GCC Corporate Governance: Key Components, Best Practices, and Trends

At present, the Gulf Cooperation Council (GCC) has been focused on building stronger corporate governance that supports economic and sustainable growth, as well as financial stability. Organisations in their member states are creating governance policies and prioritising practices that align with international standards, exhibiting utmost compliance and transparency.

GCC countries are proactively seeking economic diversification to promote sustainable economic growth — one is to refine governance frameworks and practices. Learn more about the region’s continuous effort towards sound corporate governance, and the best practices GCC-based companies should follow.

What is corporate governance and why does it matter?

Corporate governance plays a critical part in shaping resilient economics and sustainable businesses across the GCC region. But what is corporate governance? It is a system that defines how organisations are directed, controlled, and held accountable, ensuring strategic decisions align with stakeholder interests.

Good corporate governance provides a clear structure used by boards to prevent operational inefficiencies and financial misstatements. Additionally, global governance frameworks like the OECD Principles of Corporate Governance help mandate rigorous financial reporting, whistleblower protections, and external audit oversight. When done right, corporate governance can help:

• strengthen investor confidence,
• support sustainable growth,
• reduce risks and ensure compliance, and
• enhance operational efficiency.

Key Components of Effective Corporate Governance

There can be as many components as necessary to ensure organisations operate efficiently, ethically, and sustainably. However, some are universally recognised as critical to fostering effective corporate governance. Find out what these core elements are below.

1. Board Diversity and Independence

Organisations with more diverse boards are known to be more risk-averse. Some tend to have lower risk levels by adopting conservative and more consistent financial policies. Research by McKinsey reveals that organisations with ethnically diverse boards are 39% more likely to outperform their peers, with an average of 27% financial advantage. This is why diversity by nationality, gender, and age must be a requirement for the composition of the board and the company’s senior management ranks.

Board independence is equally vital. Having independent directors allows for objective oversight, often challenging management decisions to guarantee shareholders’ best interest. Research suggests that companies with a majority of independent directors have superior market capitalisation — which usually attracts more investors.

2. Transparency and Complete Disclosure

Transparency is considered to be the foundation of stakeholder trust and informed decision-making. According to EY, genuine transparency helps build investor confidence in reported information. Complete disclosure practices enable stakeholders to access relevant financial and non-financial information — such as good corporate governance practices, risk exposures, and strategic objectives.

In fact, transparency in financial reporting significantly impacts investor decisions, according to research. Such an effect goes beyond reducing information gaps and boosting confidence—it also lowers capital costs and promotes long-term investments. Additionally, adopting global reporting standards like IFRS (International Financial Reporting Standards) and GRI (Global Reporting Initiative) further promotes comparability and credibility.

3. Well-Defined Shareholder Rights

Many investors consider shareholder rights as a key component of effective corporate governance. This is why companies need to ensure shareholders have equal, adequate rights. In terms of shares or classes, it is common for company founders to hold shares with greater voting rights than outside shareholders.

While this does not indicate poor governance, it can be something to take into account. The OECD’s 2023 Corporate Governance Factbook indicates that the effectiveness of the corporate governance framework may depend on investors’ ability to make informed use of their shareholder rights. Hence, OECD recommended that all shareholders be treated equally, including the minority and overseas.

4. Adaptable Risk Management

An effective governance structure is not complete without a robust risk management system capable of adapting to emerging threats. In the 2024 EY GCC Attractiveness Survey, the main risks affecting the region’s attractiveness over the next three years include the rising climate and environmental disasters (34%), tight labour market (32%), geopolitical tension and conflicts (31%).

Governments in the GCC are also actively looking at other aspects like talent-related investment risks, independence of courts, inward investment, and rising cost of living. With that in mind, organisations are also expected to implement a comprehensive risk management framework to systematically identify, assess, and mitigate risks. This applies across financial, operational, environmental, and reputational domains.

5. Ethical Decision-Making

Ethical governance extends beyond regulatory compliance to encompass integrity and fairness. For instance, ethical leadership can provide a positive work environment — encouraging employees to be more creative and engaged. In a 2024 study, 99% of surveyed employees believed managers who adhere to principles can lead their companies to long-term success.

That said, companies must embed ethical considerations into strategic decisions. This ensures governance principles guide corporate policies and operations. Generally, ethical frameworks should include codes of conduct, whistleblower policies, and regular ethics training. Ethical decision-making should also be embedded in all regulating documents such as bylaws and articles of incorporation.

6. Regular Compensation Review

Executive compensation directly influences organisational performance. Well-designed remuneration policies must balance fixed and performance-based incentives, aligning management actions with shareholder returns.

Conducting regular compensation reviews maintains competitiveness and fairness. To prevent conflicts of interest, independent remuneration companies must be involved in overseeing the reviews. In addition, the board is also responsible for overseeing executive pay, setting performance targets, and creating pay packages (e.g. base salary, bonuses, and stock options).

Best Practices in Corporate Governance for GCC Organisations

Understanding the key components of effective governance is not enough. Listed here are the most critical corporate governance practices that organisations in the GCC should implement.

1. Establish a qualified and diverse board

Having a qualified and diverse board is crucial for good governance. In the GCC — where family-owned businesses dominate 90% of the private sector — diversity in expertise, nationality, and gender helps enhance governance standards. In addition, independent board members help balance family influence — ensuring strategic decisions align with stakeholder interests. To build a board with diverse skill sets and backgrounds:

• Use a board competency matrix to map essential skills (e.g. risk management, ESG) and address existing gaps.
• Ensure at least 40% of board members are independent to counterbalance family influences.
• Design remuneration structures tied to long-term value creation using KPIs (e.g. total shareholder return (TSR), economic value added (EVA)).

2. Create extensive risk management frameworks

The GCC’s exposure to oil price volatility, geopolitical tensions, and regulatory shifts necessitates advanced risk management frameworks. Risk management practices in the GCC must account for both market-specific risks and global uncertainties.

In PwC’s 28th Annual CEO Survey, Middle East CEOs identified top issues likely to impact their decisions: geopolitical conflict (41%), cyber risks (36%), and inflation (30%). Hence, emphasising the need for comprehensive risk management frameworks.

• Adopt Integrated Risk Management (IRM) frameworks to unify risk processes across silos using AI-based predictive analytics.
• Have clear Risk Appetite Statements (RAS) aligned with enterprise strategy, quantifying acceptable risk thresholds for each business unit.
• Leverage blockchain to ensure real-time visibility and traceability of operational risks across the supply chain.

3. Improve internal controls and audit functions

Effective internal controls and audit functions are key ingredients in financial transparency and operational efficiency. The GCC’s evolving regulatory environment demands proactive measures to ensure compliance. Some actions to take into consideration include:

• Employ AI-powered audit platforms to automate anomaly detection, and significantly reduce audit cycles.
• Implement Continuous Control Monitoring (CCM) systems to provide real-time assurance of compliance and control effectiveness.
• Strengthen alignment between the three lines of defence — internal audit, risk management, and compliance — to optimise oversight.

4. Conduct regular performance evaluation

Performance evaluations foster accountability and continuous improvement within governance structures. In the GCC, where market competition intensifies, regular assessments of board and executive performance can differentiate high-performing firms.

In the GCC BDI Board Effectiveness Review 2023, independent reviews should be carried out every three years, with internal reviews annually in between to maintain focus on performance. Boards and organisations can also:

• Apply balanced scorecards integrating financial, customer, and internal process metrics to measure board performance.
• Seek independent evaluators for unbiased assessments and benchmark findings against regional peers.
• Use machine learning algorithms to analyse feedback data for deeper performance insights.
• Translate evaluation findings into clear performance goals to ensure board reviews results in concrete, actionable insights.

5. Monitor compliance systems regularly

With increasing regulatory scrutiny across GCC markets, regular compliance monitoring has become more important than ever. For instance, stricter regulations related to anti-money laundering (AML), data protection, and corporate disclosures require modern and effective compliance practices. Some best practices corporate governance include:

• Deploy RegTech solutions that use natural language processing (NLP) for real-time monitoring of regulatory updates.
• Utilise interactive dashboards for real-time compliance tracking, which facilitates swift remediation of issues.
• Conduct automated Know Your Customer (KYC) and AML checks, streamlining customer due diligence.

2025 Corporate Governance Trends in the GCC

As the GCC economies continue to diversify, corporate governance practices are shifting to meet new technological, regulatory, and sustainability demands. One best practice is to stay ahead of these critical corporate governance trends shaping the GCC in 2025.

1. Generative AI for Innovation

In the GCC, corporations and governments are leveraging AI to optimise business strategies and streamline public services. A 2024 report by McKinsey reveals that generative AI could contribute up to $35 billion a year to GCC nations. The potential of generative AI has also driven a surge of investments in the region.

To take part in this, 57% of GCC respondents revealed their companies were investing 5% of their digital governance budgets in generative AI — with many already using this tech to some extent in their business.

As the GCC takes charge of generative AI, several innovations have already been developed within its nations, such as Jais in the UAE (using Arabic large language models). In Abu Dhabi, the Technology Innovation Institute launched the second iteration of its large language model (LLM), Falcon 2.

Looking ahead, the GCC is expected to continue leading the charge in the global AI landscape. This requires organisations to move beyond surface-level digital adoption and focus on developing AI models for innovation.

2. Implementation of Ethical AI

A trend—and part of the GCC’s manoeuvre toward innovation is the responsible development and deployment of AI. Countries in the GCC, such as Saudi Arabia and the UAE, play an active role in ethical AI advancement and implementation.

Corporate governance in Saudi Arabia is shown through its NEOM project, which demonstrates how AI can be used to balance environmental restoration with sustainable urban development. In recent news, NEOM signed a $5 billion deal to build an AI data centre, expected to be online by 2028.

To further support ethical AI, the UAE is developing its UAI brand to attract global talent. This will also help recognize ethical AI organisations and reward safe and verified AI technology. The GCC representatives and prosecutors have also endorsed Bahrain’s ethical AI framework, including principles for responsible AI governance. With the speed of developments in AI, such actions help ensure this technology is developed in a safe, ethical environment.

3. Focus on Sustainable Finance

Among the biggest governance trends in the GCC region is sustainable finance. In a new report by KPMG Lower Gulf and First Abu Dhabi Bank (FAB), sustainable finance is identified to potentially boost economic growth. Its expansion in the GCC is driven by the need to invest in renewable energy projects, sustainable water management, and energy-efficient infrastructure. Such focus on green investments is also expected to contribute up to $2 trillion to GCC’s GDP by 2030.
With the rising global interest in sustainable finance, the GCC is using it to drive economic diversification and achieve its net-zero targets.

Leaders in the region also believe that the youth will be critical in shaping industries like renewable energy, circular economy, and sustainable agriculture. In fact, GCC countries have pledged a $100 billion investment in renewable energy by 2030.

4. Double Down on Cybersecurity

One integral part of GCC’s governance journey is its cyber defence efforts. The Gulf has been increasingly subjected to cyber attacks and financial losses — driven by its move from petrochemical-based economics to a knowledge-based future.

In PwC’s 2025 Global Digital Trust Insights, 42% of Middle Eastern organisations reported they are prioritising cyber risks for mitigation this year. Over the next months, companies in the Gulf are most concerned about hack-and-leak operations (47%), third-party breaches (36%), business email compromise or account takeovers (36%), and cloud-related threats (35%).

Last November 2024, Qatar’s National Cybersecurity Agency (NCSA) and GCC Ministerial Committee held a meeting on cybersecurity — scheduling Gulf cyber exercises. GCC also launched the Gulf Cybersecurity Strategy with a platform for sharing cyber threat information. Such initiatives are set to create a safe cyberspace for its countries for the Gulf’s member states and strengthen cybersecurity across the region in the coming years.

Convene: Your Board Governance Partner in the GCC

Effective governance is a fundamental pillar for organisations in the GCC — ensuring transparency and sustainable practices. But with complex regulatory and compliance demands, boards in the region must leverage advanced technological tools to streamline their processes. This is where board portals come into play.

Convene, a global-recognised board portal, is designed to help GCC boards navigate the intricacies of governance with ease and confidence. Our software empowers boards in the region to maintain compliance and collaboration while driving strategic decision-making across their organisations. Among its suite of offerings are:

Top-notch security that meets the highest industry standards to safeguard confidential data and discussions. These include security features such as full-system ownership, account management and role-based access control, secure user authentication, Active Directory integration, and multi-factor authentication. Our platform offers a proactive approach to cybersecurity, while guaranteeing governance system security, availability, and integrity.

Seamless document access, review, and approval with Convene’s Document Library, Review Rooms, and more. These features facilitate easy access to board materials, enable members to collaborate effectively, streamline document management, and accelerate approvals — all while maintaining compliance with governance policies. Additionally, Convene Authority—integrated with Sayen by stc—enables an end-to-end digital signing workflow tailored to GCC organisations.

Convene is not just a board management tool; it is a strategic governance partner for GCC organisations. Learn more about Convene and its other features by booking a demo today!