Dubai code for SME governance

Corporate governance codes have tended to focus on larger organisations, ones listed on stock exchanges with distant shareholders likely to suffer from what academics like to call "agency costs" – the danger that managers will exploit the company's resources for personal gain. The problem is rather different for smaller companies, especially when the biggest shareholder works in the business, but where any outside interests could be ignored. But such businesses often aspire to be larger, too, so a cross-over point arises where the board needs to evolve, changing the focus of its concern and contribution. Add to that cultural differences in the home countries and you're on course for rather complex iterations of whatever might be deemed best practice. In Dubai, where the Arab and Muslim practices mix with an orientation towards more western approaches to finance, the Hawkamah Institute has been at work developing what it calls the first-ever code with key principles and practices for small to medium-sized enterprises. It will be launched at a conference for corporate governance for SMEs to be held in September 26 and is aimed to be a guide for SMEs in various stages of growth to embrace best practices in corporate governance. "The aim is to create awareness amongst SMEs on the importance of adopting a basic level of corporate governance that will make them more robust, better manage risks, be more bankable and investable," the institute said. It wants SMEs to appreciate that corporate governance is "not just something good to follow but is a must-have to grow and progress sustainably". How it squares the circle of prescription and flexibility remains to be seen.

Source document: The Hawkamah news release describes the code.