End of Year Protocol #2 - Words of ?

Copyright 2003 David Monniaux

Another contribution to the year end protocol of media retrospectives. 

This one not in the wisdom category but somewhere between incredible and bizarre.

1. "Something is unusual. We have never had such a high number of people involved in corruption," Dhahi Khalfan Tamim, who also heads the Dubai government's budget committee, told Reuters. 
2. Tamim said police had drawn "a list of more than 60 people mainly from government-linked companies" who are under investigation, adding no-one on the list was from a government department.

It's hard to understand this surprise.  

After all, what possibly could go wrong with US$ 60 billion of hot and easy money rocketing through the Emirate?  With contracts being let left and right for billion dollar projects?  And ignoring for a moment the regional history of commissions,  Philip Thorpe's observations in 2004 or the corruption trials at the beginning of 2008, who in their right mind might have guessed there was an increased potential for corruption?  Or that it was occurring?

As a distinguished Capitaine once put it "I'm shocked, shocked to find that gambling is going on here".

The Power of the Blackberry?

In today's fast paced wireless world of business, one's office can be in one's pocket.

Ex-chief of Deyaar accused of taking bribes while in jail.

New Dubai Law on Financial Fraud - Big Fish in the Net as Well?

A follow-up to my earlier post of the day based on a Gulf News article.

The following quotes caught my eye and raise the hope that perhaps more than "SR the Canadian" may be visiting the Court.

1. Self-seeking individuals have caused serious damage to the national economy and affected the government by bringing heavy debt liabilities on public companies and exposing them to great losses, he [Ahmad Humaid Al Tayer, Governor of DIFC] added. "These people have amassed illegal wealth at the cost of public funds. The law has given them the option to amend their ways and hand over the public money they have embezzled through illegal means."
2. According to Al Tayer, there have been instances where corrupt officials established bogus businesses to conceal the money they had diverted from the government coffers.
3. "There is no one above the law. The law will have no exception and everyone who has embezzled government money will be punished severely," said Dahi.  [Lt. General Dahi Khalfan Tamim, Police Chief of Dubai]

As I've posted before, the sheer scale of the projects in Dubai afforded opportunities for massive commissions and other diversions of funds.   Up in Qatar, Philip Thorpe is probably too civilized to be saying "I told you so", but perhaps he's thinking it.  Remarkable that it took so long for this discovery to be made.  A rising tide not only lifts all boats but apparently closes a lot of eyes.

There will of course now be speculation about every senior level change in Dubai Inc - particularly those involving nationals.  Stay tuned.

Nakheel Corruption Case: The Iceberg Just Got Bigger

Seems that six individuals have been accused of improriety not just one as mentioned in my earlier post.

I think though that we're still in the shallow end of the pool with the goldfish.

Tie Your Camel First, Then Trust in God - Part IV Or Not Exactly the Right Sort of Advertisement of Professional Skills

From the Gulf Daily News.

A Fair Day's Wages for a Fair Day's Work - Follow-Up to Hadith Qudsi #21

A follow-up to my earlier post, two articles from GulfNews Dubai.  A bright one here and one not so bright here.

The next step is making sure the wage paid is fair.

"A fair day's-wages for a fair day's-work:" it is as just a demand as
Governed men ever made of Governing. It is the everlasting
right of man.

Thomas Carlyle

Transparency International Publishes 2009 Corruption Perceptions Index - How Did the GCC Do?

By now you've probably seen other reports on the rankings of the GCC countries in TI's 2009 CPI.  Before we turn to the numbers, a few words.

First, how does TI itself describe the CPI?

Here are their exact words:  "The Corruption Perceptions Index (CPI) measures the perceived level of public-sector corruption in 180 countries and territories around the world. The CPI is a "survey of surveys", based on 13 different expert and business surveys."

A few points to emphasize:

1. The second word in the name says it all.  It is a Corruption Perceptions Index.  It is the perception of the level of corruption not necessarily the reality. 
2. It is public sector corruption only.
   
3. It is based on surveys (there are a universe of 13 different surveys).  Not all surveys use the same methodology.  Not all cover the same set of countries.  Usually, countries are ranked using 5 or 6. 
   

Despite these factors, the results are set forth with apparent Cartesian precision.   New Zealand is the least corrupt with Sweden two places below.  Not three.  Not one.   Similarly, at the other end of the scale, Somalia is more corrupt than Afghanistan.  Really?  How do they get to this fine a level of distinction?  Are the same set of respondents doing business in both Somalia and Afghanistan?

I commented on this phenomenon before and so I will turn to the rankings.

GCC states CPI ranking (best to worst):  World rankings follow the country name.

1. Qatar             22
2. UAE              30
3. Oman             39
4. Bahrain          46
5. Saudi Arabia  63
   
6. Kuwait           66
   

Another Truckers' Delay on the Saudi-UAE Border - But What is the Real Story Here?

 "There are three whose adversary I shall be on the Day of Resurrection: a man who has given his word by Me and has broken it; a man who has sold a free man and has consumed the price; and a man who has hired a workman, has exacted his due in full from him and has not given him his wage."

Hadith Qudsi #21

SAA

If you'll look closely at this article,  you'll see in the fourth paragraph that driver, Mohammad Jolan Mustafa, gets the princely sum of AED200 (US$54.50)  to make the trip  to Doha regardless of the time spent.

Usually it only takes three days, which would make the per day wage the exorbitant sum of  AED 66.670 (US$18.17).

This time it will take eight days so his per day wages will be merely  AED25.000 US$6.81. 

I will leave it to readers to perform the wage per hour calculation.

On the border story, there was also a delay on the Causeway between Bahrain and Saudi Arabia, which the Gulf Daily News ascribes to a computer glitch in Saudi, speculating that this may have also affected the UAE/Saudi crossing.

DFSA to Tighten Corporate Governance Standards

Abu Dhabi's The National reports on DFSA plans to tighten corporate governance.

Key elements of the proposed reforms are:

1. Mandatory separation of role of Chairman from CEO
2. Abolition of share payment for non executive directors
3. Mandatory number of non-executive directors on audit, remuneration, and nomination committees

The full article is here.

Some comments:

1. I hope the reference to non executive directors is really to independent directors.   A non-executive director could be a major shareholder or the representative of a major shareholder.  An independent director as that term is understood elsewhere, e.g., the UK or Bahrain is someone with sufficient expertise and a degree of independence both from management and the major shareholders so that he or she will truly look out for the interests of all stakeholders of the firm.
2. The comment about the various board committees seems to imply that current regulations allow executive directors to sit on those committees.  An executive director is one involved in the management of the firm.  It is hard to think of a situation where any executive directors should be a member of the audit committee of the board of directors. The audit committee is supposed to be checking very carefully that the management of the firm is applying  appropriate accounting principles and standards as the basis for its financials on a consistent basis and that any estimates involved in the preparation of the financials are well founded and documented.  That the controls in the company are adequate to prevent honest errors or fraud.  And that both the internal audit function and external auditors are independent of management, have assigned competent staff to do the audit and are discharging those responsibilities fully and professionally.  Similarly, it would not be a good idea to have an executive director on the remuneration committee where he might set the salaries of other directors and thus give them an incentive to support his actions as a member of management.  Or on the nomination committee where he might pick a friend to be a director.  There is a fundamental conflict of interest for an executive director to sit on any of these committees.
   
3. While this is a good step, it is very important to understand that regulations are not a panacea. Like the traffic signal at the corner or the posted speed limit, corporate governance reuglations are only effective if people obey them.  So they are a necessary first step.   But, if they are ignored, no matter how elaborate and well constructed they are, they will not work.   Enron Corporation had an extensive code of ethics  - some 65 pages.  That document proved ineffective.  Not for want of not being there.  Rather because the people who were supposed to implement it, didn't.  More on Enron here.  Both Enron Corporation and Hollinger  International had an impressive list of independent directors.  And elaborate procedures to vet related party transactions. Reading the Breeden Report on Hollinger will illustrate better than I can the critical importance of people in making whatever process a firm has work.  Sometimes group dynamics - the desire to avoid confrontation, the fear of appearing ill-informed - cause even the most honest to make bad decisions.  Corporate governance like religion is in the heart not on a piece of paper.  Paper provides a guide, but it's no substitute for the heart.
4. People from the region should not be overawed by experts from the West preaching their particular mathhab of corporate governance.  Enron, BCCI, Madoff, LTCM and many more all occurred in these self-proclaimed exemplars of world class standards and regulation.  Though I suppose the counterargument is that the doctrine is sound but was not followed, or, perhaps more precisely not enforced by the regulators.
5. Finally, if any banker out there thinks that corporate governance code or set of regulations is going to protect him from someone determined to cheat him, I'd refer him or her to my traffic light example above.  Traffic laws have not proven to be a "grail" holy or otherwise in preventing violations or deaths.
   

Global Forum VI For Fighting Corruption and Safeguarding Integrity - Doha Qatar

Doha is hosting the "Sixth Global Forum for Fighting Corruption and Safeguarding Integrity".

Fairly distinguished attendees and speakers.  A worthwhile and highly relevant topic.

Some press articles here and here.

And more background here.  It appears that speeches will be published at this site later.  QNA has already published one or two.