g - Arab International Women's Forum

Gender and Corporate Governancein theMiddle East and North AfricaRegionArab International Women’s ForumDubai, December 11, 2007Nadereh Chamlou, Qatar(nchamlou@worldbank.org)Middle East and North Africa RegionWorld Bank

Corporate governance often confusedwith corporate managementManagement is concerned with the day-toto-dayrunning of business (production, procurement,marketing, finance, personnel).Corporate r governance n is concerned withattracting financial and human capital tomaximize i long-term value for shareholdersh while respecting the interests of stakeholdersand society.

Corporate Governance ArchitectureInternal MechanismsExternal MechanismsReportstoShareholdersBoard of DirectorsManagementOperationsAppointsandmonitorsStakeholders exercisepressures on thecorporation andregulatorsthroughmedia, “watch dogs”,professionalorganizations, ratinginstitutions, academia,and dNGOsRegulators exerciseoversight throughStandardsAccountingAuditingTechnicalFinancial SectorDebtEquityMarketsCompetitionProduct marketsForeign investorsCorporate controlSource: Adapted from “Corporate Governance: A Framework for Implementation” – The World Bank (1998)

When is corporate governanceimportant?• In a proprietary firm the owner-manager's efforts are directed datmaximizing the firm's value because this maximizes the owner-manager's income as well.• This relationship becomes complicated when corporations areowned by multiple shareholders (principals) but run by managers(agents).• The need for corporate governance arises from the potentialdivergence of interests between those who have control over afirm (insiders) and those who provide its external financing(outsiders).• This divergence can be described as a principal-agent agent problem(commonly known as agency).

Why women can benefit from goodinternal Corporate Governance? (1)• Women entrepreneurs in MENA account tf for a substantialti share of the private sector, owning large enterprises andlikely to delegate management improved corporate governance can lead to:• Hold management accountable• Minimize divergence between interest of shareholders andmanagement• Access to better external finance for expansion• Divest existing operation for better opportunities elsewhere• Attract strategic/foreign investors for better know-how

Firms managed by ownerWomen are more likely to be investors rather thanowner/manager, good corporate governance important foraccountability of management toward owners……and MENA women likely to own larger firms than in other regions10080% of fimrs604070.4%92.3%200Female-owned FirmsMale-owned FirmsSource: World Bank Enterprise survey Data

Individually-owned firmsMore female-owned firms have multiple owners –good corporate governance important for fair treatment of allshareholders and better access to external funding……706050% of firms403050.4%69.0%20100Female-owned FirmsMale-owned FirmsSource: World Bank Enterprise survey Data

Family-owned firmsGood corporate governance permits familymembers to divest or plan for succession5040% of firm ms302044.3%28.5%100Female-owned FirmsMale-owned FirmsSource: World Bank Enterprise survey Data

Why can women benefit from goodexternal Corporate Governance? (2)Women in MENA have considerablewealth that could be invested insecuritiesimproved pregulation of CG can increaseconfidence in markets re protection ofminority/outside shareholders(e.g. Saudi women’s banks estimated at $26.6bil of idlefunds in 2002 –Al-Madinah Nov 19, 2003)

Summary• A substantial ti share of women-owned owned enterprises in MNA are large which h indicatesthe need to delegate management functions• A high proportion of women are owners but not day-to-day managers – need toexercise control over the corporation• A large number are sole owners that could benefit from strategic partnerships andoutside investors – better corporate governance can attracting better partners• A significant share own enterprises with family members and/or others where fairtreatment of all shareholder is key – important for succession planning ordivestment if need be• Finally, women have considerable wealth that sit idle. With greater confidence inmarkets (through improved corporate governance), women can play an additionaleconomic role (beyond employees and employers) as direct and portfolio investorsin the economies of the region and increase wealth and assets – even those whodo not want to work outside or do not have entrepreneurial skills or ambitions

Gender advocates and CorporateGovernance advocates can reapmutual benefits• Women entrepreneurs can benefit from strongercorporate governance systems and regulationsbecause of the nature of their ownership pppatternstransparency and trust pays off• Through women’s business councils, corporategovernance advocacy can benefit by integrating theneeds of women investors Integrity of financial markets are key to liquidity and depthwhich can only be achieved if more people participate….