Mutlaq Hamad Al-Morished

The GCC Board Directors Institute (BDI) Sunday announced the results of its fourth biennial Gulf Board Effectiveness Survey. Begun in 2009, the survey gauges the effectiveness of boards and directors’ performance and provides insight into changes and improvements made in corporate governance practices in the GCC.

The 40-question survey, which polled board directors from across the six GCC countries, again found that despite positive progress, a strong majority still believe that GCC boards are not as effective as they should be.

Effectiveness was judged against six main criteria, each comprising a section of the report.

“Corporate governance and board efficiency have come a long way in the Gulf but again, this year, BDI’s survey reveals the need for ongoing development,” said BDI Chairman Mutlaq Hamad Al-Morished, who is also former chief financial officer of Saudi Basic Industries Corporation (SABIC) and the recently appointed CEO of Tasnee.

The first most significant barrier to effectiveness as cited by 71 percent of respondents were issues related to Board Composition & Directors’ Capabilities, as was also the case in the 2009, 2011 and 2013 surveys.

In terms of composition, the need for greater diversity was a strong theme that emerged among a majority of respondents.

The survey also revealed the need for greater gender diversity on boards today. While women still comprised on average less than 1 percent of board seats, a figure unchanged since 2009 when BDI first began to track female board participation, 56 percent of respondents now acknowledge the value that gender diversity brings to a boardroom.

The second most commonly cited barrier to effectiveness was the absence of a formal board evaluation process (47 percent).

A number of positive trends were also highlighted in the 2015 report. Notably, there was a continued decrease in cross-board representation, with 23 percent of respondents now sitting on one board, and about half sitting on two or three boards. The percentage of respondents acknowledging sitting on five or more distinct boards this year reached only 17 percent. This is a positive improvement from 2009 when one-third of the GCC board members surveyed held five or more board positions.

To tackle the challenges identified and build on positive momentum gained, the report provides six priority improvement areas and recommendations for boards in the region.

Make training for new and incumbent board members mandatory; replace ineffective board members and rotate board members more frequently; appoint more international and independent board members; strengthen the board secretary role (42 percent of respondents confirmed there was currently no corporate secretary despite the critical role they play in ensuring board effectiveness); dedicate more time in the board agenda to talent management and risk management; conduct evaluations of a board’s performance annually.

Al-Morished said: “It is well documented that a significant causal relationship exists between sound corporate governance and superior company performance. We will continue to work closely with executives, directors, shareholders and regulators.”

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