Corporate governance as a means of building competitiveness and growth is an increasing priority for policy makers and the private sector across the Middle East and North Africa (MENA) region. During the last decade, MENA economies have responded to a shifting global and regional landscape by embarking on an era of transformation characterised by economic diversification and reform. In particular, citizens have called for governance reforms and an inclusive society with social and economic opportunities for all.

This report looks at the corporate governance landscape in the MENA region in order to identify challenges and propose recommendations going forward. It is based on the analysis of policies and practices in four thematic areas.

The first area explores how strengthened corporate governance policies can facilitate access to corporate finance and capital markets, particularly for the growth companies that contribute to building the economic prosperity of tomorrow. It examines the region’s corporate landscape, including ownership structures, limits on foreign ownership, and the role of key institutions such as securities regulators.

The second area considers the role of transparency and disclosure in providing the information necessary for investors to evaluate opportunities and risks. Transparency also helps companies make sound business decisions and improve their performance. It reviews the corporate governance framework in MENA and looks at international efforts to enhance investor protection via a fair, efficient and transparent market.

The third area examines the importance of increasing women’s participation in corporate leadership as a means to achieve the inclusive economic growth needed to boost the region’s competitiveness. It highlights the positive impact on company performance of women’s participation in corporate decision-making, investigates the career barriers faced by women in MENA and stresses the need for better data to inform policy design.

The fourth area examines how improved corporate governance can help state-owned enterprises (SOEs) operate efficiently, transparently and on a level playing field with private companies. It notes that a lack of data hinders evaluation of state ownership in MENA and that professional ownership and governance practices are needed to maximise SOEs’ contributions to the economy and society.

Overall, the report finds that MENA economies have made progress in strengthening corporate governance frameworks in recent years, but that the region still faces challenges in adopting and implementing measures that support the economic efficiency, sustainable growth and financial stability needed to foster development.

Based on these findings, the report makes the following key recommendations:

• Develop strategies for capital market development, based on strengthened corporate governance policies, increase opportunities for growth companies to access finance and contribute to the region’s overall economic development. Analysis of MENA’s capital markets indicates that they do not reflect the potential of the region’s economies. Steps that can help build capital market growth include: preparing a national action plan; enhancing the monitoring capacity and accountability of securities regulators; improving market based financing alternatives; and developing the investor base, including by relaxing foreign ownership limits.

• Benefit from international good practices on transparency and disclosure to improve the effectiveness of the region’s corporate governance frameworks. Analysis of MENA’s corporate transparency practices highlights two areas of concern: disclosure of beneficial ownership and of related party transactions. Steps that can boost investor confidence include: strengthened disclosure rules on ultimate beneficial ownership, related party transactions and remuneration of board members; effective supervision and enforcement of corporate disclosure rules; inclusion of corporate governance reporting in annual reports; and promotion of shareholder engagement.

• Emphasise the importance of including gender diversity in policy frameworks as a first step towards facilitating gender balance in corporate leadership. Analysis of the participation of women in corporate decision-making roles in MENA shows that constitutional measures on non-discrimination against women have not yet translated into company practices. Steps that can promote women’s participation in corporate leadership roles include: introducing targeted measures to encourage gender balance; combining national goals with company strategies; and providing training and mentoring to shift values.

• Gather and disclose information on state-owned enterprises to strengthen accountability and help improve their performance. Analysis shows that the exercise of state ownership in most MENA economies remains dispersed across the public administration, with ministries often simultaneously holding ownership and regulatory roles. Steps that can enhance the contribution of SOEs to economic development include: harmonising their corporate governance and disclosure standards; clearly defining their financial and non-financial objectives; collecting data on their performance; and preparing aggregate reports on their operations to strengthen accountability.