Corporate Governance Effects on the National Banks in the UAE

Study Background

The UAE ranks among the best investment destinations in the world, probably due to the political and economic stability enjoyed, despite challenges in the region. Apart from undoubted stability demonstrated to the investor world, the investor community needs tangible assurances of management competence. Aware of the attention that the UAE attracts from the pool of global investors, the authorities in the emirates must respond to potential industry risks.

This facilitates developing an image of assuring investment safety in the financial sector. Among the most crucial steps of ensuring that investor confidence remains at high levels, economic authorities must demonstrate responsiveness to issues of financial management and governance. Standard practices formulated for economic models propose impeccable performance approaches with a highlight on various financial and accounting principles. Reconciling internal practices with financial, accounting, and auditing models formulated by international professional associations, the industry provides a clear blueprint to financial management teams.

Done closely within the internal circumstances of an organization, corporate governance outcomes usually realize high performance. In this regard, this study assesses the level of corporate governance approaches adopted in the UAE banking sector. Additionally, this study interprets the potential effects that corporate governance generates on the performance of national banks in the UAE.

Introduction

Corporate governance approaches in the banking sector narrow down to increased customer satisfaction and protection from various financial risks. Corporate practices enhancing customer satisfaction in the industry must go beyond an efficient customer service system, to encompass corporate social responsibility. In such elements of the customer and public appeal, the industry takes an active role in shaping business culture as well as promoting human values within the industry. A different concept in the corporate governance approach deals with the need for continued monitoring, analyzing, and mitigating harmful market risks that face the investors.

Perhaps, every financial model proposed after intensive research by professional bodies captures risks involved in financial operations. Ranging from handling customers and bank staff to the delicate detail of directors’ conduct, corporate governance approaches provide processes and practices those financial institutions must adhere to for enhanced performance. The proposed environment for the establishment of internal standards adhering to internationally recognized standard practices defines the regulation’s responsiveness to investor concerns.

Within a competitive banking sector with national and foreign banks, the UAE faces the compulsion to synchronize its standards with international standards to factor in foreign investment concerns. In this study, academic assessments attempt to unravel the authorities’ proposals for compliance with internationally expected standards of handling national banks in the UAE. The study assesses the different financial practices and procedures enforced under the UAE banking regulations.

The study highlights a few company laws that define the conduct of boards of directors in the UAE. From the enforcement by the banking regulator, conclusions and inferences emerge concerning developments in the financial markets around the world. In this regard, the study illustrates the effects of corporate governance regulations in the UAE. Highlighting developments in other jurisdictions around the world assists in the illustration of the difference generated by the corporate governance regime in the UAE.

Statement and Purpose of the Problem

The study deals with the problem statement touching on: whether UAE banks have cleared corporate governance practices and the overall effect felt in the country’s financial industry performance. The statement captures the question of the presence of corporate governance frameworks on one hand. On the other hand, it captures the question of the specific practices commonly followed in the financial regulations as enforced by the authorities. In addition, the impact of the enforced corporate governance culture on the performance in national banks.

The secondary purpose of the study is to enumerate the importance of corporate governance in the globalized financial markets, for the UAE banking industry. The primary purpose is to demonstrate that the UAE has an elaborate corporate governance system in the banking sector. Equally, the study illustrates the significance of corporate governance as a factor in the global elevation of the UAE as a preferred investment destination.

Study Questions and Hypotheses

Study Questions

Study questions arising from the problem statement as highlighted above include the following.

1. Does the UAE embrace clear corporate governance guidelines for the financial industry?
2. What corporate governance standards does the Central Bank of the UAE propose to the banking sector?
3. Do national banks in the UAE adhere to the regulations of the Central Bank about setting up internal corporate governance standards?
4. Does the UAE face pressure from foreign banks, to practice international corporate governance standards?
5. What performance effects does the corporate governance regime in force in the UAE reflect on the financial performance of national banks?

Hypotheses

• H1. There is a positive relationship between improved performance in national banks in the UAE and enforcement of corporate governance.
• H2. There is a positive relationship between the high investment-destination rank of the UAE and successful corporate governance practices enforced by the current financial regulatory regime.
• H3. International standards on management and corporate governance influence financial policies in the management of national banks in the UAE.
• H4. Compliance with the Central Bank financial regulations facilitates a culture of corporate governance in the UAE.

Significance of the Study

The study highlights the significance of efficient financial management systems to emerging economies, in tapping opportunities from local and foreign markets. In a world connected by factors of globalization and information technology, the financial market’s sensitivity to malpractices continues to increase. Inevitably, exposure to financial risks associated with internal practices depends on the demonstrated strength of management approaches.

As a factor of perceived risk protection, investor behavior can reflect the confidence held concerning applicable regulations. This study attempts to demonstrate that the impeccable financial regulations enforced by the UAE authorities reflect the necessity to build investor confidence. Alternatively, the study illustrates the role of corporate governance in modern financial markets as an efficient way to tackle various internal practice challenges that emerging markets need to highlight.

The supportive nature of political and economic stability provides another significant concept that the study highlights on investor confidence, concerning the state of managerial integrity of the financial industry. As illustrated in the study, the stability of the UAE plays a different role than corporate governance and management integrity of the industry in shaping the attractiveness perceived by investors. Therefore, the study emphasizes the irreplaceable position of corporate governance as new frontiers of financial markets continue to emerge with globalization. Expectations of the international investor community define the quality of standards that the financial markets need in driving the economy.

The study underscores the position of various professional regulations in financial management, accounting, and auditing standards that harmonize practices across the world. Elimination of traditional barriers to global investment as envisioned in professional standards must occur in preferred investment destinations such as the UAE.

Definition of terms

• Corporate governance efficient investor-confidence practices targeting broad internal systems of the board, management team, and customer satisfaction
• Financial management standards detailing the treatment of financial aspects of the company
• Standard practices approved approaches in dealing with various aspects of the company, for instance, accounting standards
• Internal practices include adopted approaches that various departments follow in the company to achieve goals set out by the management
• UAE national banks operating the UAE, with an origin in the UAE and primary clientele among UAE nationals
• Foreign banks comprise of banks operating within the UAE with an origin from outside the Emirates.
• GCC Gulf Cooperation Council
• UAE United Arab Emirates.

Limitation of Study

The methodology of choice for data collection in the study entails sampling techniques, which expose the independence score to sampling variables. Reliance on sampling techniques to identify representatives poses the inherent risk of factoring in the wrong impression of the entire population of samples. It implies that while testing compliance with the laid-out regulations, risks of picking below average and above average respondents apply. In addition, the use of questionnaires to collect data from respondents on various research questions exposes the study to the limitations of self-assessments.

Cases of overrated responses in certain response versions, such as open-ended and structured questions, subject study results to presumptive score allocation. Alternatively, Islamic banking as an important factor in the emirates does not present conventional banking practices, which affects the interpretation of corporate governance in that category of UAE national banks (Al-Tamimi and Charif, 2012). Categorization and characterization of the unique corporate governance needs of the religion-dependent factors pose a challenge to the study. However, a huge majority of banks in the UAE follow banking practices in the ordinary western models, enabling the study to rely on the assumption that their small fraction is insignificant to the study outcomes.

Literature Review

Investigating the corporate governance framework and environment available in the UAE facilitates enumeration of the connection with performance in national banks. As a leading investment destination, the country has supported several economic regulation changes. For the financial industry’s responsiveness to international standards, the study highlights these measures as reported by various academic authorities.

Market efficiency comes into the fore of the qualities displayed in the study conducted by Marashdeh and Shrestha (2008), about emerging-market features of the UAE. According to the authors, financial markets foundations stem from the practices conducted in the stock exchange markets, which must demonstrate growth beyond developing world status. Exposure to the international environment and standards implies that the country’s willingness to accommodate foreign investors complements ambition as a leading investment destination.

Given the preferred conditions that the UAE possesses, testing the financial markets for stability leads to authentication of the financial market as a compatible environment for business. As Al-Tamimi (2012) reckons, corporate governance requirement by the central bank appears as the beginning point of success in many financial markets, including the UAE. In the study, the author assesses corporate governance culture among national banks in the UAE.

Various attributes of the culture among national bank institutions demonstrate the presence of deliberate measures in the country to streamline the financial industry alongside international markets expectations. It emerges that the awareness and willingness to comply with the disclosure standards support Al-Tamimi’s (2012) opinion that corporate governance practices in the UAE complement international standards. Additionally, executive compensation within the limits of an excellent economy forms part of the culture in the UAE. As an instrumental step towards raising investor confidence, handling of internal and external relations also form part of the author’s assessment of the UAE corporate governance. In nearly all of the international expectations investigated in the study, UAE performance in corporate governance among national banks indicates positive compliance and responsiveness.

According to observations by Hadef and Partners (2010), the performance of the UAE financial regulations authorities reflects the awareness of corporate governance practices. In the observations, the presence of regulations on the creation of committees responsible for the implementation of various financial practices supports responsiveness to corporate governance. Since most of the national banks in the UAE list in the capital markets such as the Abu Dhabi Stock Exchange and Dubai Financial Market, that exposes them to compliance with the corporate governance regulations.

As Central Banking (2009) reported, the UAE formulated definite corporate governance requirements within the banking industry as early as 2009. The 2009 regulations reported included measures to increase transparency and increase accountability. In addition, the regulations highlighted the management of conflict of interest as a common hindrance to performance in the financial sector. As mentioned in the Hadef and Partners (2010) observations, the regulations handled the formation of various corporate governance committees tackling different issues.

The basic committee management issues include audit, risk, as well as functionalities of nomination and employee remuneration. In addition, the consideration of the international financial markets environment within the internal standards contributed to the establishment of the various regulations. Assessing the establishment of these compliance requirements reflects observations before the 2009 regulations, such as those made by Al-Mazrooei and Al-Tamimi (2007). The study by these authors reflected on the practices of risk management in the UAE national banks at that time. Despite inherent differences between foreign and national banks in the UAE, tremendous steps taken in terms of risk management demonstrate corporate governance evolution in the country.

The authors found that the UAE national banks responded to various risks with awareness as required by international standards. The authors reported that banks in the UAE responded to exchange, credit, and operating risks that commonly affect financial institutions. As a driver in investment patterns, risk management in the UAE national banks promoted investor confidence leading to growth. This presence of positive indicators of corporate governance in the financial sector in the UAE promotes the hypotheses that point at a potential relationship between good governance culture and investor attraction to the country (EBA, 2004).

The responsiveness of the UAE financial markets to foreign investment explains the impact felt in the recent economic crises, which originated from foreign markets (Mehta, 2012). Risk management areas that the UAE banks find corporate governance successful include understanding risks, successful risk identification, credit risk analysis, financial risk assessment, and risk monitoring. Regressive market experiences demonstrate that the UAE banks experience significant interaction with foreign markets today. It implies that the level of attractiveness enjoyed by the UAE supports foreign players in the country.

Whereas other countries had extreme risk exposure leading to the eventual closure of banks, the UAE banks reported a relatively safe performance (Al-Mazrooei and Al-Tamimi, 2007). The outcomes of the corporate governance practices about the management of risk could explain the performance associated with the relative stability. In terms of corporate governance responsibility that banks ought to observe, protecting customers from high-risk trading must always hold.

Authoritative findings after the financial crisis found that trading in risky instruments among financial institutions in the USA and Europe exposed the global economy to the crisis. Such exposure fell short of the corporate governance requirement of protection of investors from deliberate risks. UAE listed companies follow strict corporate governance regulations, making them among the leading in the region and beyond.

As CIPE (2011) reported, UAE companies such as Sorouh recorded impressive regional performance in corporate governance due to the environment in the country. Identifying the success of the company as a corporate governance giant in the region with the national framework facilitates establishing the emerging financial culture in the country. When compared with the banking industry in the region, UAE has among the highest penetration rates. This implies that the GCC standards represented by the UAE and Saudi banking industries must set the pace for international financial interactions (Al Shamsi, Aly, and El-Bassiouni, 2008).

The authors identify various strength points that the UAE banks possess to rank them above other regional and perhaps global financial systems. Whereas other GCC nations continue to struggle for a political presentation to the Western nations, the UAE enjoys one of the most impressive neutral positions in global politics. As an illustration, the Middle East faces serious challenges of political preference with continuous standoffs with each other and the rest of the world. The strategy employed by the UAE in terms of political stability augurs well with the corporate governance strategy of integrity and transparency. As mentioned in the introductory remarks, stability requires complement by corporate governance to catch investors’ attention.

According to studies conducted by, Al-Tamimi (2012), the UAE banking sector ranks above the main industries in the region due to its better audit and compliance regulations. Audit regulations as proposed by the international audit professional body assist the national framework to handle audit issues. Common audit areas as mentioned above include transparency and disclosure of conflict of interest, to increase investor confidence.

Other audit committee responsibilities include setting internal audit functionalities to assist the banks to respond to audit queries when the external auditor interrogates the banks. Identification of various risk issues as an audit activity requires a distinct focus by the banking industry. A separate risk committee must always facilitate the bank’s willingness to respond to investors’ protection. In other companies, an audit may include risks and auditing collectively.

Such a comprehensive committee framework facilitates the UAE financial sector management to establish a strong corporate governance foundation. To this end, the UAE boasts of one of the strongest audit-compliant banking industries in the region. As a parameter of investor attractiveness, risk and audit components of corporate governance promote foreign investment in the country over the last few decades (Al-Mazrooei and Al-Tamimi, 2007). To support the vibrant economy in financial stability, the banking industry has made tremendous efforts to satisfy customers and add value to investor confidence.

In terms of the expected corporate practices, corporate governance depends on several internal and external standards. As discussed in this discussion on the state of UAE national banks’ compliance, various levels of improved management and professional performance emerge. The emphasis in corporate governance lies within the conduct and delivery of duties by the board of directors. Assuming that the board of directors assumes the sole responsibility of company decisions, every action, and decision must provide impeccable value to the company. Among the values that corporate governance standards advocate for about the conduct and qualities of the board, every detail of board membership comes into focus (Aljifri and Moustafa, 2007).

In terms of the expected corporate governance provisions for compliance by the board of governors, the role of the board clearly defines company responsibility to investors. As mentioned above, the company must provide sufficient protection of investors’ interest in the company. In a sector such as the banking industry increasingly facing tremendous attention from investors, the highest assurances of safety define the profitability path of the industry. Among the issues, that corporate governance attempts to ensure in the industry, the board and other stakeholders top the list of priorities in modern company practices. Highlights of the state of compliance amongst national banks in the UAE accompany the discussion, to illustrate the link or lack of it as expected.

Corporate governance standards commonly followed around the developed world highlight the duties of the board of directors. As an area where most companies fail to guide the directors, the duties of directors form a critical service delivery determinant. Persons chosen to sit for purposes of delivering director services to the company must possess substantial knowledge of relevant company business. Experience in the industry always forms part of the determination of the knowledge held by an individual, but corporate-wide experience also provides admissibility (Helgab, 2004).

As an illustration, a company may take in an individual with specified industry experience or from a different industry with exceptional skills applicable in numerous industries. Having such guidelines in place, the UAE banking industry benefits in directing expertise in the executive management of the banking industry as is the case with other corporations. This explains the upward trajectory of the banking industry in the country when compared with the region’s banking industry that relatively drags behind the UAE (Al-Tamimi and Charif, 2012). As mentioned in this discussion, the status of the UAE financial markets in the region relatively favors investment into the country when compared to its neighbors.

Alternatively, the ability of the individual to devote time, skills, and unique personal abilities must always inform the company in choosing directors. In such a perspective, discharge of company duties by directors must not face obstacles from personal inabilities or lack of commitment. The duties of the director must start with awareness of the company’s business and operations from the inside (Helgab, 2004). As contained in nearly all company regulations, directors have a right to access every detail of the company’s dealings. This deliberate access allowance came about for the directors to familiarize themselves with duties in making vital decisions of the company.

As a key corporate governance concept from foreign jurisdictions, the UAE demonstrates to the international investor community of its readiness to do business with assured success in executive management (Linklaters, 2010). Demonstrating a departure from the traditional patriarchal system where expertise played no role shows the brighter side of the country in managing the globalized banking requirements. Board committees mandated to recommend nominees for approval to the board for membership follow certain rules in determining the suitability of the individual. Such standards also apply in the selection of managers and senior managers, who must reflect the industry’s ambition to have competent individuals taking charge of its affairs.

In the UAE banking industry, the corporate governance regime contains such regulations as to capture awareness of responsibilities and duties by the directors (Al-Tamimi and Charif, 2012). The requirement of knowledge of duties and responsibilities in the UAE banking sector extends to the requirement that employees obtain such information. To ensure that the UAE banking industry performs following expected knowledge and experience, in-house training arrangements continue across banks (ADCB, 2013). The hiring of trained personnel does not prevent the banking industry in the UAE from performing training programs.

In a growing industry with the willingness of adopting awareness of duties ahead of its operations, training forms a basis for determining compliance levels. In the UAE banking industry, directors’ training on the industry’s performance also continues (Linklaters, 2010). In a highly sensitive industry such as the UAE, the choice of directors follows a strict in-sourcing pattern. Banking personalities form a significant section of the boards’ pool of human resources, making it easy to access experienced directors and managers. In terms of the education sector, education standards in the country rise to this challenge by providing a highly skilled pool of graduates. Such ability of third world countries paves the way for development towards developed status.

Another concept of the board of directors’ conduct touches on the rules of engagement that every director follows. To instill order and decorum in a board, the chairman requires to have undoubted authority in the form of enforceable rules as Aljifri and Moustafa (2007) observed. Assisted by the managing director, the flow of authority from the chairman in taking charge of the board specifies the working rules.

The working rules must demonstrate the division of roles between the members of the board, the various board committees, the managing director, and the chairman. An organized board with clear meeting structures and rules, which extend to internal and external conduct, demonstrates the seriousness of the board. Other details about the making of decisions and voting procedures must form part of the board’s working rules.

The ability to handle sensitive information with confidentiality and the highest professional standards define the quality of the individual. Conduct extends to an awareness of every company rule and regulation as set out in different company instruments. In the UAE, the lack of exemption of national banks from observing the usual requirement of following company rules implies that the industry follows strict guidelines laid out in law (Al-Tamimi and Charif, 2012).

UAE laws define levels of membership as independent, executive, and non-executive directors in structuring companies (Linklaters, 2010). Under strict rules of the banking industry in the UAE, membership regulations illustrate deliberate structures of ensuring awareness of duties. Besides the requirement that UAE nationals take up a majority in the running of board membership, other restrictions of sitting in different boards highlight the protection of devotion concept.

The requirement of forming various specific committees augurs well with global industry trends (Porbunderwalla and Tarantino, 2009). In the UAE, clear guidelines that every company selects an audit committee for instance explains the magnitude of financial prowess needed. Besides the awareness of the duties in the appointment of the director, the qualification standards set by the law illustrate the seriousness paid by the authorities in the UAE. In terms of the benefits of these corporate governance foundations accruing from the definition of board membership, the UAE banking industry derives strength and momentous future direction.

In terms of the other mandatory committees, the focus of board membership appointments and commission structures shows how balanced the board must remain at all times. To overcome the various challenges involved in meeting audit standards, a functional audit committee must always advise the board (Helgab, 2004). To this end, the UAE highlights the significance of having audit and nomination standards across companies. The advice to national banks to perform extra caution in dealing with risks demonstrates the preparedness to handle internal and external exposure to potential harm from financial risks.

At an age when exposure to global economic forces stands at a historic level, unique measures such as those demonstrated by UAE, show preparedness to welcome globalization. Such an effort enables the country to withstand potential financial harm from external sources, making it withstand the pressure associated with direct exposure. As mentioned above, the economic crisis in the global markets had devastating effects on countries that allowed risky business practices.

The audit committee presents an invaluable creation of the company to overcome various financial integrity hurdles that the company faces. Within the financial sector, institutions such as banks face a relatively higher threat to operations due to handling liquid investment. The role of an audit committee provides mitigation to involved threats by constantly supervising the progress in the financial net worth of the company (Linklaters, 2010).

To perform this function, the committee ensures the existence of a competent internal control system and running standards. In terms of the financial reporting standards, the committee ensures that the requirements of the regulating bodies remain insight during the filing of returns. Audit committees assure compliance with different financial requirements that act as a sensitive area in the life cycle of the company.

For the sensitivity of the financial sector, banks need extra caution to these rules and the audit committees must always perform. In this aspect of the delivery of services, the audit committee finds the services of an internal auditor significantly necessary. Strict adherence to internal control standards set by the audit functions facilitates the realignment of employee service delivery with the overall company objectives. In the banking industry, such measures formulate the foundation of a successful environment.

Further to this line of approach, consultation with external accountants and auditors must inform the committee in its mandate. Constant evaluation of the procedures implies that the committee replies to the need to have working audit systems (Linklaters, 2010). In the UAE, functional audit committees in different industries as copied from other jurisdictions in the developing world already deliver tremendous success in performance. Equally, the functional status of the nomination and remuneration mandate of the board assigned to the relevant committee ensures that the issue of conflict of interest resolves internally.

To the need for shareholding control among the board membership, the remuneration committee plays a vital role in the UAE. Issues of disproportionate remuneration and compensation witnessed in other jurisdictions do not severely affect the UAE. In this regard, the investors feel protected by the applicable regime in the country when compared with other nations. Constant review of the corporate governance system facilitates updating it with the rest of the world. In adopting proposals by various professional bodies in terms of treating different management concepts, corporate governance ensures that the regime in force corresponds to the internationally admissible practices (Al-Tamimi, 2012).

Pertinent issues arising from the need to have corporate governance illustrate the importance of proper financial risk management. Ethics and morals of having a functional corporate governance framework extend beyond error-free work but the protection of investors and the economy. Among the regulations enforced by the UAE authorities, the requirement of board members may provoke playing a patriotic duty to protect the economy. Perhaps with increased financial management sense of responsibility among the management, the corporate world can eliminate certain risks such as those witnessed in the global financial crisis (Porbunderwalla and Tarantino, 2009).

Equally, handling operational risk in an industry facing a higher share than the rest must adopt higher management standards as proposed by corporate governance practices. In dealing with the tricky issue of operation ratios, solvency, and reputational risk involved in the financial markets, deliberate steps as proposed in corporate governance must take effect. In a world fast embracing democracy, avoiding the risk of litigation and falling prey to legal technicalities must form part of the control standards. The UAE’s preparedness to this in the banking industry involves strict adherence to regulations, which act as a remedy against litigation.

Dealing with different risks such as fraud and corruption that traditionally affect financial markets requires deliberate efforts through compliant systems. The UAE banking industry possesses these qualities in corporate governance efforts highlighted in its enforceable regulations. Facilitation of the appropriate relationship between the directors and other stakeholders implies that the applicable corporate regime responds to public relations issues. Through the adoption of different technology-based solutions, the management embraces solutions that accurately solve various errors and mistakes (Porbunderwalla and Tarantino, 2009).

In such efficient systems, the management enables the company to operate at less cost, thereby increasing profitability. The impressive level of technology application in the UAE banking sector implies that the industry enjoys the benefits of an efficient system, thereby increasing its performance. As a corporate governance approach in risk reduction, employing modern technological tools to monitor and intercept various risk elements contributes to UAE banking industry success. The contribution introduced by technology fits in the cost-benefit analysis, which determines the suitability of such solutions (Porbunderwalla and Tarantino, 2009).

This implies that the benefits obtained in installing technology-based risk management and efficiency-enhancing tools outweigh the overall costs incurred. From a business perspective, a system that reduces operating costs incurred in covering risk contributes to the overall profitability of the organization. From such a perspective, the UAE industry obtains tremendous benefits from embracing technology in its management systems.

The use of international standards proposed by international professional bodies in management exposes the UAE banking industry to proven successful management practices (Aljifri and Moustafa, 2007). Relying on international accounting standards for instance enables the industry to resolve traditional accounting challenges that global research solved decades ago. In harmonizing reporting standards, for instance, the accreditation of the industry as a globally competitive player exposes the country to the international pool of resources. In adopting international auditing standards, the benefits of audit functions established through rigorous research and participation of international professionals accrue in the country. As such, the UAE corporate governance culture based on international success and experiences explains the effect felt on performance.

As Linklaters (2010) observes, the harmonized corporate governance code for 2010 discloses a close resemblance to those applicable across the developed world. In terms of the requirements that most developed world corporate governance standards embrace, a clear trend emerges as all target conduct of company executives. In the elaborate guidelines given in consultation with the applicable company laws, company executives need above-average qualities to deliver results. Apart from knowledgeability and possession of skills, the moral standing of the individual affects their ability to deliver.

Through vetting conducted by the relevant committee as required by the board’s operations, individuals appointed for nomination to the board must deliver results. In setting high standards for the top leadership of the banking industry, the UAE conforms to standards applicable in the most successful financial markets systems. Given the roles of the directors and management teams, the awareness of the expected conduct forms part of a clear code for the rest of the industry’s human resources.

To increase accountability and transparency in the management of the company, the UAE laws require that the composition of the board accord director membership to executives and non-executives. In addition, independent directors must form part of the board, to provide checks and balances to the board. The independence of this category of directors ensures that the board does not make decisions against the general intention of the majority shareholders or stakeholders. Linklaters (2010) highlight the requirement that the nominee’s advertising must appear in the dailies for various board appointments.

Issues arising from the public’s information on the appointment provide further checks to the composition of the board. A requirement that the board members obtain relevant training on their roles and mandate complements the general expectation that the board functions from an informed point of view.

Handling of the public image of the company affects the performance of the company since perceptions determine its attractiveness to investors. In terms of the mandate by the company employees to act as agents of the company, banks in the UAE provide sufficient image protection among the employees. To work for a bank in the UAE requires commitment, which the banks reward relatively better when compared to several industries. Motivation among employees presents a challenge to the management team to ensure that their contact agents with the customers always advance a pleasant image to the clientele.

Training and welfare programs for employees in the banking sector must always supplement the efforts to have employees observe the set code of conduct (Al-Mazrooei and Al-Tamimi, 2007). A closely related field handling corporate social responsibility deals exclusively with enhanced public interaction, but as a critical image development strategy.

References

ADCB, (2013). ADCB achieves success for its aspiring managers’ programme. Web.

Al Shamsi, F., Aly, H., & El-Bassiouni, M. (2008). Measuring and explaining the efficiencies of the UAE banking system. Web.

Aljifri, K., & Moustafa, M. (2007). The impact of corporate governance mechanisms on the performance of UAE firms: an empirical analysis. Journal of Economic and Administrative Sciences, 23(2), 71-93.

Al-Mazrooei, F., & Al-Tamimi, H. (2007). Banks’ risk management: a comparison study of UAE national and foreign banks, Journal of Risk Finance. Web.

Al-Tamimi, H. A. (2012). The effects of corporate governance on performance and financial distress: the experience of UAE national Banks. Journal of Financial Regulation and Compliance, 20(2), 169-181.

Al-Tamimi, H., & Charif, H. (2012). Corporate governance practices and the role of the board of directors: evidence from UAE conventional and Islamic banks. Web.

Central Banking (2009). UAE to improve bank’s corporate governance. Web.

CIPE (2011). Advancing corporate governance in the Middle East and North Africa: stories and solutions. Washington, DC: International Finance Corporation.

EBA, (2004). Financial position of commercial banks in the UAE, Abu Dhabi: Emirates Banks Associations.

Hadef & Partners, (2010). Corporate governance committees mandatory for UAE listed companies. Web.

Helgab, J. (2004). Guidelines on corporate governance. Web.

Linklaters, (2010). Briefing note: UAE corporate governance regime. Web.

Marashdeh, H. (2008). Efficiency in emerging markets- evidence from the Emirates Securities Market. European Journal of Economics, 12(1), 143-150.

Mehta, A. (2012). Financial performance of UAE banking sector- a comparison before and during crisis ratios. International Journal of Trade, Economics and Finance, 3(5), 381-387.

Porbunderwalla, K., & Tarantino, A. (2009). Next generation techniques in corporate governance, risk management, and regulatory compliance (GRC). Web.