Bahrain launches new corporate code
Manama, March 17, 2010
Bahrain has launched a new corporate governance code which is designed to strengthen the kingdom's position as a business and financial centre.
The code was launched by Industry and Commerce Minister Dr Hassan Fakhro at a ceremony at the Gulf Hotel, where he described the code as the completion of an eight-year journey, a report in the Gulf Daily News, our sister newspaper, said.
"There could be no better time to introduce a corporate governance code than now," said Dr Fahkro.
"With the hindsight of disastrous corporate failures around the world, and the global financial meltdown, the corporate governance code will help us strengthen our position in Bahrain as a legitimate business and financial centre and underpin our regulatory success in avoiding the excesses, speculation and abuses that have been a characteristic of other countries that are now suffering as a result."
"This is the culmination of some eight years of hard work but our journey does not end here," he said.
"Good corporate governance cannot be achieved merely by establishing a set of rules and guidelines and it is not even sufficient to have binding law.
"It needs to come from within each company director, it needs a longer term holistic perspective of corporate growth and its contribution to the economy and it needs dedication, integrity and a sense of community. We must all play our part to ensure that Bahrain becomes a model of corporate success.
"As we move forward with the implementation of the code we will need to keep abreast of new developments and issues, which will require future codification," he added.
"It is for this reason that we must view the code as a living document which requires updating from time to time."
"It is important that public companies in Bahrain, both financial and non-financial, enter fully into the spirit of the new code," said Central Bank of Bahrain Governor Rasheed Al Maraj, at the launch event.
"It should not just be seen as a matter of complying with another set of regulations, but as something that should influence the corporate culture of companies in Bahrain."
"Unfortunately, the global financial crisis has provided many illustrations of failures of corporate governance," he said.
"There is a common pattern behind many of the failed financial institutions of the last 18 months. In many cases, the chief executive was a dominant figure who made sure that he alone made all important decisions.
"There was no culture of open debate and discussion within the senior management of these institutions, resulting in other members of the board feeling unable to challenge the chief executive's decisions."
Many bank boards lacked banking experts, he said.
"Individuals were recruited to the board of banks for their connections rather than for their knowledge of the banking industry and their ability to ask the right questions."
"In the case of many failed banks the standards of corporate governance fell far short of what should have been expected.
"It was the directors who should have challenged the aggressive growth strategies pursued by some chief executives. It was the directors who should have ensured there were proper risk management and control systems within each bank.
"It was the directors who should have ensured that the senior management of the bank had taken into account the possibility of experiencing extreme stress scenarios. Finally, it was the directors who should have ensured the remuneration structures were in line with the long-term interest of the bank itself rather than rewarding short-term risk-taking."
"The need for high standards of corporate governance is, therefore, one of the main lessons to be drawn from the global financial crisis," he added.
"It is in this context that the CBB views the new code as a significant development in strengthening Bahrain's reputation as a well regulated financial centre." -TradeArabia News Service