The Gulf Cooperation Council (GCC) was established in 1981 and comprises of six member countries namely Saudi Arabia, Qatar, Kuwait, Bahrain, Oman, and the United Arab Emirates (Saidi, 2011). These countries are all oil exporting nations; therefore, they formed the cooperation to fight their challenges jointly. GCC was established with an initial aim of protecting the member countries from threats caused by the Iran- Iraq war. On the other hand, corporate governance is defined as the structure, in which large business enterprises are governed and controlled. Corporate governance at GCC has made its economy flourish, and the member states continue enjoying the continued period of explosive growth (Saidi, 2011). These countries have an exceptionally strong economic block whose growth has been on the rise. This paper will focuses on the corporate governance of Gulf Cooperation Council (GCC) and how this compares with the Euro.
Corporate governance can sound like a relatively new term in the GCC member states. This is because it is not long since the concept was introduced to the Arab countries. Nevertheless, for the short period that it has endured in the region, corporate governance has helped the region to improve the manner in which corporations in the area are governed, significantly (Saidi, 2011). It can be said that implementation of corporate governance is erratic, perhaps, due to the underlying values that are a norm in the area. Despite of this, philosophy and concepts of corporate governance are currently remarkably well accepted in the region (Saidi & Kumar, n.d). In line with this statement, it is worth noting that nearly all member countries of GCC have embraced corporate governance codes that are used in publicly listed corporations. Oman took the lead by instituting corporate governance standards for listed companies in 2002.
It can, therefore, be said that corporate governance in the GCC’s member states has shown some remarkable strides over the recent couple of years. It has been mainly accelerated by public governance and the need to pursue the high standards in governance. It has seen economies in member states grow at a tremendous rate owing to diversification of their economic investment portfolio. The investment in the infrastructure has been on the increase, and this involved both the public and private sectors (Saidi & Kumar, n.d). An economic block, which enjoys social integration and political stability, is usually a target for many investors, such as proved to be the GCC. The increase in the investment ratio by the private sector in GCC has fostered productivity growth. It is also found that the vibrant private sector in GCC has taken the lead in accelerating economic integration in the region (Saidi, 2011). Even foreign investors have targeted the region resulting to mergers and acquisitions among multinationals and local corporations.
There is, however, a lot of effort that needs to be put towards expelling the perception that the concept refers to extravagance and compromises the economic performance of an organization. The set codes and guidelines need to be enforced, so that companies and other organizations in the area can realize sustainable improvement (Saidi, 2011). When best worldwide practices in corporate governance are incorporated into companies, within the local settings at the region, the economy at GCC will attain much higher levels than it has, at present.
The corporate governance structures, as stipulated in the guidelines by regulators, have been implemented in the six member states of GCC, at different phases. Some of the countries in the cooperation are advanced compared to others, in the viewpoint of corporate governance. This implies that there have been limitations that have hindered successful implementation of the concept of corporate governance among members of GCC (Saidi, 2011). This was influenced by factors, such as isolation of economic block from the entire world economy. Moreover, the region is dominated by large and well established businesses that are family–owned and which have been depending on internal sources of income, for a long time (Saidi, 2011). Development of corporate governance is further derailed by the presence of a competitive banking network in the area, in order to meet the requirements of the organizations, based in GCC.
Effective corporate governance is concerned, among other things, with the overall accountability and empowerment of all those involved. However, most of the efforts are aimed at ensuring that the management structure of companies in the GCC member states adhered to the standards of corporate governance (Saidi & Kumar, n.d). Previous studies have shown that the banking sector in GCC countries is well established so that banks retain their role in funding of businesses. Financial institutions have also embraced the concept of corporate governance in most of their operations, thereby bringing about the effectiveness in the region (Saidi, 2011). The banks and other financial institutions are paramount stakeholders in progressive performance of organizations within the GCC. This provides, therefore, an excellent platform on which the research will be based.
Although GCC countries enjoy sound economic growth, their monetary policy is yet to be improved. A strong currency, such as the euro, helps towards placing countries that are members of the European Union in a better position, while carrying out international trade (Saidi, 2011). However, GCC cooperation is yet to come up with a strong currency that marches the euro. These countries need to develop a common currency, which has to be strong like the currency of the neighboring trading blocks.
Just like scenarios that advocate for change face a lot of resistance, implementation of corporate governance has also faced various challenges, some of which were outlined above. Some challenges are only witnessed in concentrated localities, and not in others. In order to realize some considerable change in the region, government authorities need to support and foster the changes (Saidi, 2011). When the government pledges its support to the initiative, significant success may be achieved. Moreover, there is also a need to institute structural, legal and regulatory reforms, in order to bring an overhaul in the entire economic sector.