Qatar Perspective: Khalid Al-Jaber
Web posted at: 1/20/2010 2:16:46
Source ::: The Peninsula
Shura Council move to enhance transparency is welcome
Two weeks ago, the infamous American network CBS’ television show, “60 Minutes”, aired American President Barack Obama’s fierce verbal attack on those receiving lucrative banking bonuses. The President expressed his anger at US banks that were rescued by the government’s stimulus package, funded by taxpayers’ money, that used the funds to reward huge bonuses to their management while citizens suffered from debt.
The problem endured by the US economy, which extended to markets across the globe, including Qatari banks, is that the salaries and lucrative bonuses granted by financial institutions were some of the main reasons that persuaded institutions to embark on high-risk investment funds. This compounded the mortgage crisis into an international financial crisis, and pushed the US financial sector to the brink of collapse a year ago.
The new orientation of financial institutions’ board members after a semi-reasonable stability of the crisis, is to evade government regulations of corporate bonuses, and to use “bailout” funds in order to maintain old habits.
In the same week, a British report recommended that major banks disclose corporate salaries and bonuses in excess of $ 1.65bn. The report is based on the recommendations of David Walker, former Chairman of the International Unit of Morgan Stanley, submitted to the British government, after a wave of public criticism over major banks’ payment schemes.
The Financial Times reported that British Prime Minister Gordon Brown pledged to take “firm action” on the bonus amounts in the financial sector in the framework of an international push for transparency.
In an interview published in the newspaper on its front page, Prime Minister Brown said that the salaries and bonuses must be paid on the basis of results on long-term gains rather than speculation.
Business Writer, a specialized website to provide financial information and economic news on stock markets in the Gulf region and publicly listed companies, published a study on the remuneration and allowances received by senior executives in Saudi joint stock companies. The study revealed that officials of Saab, Cable, Savola, and Research and Marketing, received the highest bonuses. The study showed that senior executives in seven banks, Saudi Arabia and three other companies (Mobily, Emaar, the Red Sea) were the highest on the list.
Samba was the most generous benefactor of bonuses, rewarding six top executives with 47.6 million riyals, including the Executive Chairman of the group.
Qatar’s Minister of Finance announced some time ago that the ministry will spend $900m to buy a 5 percent stake in local banks before the end of the year. This is based on the decision taken by the Qatar Investment Authority last year to purchase between 10 - 20 percent of the shares of listed banks in addition to the purchase of securities and troubled debts. According to a report by Credit Suisse on December 23, 2009, despite the denouncement of several national banks, including Commercial Bank of Qatar, Qatar International Islamic Bank, and Doha Bank, several of the nation’s banks suffer from exposure to the Dubai World group and are desperately seeking to reschedule debts incurred on about 22 billion dollars due to their exposure to the Dubai World Group and its affiliated companies. Of these aforementioned banks, only Qatar Islamic Bank revealed its exposure to the Dubai World Group in the amount of approximately QR 54 million in the form of contributions in Islamic bonds covered by assets in kind payable in 2017.
The Shura Council’s decision to enhance transparency of banks should be applauded. This is the correct initiative to be followed by steps in the assessment and review of laws, regulations, and corporate governance standards of financial institutions. Salaries and bonuses should be submitted on the basis of long-term performance and not through speculation in the stock market and real estate.
It is clear that the main cause of the global financial crisis is due to the absence of controls, standards, and laws governing officials and managers, members and owners of economic activity, the banking arms and subsidiary financial institutions, corporations and money markets, as noted by Dr. Ghassan Kalaawi, which went back to address the crisis with the same methods that led to it in the first place
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