Three key aspects of governance for boards of directors



The second part of our corporate governance series focuses on effective governance of management. There are broadly three areas: information disclosure, strategic direction and operational governance. For the board to discharge its duties in these areas it needs to take a proactive and consistent approach.
The foundation of any decision making process is information. Although it is the responsibility of management to assemble information it is imperative that the board leads the way in deciding what information is collected and how it is presented. The reasons for this are not only to avoid dishonesty but also to minimise the natural selection bias present in nearly any human endeavour. Examples of such information might include presentation of quality of revenue. Diversified, sustainable revenue generated from ordinary operations is considered high quality whereas a one time profit from the sale of a non-operating asset would be considered poor quality.
On the profit side it is now understood that free cash-flow should be considered when assessing the quality of profits. There are however many other factors to consider. One such factor that was prevalent in the aftermath of the financial sector meltdown is cost cutting. There is a big difference between cutting excess capacity which generates sustainable profit increases and cutting actual capacity which generates short term profit increases that will reverse in a year and decrease the long term viability of the business. The seduction of thoughtlessly increasing profits in the near term at the expense of long term profits is particularly insidious, as there is always pressure to increase immediate profits and management will rarely be around to be held accountable for this manoeuvre.
The next main area that the board is responsible for in terms of overseeing management is strategic direction. The first major sign of failure is when management or the board abdicate their responsibility in this matter to external management consultants. The issue here has nothing to do with the debate of whether consultants add value and everything to do with the realities of transforming primary ideas around identified opportunities into viable businesses with sustainable profits. Many government related projects suffer this issue, correctly identifying strategic opportunities but naively assuming that a combination of technocrats and consultants can produce anything other than missed targets and cash flow black holes. What is needed is experienced private sector leaders who understand that successful strategy is driven top down by the internal team, optionally with consultants in a support role.
The second major failure in driving the strategy of a business is understanding the relationship, often adversarial, between consistent positive short term performance and long term strategic achievements. Simply put, delaying or even canceling capital investments in the near term can lead to stronger profit numbers but will lead to the inevitable and irreversible decline of the company. It takes a strong board to support its management to focus on longer term goals in a world dominated by pressure for short term results.
The final main area is operational governance. The foundation is the authorities matrix, the corporate document outlining who has the authority to make decisions and take actions. This should not be restricted to financial controls only. All facets of the business need to be covered including HR rules around recruitment and termination, handling of errors as well as rules on branding. Again, this starts from the top and any decisions taken by the CEO regarding HR matters to do with his direct reports must be approved by a committee of the board in charge of such matters. Similarly, authorities should be diffuse whenever possible so as to avoid the concentrations of power that have led to mismanagement, neglect and even fraud. The standard method for this is to create standing management committees for various facets of the business, e.g. finance, HR, operations, and imbue those committees with authorities instead of individual executives.
Another operational governance point is the interpretation of performance data. It is one thing to receive information along with management analysis but it is something completely different to synthesize into something meaningful. One example is the new-CEO cushion: taking reserves in excess of what is necessary whilst blaming the outgoing CEO. These reserves can then be reversed the next year for an easy profit boost. This also happens when senior executives in charge of profits leave. There is also the never appearing pipeline play: every quarter management say they have a pipeline of potential business that they are certain will generate revenue. The following quarter this pipeline has not materialised, the excuses are many and a new pipeline is presented. Unchecked this con-game can be rolled over ad nauseam.
A final note. The above is a small sampling of the responsibilities of a board and to discharge this responsibility the directors need to understand that when they agree to be appointed they are not simply signing up to four meetings a year and possibly some committee meetings. They need to spend another two weeks per annum to discharge their duty.
Sabah Al Binali has held several board positions including chairman of Zawya, director of the board of Credit Suisse Saudi Arabia and vice chairman of Gulf Finance. He holds a diploma in Company Direction from the UK Institute of Directors.
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Game Changer

Director: Shankar 

Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram

Rating: 2/5

Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Sunday's games

Liverpool v West Ham United, 4.30pm (UAE)
Southampton v Burnley, 4.30pm
Arsenal v Manchester City, 7pm

German intelligence warnings
  • 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
  • 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
  • 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250 

Source: Federal Office for the Protection of the Constitution

The Sand Castle

Director: Matty Brown

Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea

Rating: 2.5/5

Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
  • Stay invested: Time in the market, not timing the market, is critical to long-term gains.
  • Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
  • Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
 
 
Scoreline

Real Madrid 1
Ronaldo (53')

Atletico Madrid 1
Griezmann (57')

 

 

UPI facts

More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions

COMPANY PROFILE
Name: HyperSpace
 
Started: 2020
 
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
 
Based: Dubai, UAE
 
Sector: Entertainment 
 
Number of staff: 210 
 
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.

When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.

How to get there: Emirates currently flies from Dubai to Orlando five times a week.
RESULTS

6.30pm Maiden (TB) Dh82.500 (Dirt) 1,400m

Winner Meshakel, Royston Ffrench (jockey), Salem bin Ghadayer (trainer)

7.05pm Handicap (TB) Dh87,500 (D) 1,400m

Winner Gervais, Connor Beasley, Ali Rashid Al Raihe.

7.40pm Handicap (TB) Dh92,500 (Turf) 2,410m

Winner Global Heat, Pat Cosgrave, Saeed bin Suroor.

8.15pm Handicap (TB) Dh105,000 (D) 1,900m

Winner Firnas, Royston Ffrench, Salem bin Ghadayer.

8.50pm UAE 2000 Guineas Trial (TB) Conditions Dh183,650 (D) 1,600m

Winner Rebel’s Romance, William Buick, Charlie Appleby

9.25pm Dubai Trophy (TB) Conditions Dh183,650 (T) 1,200m

Winner Topper Bill, Richard Mullen, Satish Seemar

10pm Handicap (TB) Dh102,500 (T) 1,400m

Winner Wasim, Mickael Barzalona, Ismail Mohammed.

The years Ramadan fell in May

1987

1954

1921

1888

The bio

Job: Coder, website designer and chief executive, Trinet solutions

School: Year 8 pupil at Elite English School in Abu Hail, Deira

Role Models: Mark Zuckerberg and Elon Musk

Dream City: San Francisco

Hometown: Dubai

City of birth: Thiruvilla, Kerala

The Bio

Name: Lynn Davison

Profession: History teacher at Al Yasmina Academy, Abu Dhabi

Children: She has one son, Casey, 28

Hometown: Pontefract, West Yorkshire in the UK

Favourite book: The Alchemist by Paulo Coelho

Favourite Author: CJ Sansom

Favourite holiday destination: Bali

Favourite food: A Sunday roast

COMPANY%20PROFILE%20
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3EAlmouneer%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202017%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Dr%20Noha%20Khater%20and%20Rania%20Kadry%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EEgypt%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%20%3C%2Fstrong%3E120%3Cbr%3E%3Cstrong%3EInvestment%3A%20%3C%2Fstrong%3EBootstrapped%2C%20with%20support%20from%20Insead%20and%20Egyptian%20government%2C%20seed%20round%20of%20%3Cbr%3E%243.6%20million%20led%20by%20Global%20Ventures%3Cbr%3E%3C%2Fp%3E%0A
Vidaamuyarchi

Director: Magizh Thirumeni

Stars: Ajith Kumar, Arjun Sarja, Trisha Krishnan, Regina Cassandra

Rating: 4/5