COVID-19 is forcing businesses across the globe to adapt to how they operate. The impact for the Middle East varies, but countries who rely heavily on income from oil and gas, passenger air transportation, hospitality and tourism have been most affected. Some of the less developed countries across the Middle East North Africa (MENA) have seen a considerable drop in GDP[i]. Q2 will likely see a further negative impact on GDP globally, as many countries went into full lockdown in late March or April.
While COVID-19 is impacting the strategy and business objectives of many companies; others have seen an upswing in revenue and opportunities (technology platforms for webinars, video conferencing, team collaboration, healthcare and PPE and hand sanitiser manufacturers). Due to the global pandemic directors are having more board and committee meetings. These meetings are happening through video conferencing or online meetings or webinars.
Some companies were able to immediately move to a virtual platform for their board and committee meetings. Other companies had to test and acquire the relevant technology to allow for online virtual meetings. This has put a tremendous burden on the shoulders of the company secretary and governance professionals worldwide. As companies move to virtual meetings, company secretaries have worked hard to understand the software and then bring the directors up to speed on the technology chosen.
With many countries in full or partial lockdown, companies have moved to a virtual platform for their board, committees, and shareholder meetings. In the Kingdom of Saudi Arabia (Saudi) and United Arab Emirates (UAE), regulators and authorities have allowed companies to conduct virtual AGMs and extended filing deadlines.
On 11May 2020, Saudi Arabian Oil Company (Saudi Aramco) held its first virtual ordinary general meeting[ii] of its shareholders to approve the annual report and reappointment of their auditors. Saudi Aramco encouraged all its shareholders to register in the Tadawul system to be able to attend and vote in the ordinary general assembly meeting.
In UAE, most listed companies have already conducted their 2020 AGM online. This has allowed companies to meet shareholders virtually. Having AGMs through webcast, video conferencing or webinar could very well be the way for listed companies to keep their general meeting costs lowered. The boards and committees of many companies in the UAE are only meeting virtually.
During this tragic time, directors are meeting more often to review the principal and emerging risks and monitor company performance. The workload for directors and company secretaries has increased significantly due to the higher frequency of meetings and the formalities around agenda, board packs and minutes preparations.
Predominately, the laws and regulations of the leading Middle East countries allow the use of contemporary technology for virtual or hybrid meetings.
Companies may have had to change their articles of association to allow for virtual meetings, include sending an electronic notice and materials. For many companies, the lockdown has required them to purchase a board portal and an online meeting or webinar platform for the secure delivery of meeting packs to their directors and shareholders and for conducting meetings securely.
Listed companies usually have a proportion of international independent or non-executive directors. Where directors are attending meetings, virtually this could create a tax liability for the individual and the company. Some groups are required to meet in the country of incorporation for substance. In this case, virtual meetings and attendance of directors may need considering to ensure the substance requirements for tax purposes are met.
As boards go digital, there is a higher risk of confidential information being leaked or made public before announced through official channels. During this period, there is an increase in cybercrime. Companies should consider their IT governance and security as a top priority. It is the responsibility of the board to ensure that the data and information of the company are secure. Since the introduction of GDPR and other international data privacy laws, companies have had to enhance their IT governance of data controls. Many of the larger Middle East groups have subsidiaries in Europe, US and South East Asia so should consider GDPR and their corporate governance framework[iii].
As companies are working from home, there is a higher risk of employees clicking on malicious links or downloading software which could give hackers and criminals access to the company’s files and data. Ransomware is also a real risk for organisations.
Companies might consider adopting a ‘working from home’ and ‘virtual board and committee meeting’ policy to set out the does and don’ts for employees and board members when working and meeting virtually.
I recently wrote a blog on what is corporate governance?[iv], the reality is that not too much has changed from a corporate governance perspective for most companies internationally. Across the Middle East, the laws and regulations generally allow for the use of technology for board and shareholder meetings. The articles of association or bylaws should also be checked for any additional requirements or restrictions, namely, quorum or the physical location of the meeting and the chairman of the meeting.
Corporate governance is a never-ending journey towards operational excellence and optimal board performance and effectiveness.
Robert L. Ford MA FCG MIoD TEP is the Executive Director of Strategy and Governance for Governance Gurus, the UAE’s premier corporate governance training and consultants. Governance Gurus is a tuition partner in the Middle East for ICSA Courses[v].