Bank Dhofar and corporate governance in the Oman

 

The company which I selected to examine corporate governance is Bank Dhofar. Corporate governance is an essential element in attaining, enhancing and retaining confidence of the bank’s Stake holders. It helps to make a bridge between stake holders and directors of bank in regard to relationship and responsibilities. It is done through by making strategies, clear objectives and improving performance but making sure that all these efforts are done in compliance to code of ethics and regulatory framework.

The board of directors of Bank Dhofar has made full efforts to make corporate governance of bank compliant with policies of central bank of Oman. Decision making in bank Dhofar has been divided into two departments one is headed by board of directors and other one by trustees. This two tier system has created a balance between stake holders where trustees of shareholder also gets change to take art in decision making process along with board of directors so they can achieve strategic objectives collectively. According to Cadbury report in corporate a single individual should all powers so bank Dhofar comply with it as powers in it are distributes in tiers.

According to Cadbury report and combined report there should be clear distribution of responsibilities in the company. This has been applied in bank Dhofar by dividing it in to different departments and every department has its own role to fulfill. The role of board of directors and duties should be well defined according to Cadbury report and it has been applied in bank Dhofar.

The bank of Dhofar has been divided into different committees and every committee has its own responsibility. Some of the committees are as following

1) Committee of Board Credit

2) Committee of Board Audit

3) Risk Management Board Committee

4) Nomination & Remuneration Board Committee

5) Board of Investment Committee

6) Board Capital & Funding Committee

7) Board Strategy, Merger, IT & Transformation Committee

According to Cadbury report and combined there should be maximum non-executive board of directors in the company and bank Dhofar is fully complaint with it as they have 9 Members of the Board of Directors and all of them are non-executive members.

According to Cadbury report and combined code there should be minimum 3 non-executive members in the audit committee and bank Dhofar has fulfilled this requirement by having all 4 members as non-executive members in audit committee.

In Cadbury report and combined code it has been emphasized that in remuneration committee companies should have maximum number of non-executives. The remuneration committee of bank Dhofar has 4 members and all these are non-executives.  So in this regard they are fulfilling corporate governance requirements.

In original report of Cadbury it has been stated and recommended that non executives should be selected by full board of the company. In case of bank Dhofar this has been applied and all non-executives have been selected by full board.

The Hampel report was more relied on principle of board and approach of common sense while other reports like Cadbury and Greenbury followed approach of box-ticking. Initially all these reports were separately published and researched but later on they have been combined and a combined code has been applied.

Now if we move on to combined code of corporate governance then there is some factors that we need to consider. The section A of combined code says that there should be effective leadership in the company and chairman will be responsible for leadership. He will have to lead the board of directors too. In case of bank Dhofar chairman of the bank Engineer Abdul Hafidh Salim Rajab Al Aujaili is fulfilling this requirement by effectively leading the bank.

 

Section b of combined cod covers the effectiveness of the organization. According to this all directors of company should give time and attention to the company so company can grow. It responsibility of directors to increase their skills and capacity so organization get maximum benefit from them. Bank Dhofar fulfills this requirement too as all board of directors are performing their duties full heartily and the performance of bank is increasing day by day. Bank has been able to get many national and regional awards in banking sector due to effectiveness.

Section c of combined code of corporate governance cover accountability according to which there should be culture of accountability in the organization and board of directors should be accountable for their decisions. Bank Dhofar is fully compliant with this section too as they evaluate performance of directors periodically.

Section d of code of conduct covers remuneration factors. According to which company should have handsome remuneration packages so directors’ remains motivated and in case of bank Dhofar they are maintaining this standard by facilitating their directors in every aspect.

Last section E is about relationship with shareholders according to which the relationship with shareholders should be awesome to satisfy their need. Annual general meeting should be used to convey new plan and objective and for building relationship with shareholder.