Responsible to govern

Is anyone in Lebanon thinking about corporate governance?

The small matter of private property and the duties and rights that are attached to its ownership are to capitalism what the solid inner core is to earth. Thus it was a good time for Executive to perk up our collective editorial ears – which are always on the listen for deeper economic truths – upon the surfacing of a speech with the question, “Who owns a company?”, asked by no lesser mind than the chief economist at the Bank of England, Andy Haldane.

“At least for publicly listed companies, its owners are its shareholders,” Haldane asserts at the start of his learned discourse. It’s their prerogative to claim the company’s profits and control its management. “And it is they whose objectives have primacy in the running of the company”.

But then he turned to the issue of corporate governance, from a broad definition that corporate governance is “the set of arrangements that determine a company’s objectives and how control rights, obligations and decisions are allocated among various stakeholders in the company.” Haldane advised in this context that the implementation of corporate governance according to the shareholder-centric model found in the UK and US has produced short-termism and other forms of corporate behavior whose macro-economic consequences are far from benign and the micro-economic frictions of which can have very negative impacts on stakeholders.

What erudite economists tell us about corporate governance in discourses such as Haldane’s is that it is not a box. There is no one-size-fits-all application of corporate governance. Corporate governance is, however, a vital process in the economy and it is vital for the health of the company, any company, to partake in this process. It is, moreover, vital that governments and regulators immerse themselves with full dedication in the setting up of legal frameworks and institutions that enable, strengthen and enforce corporate governance and create opportunities to invest into companies that demonstrate well-governed business potency.

This is why we are appalled when we see that the corporate governance report cards of Lebanon’s handful of listed companies suggest aptitudes and attitudes which one would associate with either a hopelessly dull or an actively recalcitrant pupil. So what are we to make of it if corporate governance practice at the arguably best-known and, by market capitalization, largest non-banking corporation in Lebanon is rated as inadequate? What are we to think if one of the top five banks by profit, one that is noted among leaders in