The Strategic Value of Corporate Governance and Top Tips for Creating, Implementing, and Managing a Governance Framework

Understanding Corporate Governance

Governance refers to the system of rules, practices, and processes by which a company is directed and controlled. However, corporate governance is more than a regulatory requirement; it's a strategic enabler of long-term value. It involves balancing the interests of various stakeholders; shareholders, management, customers, suppliers, financiers, government, and the community, and ensures accountability, transparency, and ethical conduct.

Corporate Governance in the UAE: A Rapid Evolution

The UAE’s corporate governance landscape has transformed dramatically in recent years. Once viewed primarily as a compliance obligation, governance is now widely recognised as a critical driver of investor confidence, corporate resilience, and sustainable growth.

Legal Frameworks: Statutory Requirements across Jurisdictions

The UAE offers a range of governance regimes, each aligned to different business needs and investment profiles.

1. UAE Federal Companies Law (CCL - Federal Law No. 32 of 2021)

This law governs most onshore companies and imposes detailed obligations on public joint stock companies (PJSCs):

• Board Composition: 3–11 directors; at least one-third must be independent

• Board Meetings: Minimum of four annually

• Committees: Mandatory audit and nomination/remuneration committees

• Shareholder Rights: Annual general meetings within 4 months of year-end

2. Dubai International Financial Centre (DIFC)

A common law jurisdiction governed by DIFC Companies Law No. 5 of 2018. Regulated by the DFSA:

• Flexible governance for private firms; single-director companies permitted

• Governance structures tailored through company articles

• Audit and risk committees mandatory for regulated firms

3. Abu Dhabi Global Market (ADGM)

Also a common law jurisdiction, governed by ADGM Companies Regulations 2020 and regulated by the FSRA:

• At least one director required for private companies

• No nationality requirement for directors

• High flexibility in internal governance; more prescriptive for licensed entities

Summary comparison

While the CCL is more prescriptive, DIFC and ADGM provide flexible frameworks aligned with international norms, which is particularly attractive for startups, multinationals, and financial institutions.

Why Good Governance Matters: More Than Just Compliance

Numerous studies have demonstrated a clear and consistent link between strong corporate governance and superior business performance. Companies with well-defined governance frameworks are more resilient, achieve higher profitability, and deliver stronger shareholder returns.

Internally, the adoption of good governance is often driven by investor expectations, particularly from institutional investors with ESG mandates, along with the tangible benefits of improved access to capital, enhanced credit ratings, and the ability to attract and retain top talent. Effective governance also equips organisations to respond swiftly in times of crisis.

Externally, reputation has become a critical driver as stakeholders increasingly prioritise transparency, integrity, and accountability. In a global marketplace where trust and brand value are paramount, companies with robust governance are better positioned to build stakeholder confidence, mitigate risk, and create long-term value. Research from global consultancies and academic institutions consistently underscores governance as a key enabler of strategic decision-making, operational excellence, and sustainable performance.

Five top-tips for creating, implementing, and managing a governance framework

A well-designed governance framework should be tailored to the needs of the business and adapt over time. Here are some top tips:

1. Tailor the framework to business context

• Size of the Business: Smaller enterprises may not need the same level of complexity as large multinationals but should still embed core governance principles.

• Business Risk: High-risk industries (e.g., finance, healthcare, construction) demand more rigorous oversight mechanisms.

• Growth Plans: A fast-scaling company requires forward-looking governance to stay ahead of future complexity.

• Geographies: Operating in multiple jurisdictions calls for a framework that respects local compliance while maintaining group-wide cohesion.

2. Recognize it’s an evolving landscape

Governance is not static. It must evolve alongside market developments, regulatory shifts, stakeholder expectations, and internal business changes. Regular reviews and updates are key to maintaining relevance.

3. Enhance, don’t hinder

Effective governance should empower decision-making and support the company’s strategic goals. It’s a tool to unlock performance—not a bureaucratic box-ticking exercise.

4. Adopt a top-down approach

Senior leadership sets the tone. When the board and executive management prioritize governance, it cascades through the organization, building a culture of integrity and accountability.

5. Blend people and technology

Technology—such as governance, risk, and compliance (GRC) platforms—can streamline reporting, risk tracking, and compliance. However, tools are only as effective as the people using them. The best frameworks blend skilled governance professionals with the right digital solutions.

Governance as a Competitive Advantage

As the UAE continues to establish itself as a global business hub, companies that treat governance as a strategic asset—not just a compliance function—will be best positioned to thrive. Good governance is a differentiator in attracting capital, protecting value, and building resilient, future-ready organisations.

Whether operating under the CCL, DIFC, or ADGM framework, businesses have a clear opportunity to go beyond the baseline and use governance to unlock sustainable growth and competitive advantage.

To discuss this further contact Alison Hubbard

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This material is provided for general information only. It should not be relied upon for the provision of or as a substitute for legal or other professional advice.