Board of Directors should not team up with the management for the day to day running affairs of companies.
The two sides should have separate interests. A lethal combination of malpractice in the corporate world is when the CEO teams up with the board of directors to sway important decisions in their favour.
When that happens, the CEO becomes a tool, and later a scapegoat, for a grand plan to hoodwink auditors and eventually shareholders. These are the weak CEOs who act as puppets when strings are pulled in the board room.
However, there are CEOs who act alone because they have been given too much power and often cross the line when they start dictating terms.
This is a behavioural problem in Oman that the system has created over the years when CEOs start to believe that they are above the law.
It is has become commonplace for CEOs to wield so much power that they ignore the interests of shareholders and sometimes even escape the scrutiny of the capital market laws. What is troubling is that they get caught years after they have started the game.
And what is even more troubling is that when they get caught, it is rarely made public. Their services are discreetly terminated and shareholders are never informed about the extent of the damage.
We are all in the dark about how different accountability laws are designed, measured or audited and to what standard.
It appears that many auditors in the country disagree on how to measure profits, especially on bonuses and executive compensations. The latter is the source of abuse by CEOs.
So whose fault is it? The board of directors, which turns a blind eye, laxity in rules that govern transparency, or general honesty of the person on top of the corporate ladder? Whatever it is, the shareholders who work so hard for their money are let down.
It is common knowledge that there is excessive executive fraud in our corporate world and the net catches just a few.
The remedy is too weak because the ways to cover up the deed are getting too sophisticated. One also wonders whether fraud investigators are skilled enough to uncover financial embezzlements, or they just get intimidated.
Perhaps, the checklist of corporate governance is not assertive enough and cannot break down a culture that has been around for many years.
CEOs find loopholes in the executive decisions and the most lucrative ones are the shady awards of contracts, shaky loan approvals, questionable funds allocated to Corporate Social Responsibility (CSR) and executive perks.
There is also no holding back for them when it comes to awarding themselves with fat bonuses even if the profits are going down. It may be time to conduct a review of how senior executives get compensations or get appointed.
Most importantly, are they qualified for the job, not just by the degrees they hold and experience, but their morals and past records?
Shareholders cannot afford a CEO who has been convicted in the past but later ‘reformed’ and gets a clean bill of health to have a chance to abuse his powers all over again.
It is also time for shareholders in the Muscat Securities Market (MSM) to have a greater say on who is appointed in top positions or demand justification on the actions they take on certain issues.
It is not just fraud that is at stake here but shareholders must now question the competence of the CEOs who run companies they have invested money in as well. Shareholders need to know that the top person got the job on merit and not because he is in the right network.
For example, shareholders should ask if the new CEO has what it takes to control a company that has a billion rial asset to drive it forward otherwise it makes no sense at all.
In conclusion, shareholders need to be assured there is transparency in all levels to secure their investments.