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Finance (Case Study Sample)

The paper critically assesses the corporate governance framework of Abu Dhabi Commercial Bank (ADCB), analyzing its effectiveness in ensuring transparency, accountability, and sustainable business practices. Through a comprehensive review of regulatory documents, annual reports, and relevant literature, the study presents a nuanced evaluation of ADCB's governance practices. The paper outlines the significance of corporate governance in maintaining investor confidence, minimizing risk, and driving long-term organizational success. It delves into the specific governance structure of ADCB, highlighting the roles and responsibilities of the board of directors, executive management, and key committees. The study analyzes the composition of the board, emphasizing the diversity of expertise, independence of directors, and potential conflicts of interest. source..
Abu Dhabi Commercial Bank State of Corporate Governance Student Name Institution Course Professor Date Table of Contents TOC \o "1-3" \h \z \u 1.0 Introduction PAGEREF _Toc129563045 \h 31.1 Corporate Governance PAGEREF _Toc129563046 \h 31.1.1 Structure and Composition of the Board PAGEREF _Toc129563047 \h 51.1.2 Role of the Board of Directors PAGEREF _Toc129563048 \h 71.1.3 Composition of Board Committees PAGEREF _Toc129563049 \h Board Executive Committee PAGEREF _Toc129563050 \h Board Risk Committee PAGEREF _Toc129563051 \h Nomination, Compensation, HR and Governance Committee PAGEREF _Toc129563052 \h Board Audit Committee PAGEREF _Toc129563053 \h 101.1.4 Director Compensation PAGEREF _Toc129563054 \h 111.1.5 Break-up of Shareholdings PAGEREF _Toc129563055 \h 121.2 Code of Ethics PAGEREF _Toc129563056 \h 141.3 Sustainability/ESG/integrated reporting PAGEREF _Toc129563057 \h 15Conclusion PAGEREF _Toc129563058 \h 19References PAGEREF _Toc129563059 \h 20Appendix PAGEREF _Toc129563060 \h 21 1.0 Introduction Abu Dhabi Commercial Bank (ADCB) is one of the leading financial institutions in the United Arab Emirates (UAE) and is headquartered in Abu Dhabi. The bank was founded in 1985 and has since grown to become a major player in the UAE's banking sector, with a network of branches across the country. ADCB offers a wide range of banking services, including retail banking, corporate banking, and wealth management. The bank has a strong reputation for innovation and has been at the forefront of introducing new technologies to the UAE's banking sector. This has enabled ADCB to provide its customers with a range of convenient and secure banking solutions, including online and mobile banking services. ADCB places a significant emphasis on corporate governance and has implemented various measures to ensure that its governance practices are robust and effective. The bank has a dedicated Corporate Governance Unit that is responsible for overseeing the bank's governance framework, ensuring compliance with regulatory requirements, and promoting best practices across the organization (Abu Al-Haija, 2021). ADCB's commitment to corporate governance is reflected in its strong financial performance and reputation as a reliable and trustworthy financial institution. The bank's governance framework ensures that it operates in the best interests of its stakeholders while upholding high standards of ethics and integrity. The study seeks to evaluate ADBC’s state of corporate governance which includes the mechanisms through which the company is held accountable to stakeholders, employees, customers, and the wider community. 1.1 Corporate Governance The ADCB’s commitment to executing the best practice governance is the key to enhancing its institutional strength for the benefit of stakeholders and the UAE economy. As a leading financial institution in the UAE, ADCB is primed to set a benchmark for responsible practices spanning from risk management to cybersecurity and customer protection. Best practice corporate governance has been the foundation of ADCB's long track record of robust financial and operational performance, and it is central to the bank's growth strategy and future ambitions. It underpins ADCB's integrity and disciplined culture, reinforcing the trust and confidence of investors, customers, and business partners (Kolsi, 2022). ADCB continuously review and improve its corporate governance approach to protect the interests of stakeholders and to ensure that the bank remains at the forefront of best business practice. The governance structure of the bank comprises of a strong board with vast corporate experience, extensive skill set and a comprehensive understanding of the banking industry. Additionally, the managing executive team is well established with a deep understanding of efficient operational excellence which contributes to ADCB’s culture of accountability and responsibility. Figure1 below highlights the ADCB corporate governance structure. Figure 1: ADCB governance structure. 1.1.1 Structure and Composition of the Board The ADCB’s board comprises of eleven members that are exclusively nonexecutive directors. The company has only one director (Khalid Deemas Alsuwaidi) who is considered not independent due to his long tenure exceeding 12 years. Of the eleven board members, 54% has international experience while 46% of the board members lack international experience. The company board and the committees meet approximately 53 times during the 2022 fiscal year and the company directors received comprehensive information on the regular activities of the board and the executive management. The ADCB board is keen on supporting gender diversity ensuring that 18% of the board members are women while 82% are males. Figure 2: ADCB gender diversity at the board level The organization management executive committee members were invited to the board meetings to address specific company topics as a requirement of compliance with the regulations of attendance during key meetings. The composition of the board committees and their chairs are continuously reviewed to enhance operational excellence (Abu Al-Haija, 2021). More so, ADCB’s committee memberships are regularly rotated to enhance suitability, combination of skills, knowledge, and experience sufficient for every committee to function and discharge its responsibilities effectively. Figure 3: ADCB Board highlights ADCB provides a comprehensive and robust Director's induction program tailored to their role, experience, and skill set for all newly appointed Directors. Meetings with other Directors, executive management, and subject matter experts are included in the induction program, as is comprehensive guidance on Director duties and responsibilities, the Bank's policies and procedures, and applicable legal and regulatory requirements. In 2022, ADCB welcomed three new Board members, all of whom were appointed by the company's largest shareholder (Reyad, 2022). ADCB assesses its Board members' expertise and competencies through an annual mapping exercise to ensure that Directors' skills and experience remain relevant to the Bank's strategy and operating environment. A critical component of the Group's governance system is the process for vetting, assessing, and appointing Board members, who must be approved by the Central Bank of the UAE (Abu Al-Haija, 2021). 1.1.2 Role of the Board of Directors The Board is the primary decision-making body of the ADCB and is ultimately responsible for directing, monitoring, and controlling the organization's overall structure. It is accountable to shareholders for generating and delivering long-term shareholder value by providing company direction and oversight. More so, the board approves large-scale capital projects and expenditures such as contracts for material purchases beyond the normal course of business which mergers and business acquisitions (Reyad, 2022). Risk management is an essential component of ADCB's corporate governance framework. The board of directors is ultimately responsible for determining ADCB group's risk appetite and ensuring effective risk management. The board is in charge of risk monitoring and management, as well as risk assessment (Kolsi, 2022). The risk assessment committee works with executive management to establish risk appetite and strategy for specific industries, geographic regions, and customer needs. The risk assessment committee regularly reviews and monitors the group's overall risk appetite and makes recommendations to the ADCB board. The board is in charge of overseeing financial reports and ensuring ADCB's financial disclosures are accurate. The board of directors is accountable for comprehensive and independent risk management, compliance, audit functions, and the overall system of internal controls. In 2022, the board assessed the objectivity and efficacy of ADCB's financial reporting and disclosure process. This entailed monitoring ADCB's accounting policies, principles, and judgments (Kolsi, 2022). The board evaluates the performance of each individual director and each board committee on an annual basis in a formal and rigorous manner in order to constructively highlight accomplishments as well as areas for development. ADCB board believes that mutual trust among directors, and between the board and executive management can only be built through a thorough, impartial, and well-managed evaluation process. 1.1.3 Composition of Board Committees The ADCB board operates four standing committees which include the board executive committee (BEC), board risk committee (BRC), board audit committee (BAC) and NCHRG Board Executive Committee The committee review ADCB’s business performance and control on the development of new initiatives including ESG strategy and investment. More so, the committee prepares ADCB’s business plan strategy approved by the board. The committee is made up of five members and they met approximately 19 times in the 2022 fiscal year. The committee focused specifically on efforts to develop and implement ADCB's short-term and long-term business strategies, which center on increasing market share in the UAE, increasing efficiency and profitability, and implementing digital transformation (Kolsi, 2022). Figure 4: ADCB’s BEC Composition Board Risk Committee The committee oversight and review the ADCB’s risk governance framework by evaluating capital adequacy, and credit concentration in accordance to the organization business strategy. More so, the committee monitor the ADCB’s Shariah noncompliance risk management and consumer protection policies. In the 2022 financial year, the committee comprised of four members where 50% were male and 50% were female. The committee held approximately 13 meetings where the ADCB’s risk dimensions were covered with a centered focus on risk app...
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