What are the new requirements and expectations in corporate governance today, in view of the changing global economy, the shift of power from management to shareholders, the complexities of global financial engineering, the new dimensions of risk, and the pressure for greater transparency and accountability? How can corporations meet these new requirements and expectations?

The Panelists:

Willem Br?cker, Managing Partner, Global Markets, PricewaterhouseCoopers, Netherlands

Khalid Al-Molem, President, Saudi Telecom, KSA

Chairing the Session:

Stewart Gilman, President, Ethics Research Center, Washington DC

Stewart Gilman opened the session by drawing on his own experience in the field of ethics, declaring that "the starting point for all businesses must be values." Noting that Enron twice voted to override its own code of conduct, he contended that recent business failures in the US did not result from financial crises at the corporate level but rather from a crisis of integrity.

How important is corporate governance? According to Khalid Al-Molem, it is "absolutely critical" to growth. Corporate governance provides guidance, works on behalf of investors, and invites investment. He concluded: "If you want to privatise, if you want outside investment in your family business, you must embrace corporate governance."

Despite the acknowledged importance of corporate governance, at least in some quarters, the Middle East is only beginning to address it. According to Khalid Al-Molem, because much of the concentration of wealth in the region is tied to governments or family-owned businesses, there has been only limited progress toward developing corporate governance standards. There is much work to be done, particularly in the areas of accounting standards and independence.

Willem Br?cker addressed the global aspects of corporate governance. He observed that the scandals in the US have had dramatic implications in Europe and around the world. At one time, developing countries looked to the US and European models for standards of governance, but now that is no longer the case.

Prompted by questions from the audience, the panelists spoke at length about the role of the board of directors. Khalid Al-Molem suggested the need for diversity on the board, a sufficient mix of executive and outside directors, and executive committees charged with addressing specific issues such as audit committees and compensation committees. Mr. Br?cker noted that it may now be much more difficult to attract people to serve on the board, particularly the audit committee, because of increased expectations and potential liability.

There was much discussion of the impact of the recent US Sarbanes-Oxley Act. As part of the law, the CEO must certify the financial statements of the company. Both panelists said that this requirement makes little sense, in light of the complexity of multinational financial statements and the fact that they are actually created by huge teams, not a handful of people. At a minimum, Mr. Br?cker suggested, the entire board should "sign off" on the statements, not just the CEO or CFO.

Some in the audience challenged the need for additional corporate governance in the Middle East. They contended that in many cases it would increase bureaucracy, stifle investment, and raise costs. Khalid Al-Molem disagreed. In his experience, the Arab world has tended to cover up issues instead of emphasising transparency. This cannot be productive in today's world. "Our capital markets are just developing," he stated, "and the right rules and regulations are well worth the cost."

Mr. Br?cker summed up the session by reflecting on how much both business at large and his profession in particular - accountancy - have changed in the aftermath of Enron and in response to Sarbanes-Oxley, which is US law but studied worldwide. "Everything is under examination, and everyone is operating very cautiously in this new era of corporate governance," he noted. "Accountability, transparency, and integrity are qualities we need to embrace going forward - but it is just as important that we do not over-regulate and stifle business initiative."

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