazara said that we must ask ourselves what happened to the Enron Oil Company when it collapsed, and that we must work on applying the rules of corporate governance to avoid what happened to some domestic companies such as the Watani Bank. We must work together through corporate governance rules to prevent any new economic collapses, said Bazara.

“I appreciate this forum on corporate governance which leads to the expression of information and company transparency,” said John Sullivan, executive director of CIPE. “Transparency of management for all stakeholders is the basis of success.”

“Some experts define corporate governance as the system by which companies are directed and controlled,” said Hassan al-Shabrawishi, a consultant to the Global Corporate Governance Forum. “Others say that corporate governance involves a set of relationships between a company’s management, its board, its shareholders and others stakeholders.”

Corporate governance on the national level leads to an increased access to financing, higher valuation of firms, greater growth potential and a reduction in financial crises, al-Shabrawishi said.

At the end of the conference, the Yemeni Businessmen’s Club announced that it had signed a contract with CIPE to prepare the code of corporate governance in Yemen, including holding training courses for businessmen and journalists and holding workshops with concerned authorities to help in preparation of the code. It announced another agreement with the Hawkamah institute to conduct a training course for board members in Sana’a with the aim to develop professional directors.