Magdi Yacoub: King Responsibility Effect of Hearts...Saved the Lives of Thousands of Reports 40 -47 People
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www.eiod.org October - December 2010 Magazine publishedby EIoD October -December2010Issue12 Not for Sale for Not Executive Director’s Letter MANAGEMENT AND BOARD: A POINT OF STRENGTH OR WEAKNESS The relationship between Boards and management is one of the main reasons for success or failure of companies. Moreover, board-management relationship has direct impact on the future of companies and their ability to protect shareholders rights. Hence the Egyptian code of corporate governance covers this relationship in a detailed manner. I may not be exaggerating if I say that that this relationship is one of the major challenges facing companies that EIoD sees evident in dealing with various types of businesses. Basically, the General Assembly, GA, or owners of the company elects the board to oversee the executive management, and to make sure that the company has all the ingredients for success, including internal controls, risk management, strategic management, and all the other systems and work procedures. The board is also responsible for the appointment of a CEO, or the top executive, and determines overall goals and achievements expected from the management. Furthermore, directors use their relationships with various stakeholders to support the company’s activities and to open new markets. The General Assembly is to monitor and evaluate the Board performance, and decides whether to keep it, to change some of its members or to change it completely. Therefore, it is important that the GA members are not themselves company directors. If this is the case, it means that the board is accountable to itself in the form of the GA. It is much better if the company’s owners elect some experienced directors with competence and skills from various disciplines to represent them on the board, so that they can hold them accountable and thus segregate them if necessary. The management is solely responsible for running the company. The highest authority in the company goes for the managing director or CEO, who has absolute executive powers under rules and regulations approved by Board. The CEO is responsible to the board for managing the company, so he/she has the power to appoint and compensate others in the company. This is consistent with the concept of balancing power with responsibility. If the board sees that the CEO has failed to achieve the goals set for him/her or has failed to put the company on right track, then it has the power to replace him. What we at the EIoD see in practice based on our work in Egypt and the region is contrary to that picture. For example, we find that the board usually consists of major shareholders, so the GA cannot seriously hold directors accountable or replace them. We also see that in most cases the Chairman and CEO is the same person. This means that the board, which is supposed to monitor and question the management, is headed by the CEO who heads the management team. Even when separation is observed, we find that the Chairman intervenes in the daily management of the company, in the appointment and dismissal of staff, he/she makes deals on behalf of the company, and he/ she is involved in a lot of operational work. This situation leads to serious accountability/responsibility problems. In other cases we find that the audit committee, which reviews company performance and controls, has a majority of executive members. This means that the committee members monitor themselves. This makes the committee ineffective representing a merely cosmetic practice. The examples given above are just a few examples. They represent major imbalances in the system of governance of companies, putting money of shareholders and other stakeholders in serious risk, even if the company is successful, because most probably this success will not last. In conclusion, I would say that the Egyptian code of corporate governance we advocate is internationally recognized and reflects other countries’ experiences. Articles of the Egyptian code are flexible and are currently being reviewed to be modified in the light of latest developments in Egypt and the world. We must not fall into mistakes made by others in order to learn; we have to learn from others and should not think that we are “different” and that our companies are “different” from companies operating worldwide. Let us be wise and learn from others. Ashraf Gamal El-Din Executive Director Egyptian Institute of Directors \ Egyptian Corporate Responsibility Center Corporate Governance and rules of representing public money: this Editorial and Supervision representation is a Production responsibility not an Hind ELFalaky honor Design Director Nesrin ElMehy Editorial Production 12 Germine Edward Board of Directors’ Marina Adel Role in the financial Ahmed Eid crisis: Directors are Samer Moustafa ultimately responsible Dina Moussa for the decline of their Tarek Ghoneim companies. For Advertisement in The Executive magazine, kindly contact the EIoD at: Tel.: +202 33352765/ 37482769 Fax: +202 37629028 email: [email protected] address: Junction of Salem Salem & Abdel Azim Rashed st., 4th floor, Agouza, Giza, Egypt 16 Mahmoud The Executive is a leading magazine for business community and business decision- Mohieldin: makers. Packed with lively and informative features and shorter advisory items, it is an A history of essential quarterly reading for directors of companies in all sectors and of all sizes. remarkable endless The Executive is editorially autonomous and the opinions expressed are not those of achievements contributors’ employing organizations, unless explicitly stated. The contributors points of view do not necessarily reflect the views of the EIoD, ECRC nor that of the Ministry of Investment Printing: Police Printhouse 06 Climate change and the economy: bringing policymakers with a dilemma Why Corporate 20-21 29 Governance? The untapped potential 3rd United Nations 22 -25 Global Compact of energy efficient lighting“Philips Report” Roundtable: Energy Challenges facing Egypt CDFE Second 30 -32 Annual Meeting A Market vision for 34 -35 Nile Basin Countries Derivatives…Powerful 36 -37 Financial Instruments 40 The Corporate 39 Magdi Yacoub: King Responsibility Effect of hearts...saved the lives of thousands of Reports 40 -47 people. Through effective 48 -51 communication, 53 leaders lead Dr. Mahmoud Mohieldin: A history of remarkable endless achievements 6 ahmoud Mohieldin: President Hosni Mubarak accepted my resignation which was written in 7 pages…In Egypt, Bank Executives receive large salaries which are 10 times my salary at the World Bank…Youth should listen Mto leader’s advice on career development. Who is Dr. Mahmoud Safwat Development Economics, from Mohieldin leading positions: Mohieldin? Warwick University, England and Dr. Mohieldin was the Minister of Dr. Mohieldin was born on in 1990, he received a Master of Investment of the Arab Republic 15 January 1965 in Egypt. He Science in Economic and Social of Egypt, a position he held received his Bachelor of Science in Policy Analysis from University of during the period 2004-2010. Economics, with highest Honors, York, England, and he received The Ministry of Investment is First in Order of Merit, from Cairo his Ph.D. in Economics from responsible for the investment University, Egypt. In 1989, he University of Warwick, England policy; the management of received a Diploma in Quantitative in 1995. state-owned assets including Financial Economics, Faculty of Economics and Political Science, Cairo University and holds leading positions in numerous think tanks, research centers and academic institutions, where he is a Member of the Commission on Growth and Development since 2005 which comprises Nobel Laureates in Economics such as Michael Spence and Robert Solow; Chair of the Advisory Board for Global Emerging Markets Local Currency Bond (Gemloc) Program starting 2008; Senior Research Associate of the Economic Research Forum of the Arab Countries, Iran and Turkey; Member of Middle East Studies Association of North America; 7 Fellow of the British Society for Middle Eastern Studies, UK; Member of the Royal Economic Society, UK; and Member of the Egyptian Society for Political Economy, Cairo. In addition to being an active board member at Benha University; the Arab Society for Economic Research; the Center of European Studies Reports and the Center for Economic and Financial Research and Studies at the Faculty of Economics and Political Science, Cairo. In addition to the academic privatization and restructuring is the Governor of the Arab career, Dr. Mohieldin worked of public enterprises, and joint Republic of Egypt at the World as an Economic Advisor to the ventures; and the non-banking Bank; the Alternate Governor Minister of State for Economic financial services including to the African Development Affairs from 1995 to 1997; Senior capital market, insurance, and Bank; the Alternate Governor to Economic Advisor to the Minister mortgage finance. the Islamic Development Bank of Economy & Foreign Trade Dr. Mohieldin is a Member of and Member of the Board of from 1997 to 1999; and Senior the General Secretariat of the Trustees of the British University Advisor to the Minister of Foreign National Democratic Party, the in Cairo. In 2005, Dr. Mohieldin Trade from 1999 to 2002. majority Party in the Arab Republic was nominated a Young Global of Egypt; he is also a member Leader of the World Economic Dr. Mohieldin served as a Member of the Policies Secretariat; and Forum. of the Board of the Directors the Co-Chairman of Economic Alongside the Ministerial position, of the Central Bank of Egypt; Committee of the Party. He Dr. Mohieldin is a Professor in a Member of the Board of the opportunities between Egypt and other countries such as; South East Asia, Arab Gulf states, Europe and America. As a result of Dr. Mohieldin’s leadership, Egypt received Doing business 2010 award making Egypt’s ranking amongst the world’s top 10 business reformers for the 4th consecutive time.