Corporate Governance: In the light of the guidelines promulgated by the General Authority for Investment and Free Zones!

 Corporate governance has a great impact in any investment community In order to achieve the economic efficiency, preserve the contributors’ welfare and to ensure the feeling of security of the small investors to promote them to pump their funds in the investment projects.

 The need to establish corporate governance rules has emerged in 2001 in USA after collapsing some American companies. Accordingly the U.S. federal government had passed Sarbanes-Oxley to restore the public confidence in managing the companies.

Such importance pushed us into writing this article to discuss GAFI’s book no. 21 dated 30/1/2019 regarding the standards of the corporate governance guidelines applied to the companies.  

Before going into the article, we have to explain the meaning of corporate governance. It means “the laws and standards that define the relationship between the management of the company on the one hand, and the shareholders and stakeholders or parties related to the company”.

The book obliges the companies and the employees to notify GAFI of any irregularities that may arise or may be committed. Therefore, GAFI shall be entitled to ask for any documents related to the company’s business.

In my opinion, one of the major flaws of such rules is that GAFI supposed to carry out periodically unannounced inspection to companies to check out any irregularities to impose administrative sanctions. Therefore, it is more appropriate to draft these standards as legislative amendments in Companies Law and not to publish them as guidelines only in order to ensure the best performance and commitment to these rules.

The book discusses the rules in details which should be followed by the Board of Directors of the company but this discussion may give a wrong impression to the reader that it  applies   only to companies that included  its  institutional structure (board of directors) excluding companies whose structure is devoid of a board of directors such as limited liability companies.

It discusses the managing director and the BOD liabilities but unfortunately, most of these rules are stipulated in Companies law. So that we hope that new rules of governance shall be stipulated in a LAW; to strengthen the use of these rules.

However, the book tries to change the course of its rules derived from the Companies Law by presenting models for the committees which can be formed by the board of directors, for example: (Auditing committee) for setting up practical written programs that specifies the scopes of its jurisdiction and responsibility.

Another example of committees, is “Governance Committee” which is responsible for making a periodical evaluation for the governance system, drafting the charters and the internal policies and preparing the periodic reports,

Finally, we believe that GAFI has succeeded in laying the corporate governance rules that we have called for during several conferences in several major Egyptian institutions but the Authority has not laid the rules in a compulsory way which guarantees the proper implementation and well-functioning that handles the institutional corruption which found in the corporates internal organizational structure.

Therefore, we call upon the Authority to follow the example of the United States of America and other European countries in laying the corporate governance rules in an obligatory legislative framework including the financial sanctions that the legal representative of the company shall bear it; to guarantee the maximum level of control, in addition to overcoming the financial and administrative corruption between the company and its clients.