Corporate governance in dire need of improvement
01 Mar 2004Fifty percent of Lebanon’s economic problems can be solved through better corporate governance, according to the chairman of an auditing company.
Talal Abu-Ghazaleh, chairman and CEO of Talal Abu-Ghazaleh Organization said that the absence of corporate governance, or internal controls, often causes huge economic and social losses. He said that the importance of corporate governance did not get much public attention until the Enron crisis in the US and that of Parmalat in Italy. In light if the Enron controversy in which the the huge American power trading company was found to have falsified accounts the US Congress passed the Sarbanes Oxley Act in June 2002. This act protects investors by improving the integrity and credibility of a company’s external reports.
Such protection, Abu-Ghazaleh said, can be offered by a company issuing governance reports as well as audit reports, stating management’s responsibility for establishing and maintaining an adequate internal control structure and procedures for financial reporting. The annual report of a company should also contain an assessment of the effectiveness of the company’s external reports.
Abu-Ghazaleh added that the Sarbanes Oxley Act aims at developing a legal framework for general ethical decision-making. He also said that “whistleblowers” are legally protected under this law.
Abu-Ghazaleh spoke on Saturday in the Central Bank’s lecture room to a large audience representing employees of the financial and public sector. The lecture was opened by Ahmad Al Gishi, vice governor of the central bank, and moderated by Mohammad Naffi, director of training and development in the Central Bank.
Gishi first spoke of the Asian crisis of the late 90s, saying that these Asian countries suffered not from economic problems but rather the absence of corporate governance. Gishi said that solving economic problems included two missions: economic reforms (in terms of balance of payments and budget deficit and trade balance) and corporate governance.
Abu-Ghazaleh concluded by saying that it was important for central banks to adopt corporate governance by issuing new legislative decrees. He also suggested that Arab countries would follow the US in issuing Arab ethical standards, due to their need to take into consideration the impact of this law.
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