Author Archives: Sabah al-Binali

Trust but verify: a deeper dive into the UAE’s latest business news

March 14, 2017 By in Corporate Governance, Economy, Oil, Finance Tags: , , , 1 Comment

Etisalat’s preliminary 2016 financial statements are available at the Abu Dhabi Securities Exchange. Earnings per share for 2016 operations? Dh0.97. Proposed dividends per share? Dh0.80. This gives a payout ratio of 82 per cent. Rationally, your payout ratio is high when you do not believe that there are any opportunities to invest in and so return cash generated to the shareholders.

Etisalat’s dividend policy would suggest that it does not see growth opportunities and therefore expects to simply be a yield play. This refers to business operations and not market price movements. Whether Etisalat is being rational in expecting the economy to stagnate, or worse, and is therefore taking a defensive cash position, or on the other hand is in denial and simply continuing to pay a historical dividend even though the payout ratio is high will be revealed by its stated strategy that it presents at the shareholders’ meeting.

If the strategy is defensive, closing certain operations or at least remaining steady, then the stated strategy will be consistent with the dividend strategy. If, on the other hand, Etisalat presents a transformation strategy or even an expansionary strategy, then this will be inconsistent with its dividend policy.

The suspense is unbearable.

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On governance and denial, from the UAE to Wall Street

March 7, 2017 By in Corporate Governance, Economy Tags: 3 Comments

Last week Arabtec announced a recovery plan, as detailed in a stock market filing. There was no report on how corporate governance would be enhanced for a company that had a loss of Dh2.3 billion in 2015 and Dh3.4 billion in 2016. It is my humble opinion that if things keep going wrong and neither the shareholders nor the board seem to change then changing executive management every couple of years isn’t a strategy, it is random action.

More fascinating was that on the same web page of The National was an article on how Expo 2020 would improve the job market this year. It would seem to me that the sector that would benefit the most from Expo 2020 is construction. And yet Arabtec is saying it will stabilise in 2017, prepare in 2018 and grow only in 2019 – which is really too late to be getting construction orders for the massive project that is Expo 2020.

So the recovery plans – one for a company, one for the economy – seem inconsistent with each other.

Denial isn’t just a river in Egypt folks.
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A whirlwind tour of Gulf corporate governance …

February 28, 2017 By in Corporate Governance Tags: , ,

Corporate governance improves with the inclusion of women on company boards, as reported by the International Finance Corporation. So what happens to corporate governance when a woman is appointed to head a stock exchange? We will soon find out, as Saudi Arabia has just appointed Sarah Al Suhaimi to head its stock exchange. Ms Al Suhaimi comes well prepared for this job as the chief executive of NCB Capital, the investment banking and asset management arm of the largest bank in Saudi Arabia and the second largest bank in the Middle East. A few days later Samba, the fourth largest Saudi bank, appointed Rania Nashar as its first female chief executive. I look forward to what I expect to be a positive impact because of this gender diversity.

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Compensation Foundations: Designing an Effective Incentive Plan

February 21, 2017 By in HR Tags: ,
Compensation Foundations: Designing an Effective Incentive Plan
This entry is part 3 of 4 in the series Compensation Foundations

This week’s column is the second in a series that I co-author with Ray Everett, the chief executive of Aon Hewitt in the Middle East. In the first article we discussed job identification, job grading and linking it to pay.

While people are paid salaries to do their job, incentives encourage them to do their job well. Nothing is more emotive in people management than communicating incentive numbers – people can be upset, happy or (as is often the case) neutral.

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My Zawya Story, 2nd Edition

February 14, 2017 By in Strategy, Private Equity, Corporate Turnaround, Entrepreneurship, Strategy Cornerstone Tags: , , 2 Comments

In 2012, Zawya, a UAE-based business media company, was sold to Thomson Reuters for a 20 times cash return by Saffar, a low-profile private equity company. I am the founding chief executive of Saffar and became chairman of Zawya after we acquired it, between 2001 and 2011. This is my story of how I bought a bankrupt, London-based company with five employees, moved it to the UAE, built it into a profitable company with more than 200 employees and then sold it to a global competitor, thus generating a 35 per cent annual rate of return over an 11-year period.

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Venture capital as a substitute for oil in driving economic growth

February 7, 2017 By in Venture Capital, Entrepreneurship, Economy, Oil, Government Tags: , , , ,

Venture capital is critical to the future success of not only the UAE but also the GCC. To understand this we first need to understand the historic formula for our success – oil leads to financial capital, which leads to real estate development, which creates social and business communities that attract people. Repeat.

Even if oil prices had not collapsed, sooner or later the size of the economy would reach a level at which oil alone could not deliver growth. We have not reached a point of reckoning because oil prices halved, that only accelerated the inevitable.

The conventional argument is that SMEs are the engine for growth in any economy. Some might argue that the global conglomerates coupled with global trade are the engines for growth. Whatever idea you subscribe to, in the end one has to accept that whether you believe SMEs drive economic growth or whether it is large companies, the first step is starting that company. Put simply, without start-ups an economy cannot normally achieve sustainable growth.

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Venture Capital Lessons from India, Lebanon and Ireland

January 31, 2017 By in Investments, Finance, Government Tags: , , , 1 Comment

In a recent article I pointed out the failure points in the UAE’s venture capital ecosystem, in particular the lack of support for entrepreneurs and start-ups. In this article I’d like to review some of the initiatives other countries have launched that could be useful in upgrading our ecosystem.

Given the recent visit to India of Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, let us start with that government’s efforts, and in particular the Startup India initiative. This initiative is comprehensive, starting with a streamlined registration process. Importantly, it has a streamlined bankruptcy process that seems to be fair – no extra-judicial imprisonment if an entrepreneur cannot financially meet a liability. There are also tax breaks for the company as well as investors in the company.

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Compensation Foundations: Grading and Job Evaluation

January 24, 2017 By in HR Tags: , 1 Comment
Compensation Foundations: Grading and Job Evaluation
This entry is part 2 of 4 in the series Compensation Foundations

This week’s column is the first in a series that I co-author with Ray Everett, the chief executive of Aon Hewitt in the Middle East, a position that he has held for the past year, and Asia-Pacific and Middle East and Africa regional head of McLagan (a division of Aon Hewitt focusing on financial services). Aon Hewitt is one of the world’s pre-eminent human resources consulting companies and I have worked with it in the past to help me unravel one of the toughest issues that I have faced in building and managing various businesses: how to think about compensation when recruiting and promoting or awarding raises and bonuses.

This area of business haunts many managers, starting with how much to offer when recruiting. The widespread approach of simply asking for a salary receipt from the candidate’s employer is simply an admission that the hiring company has little idea on how to think about pay. The extension of this ad hoc approach to raises can lead to unfair pay differentials that are not based on merit, which harms morale and the company.

In short, the more opaque or uncertain a decision-making process is, especially with regards to human capital, the greater the damage to the company, most notably via low morale and difficulty in hiring and retaining top talent. The answer is a transparent, well-defined approach.

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Ray Everett of Aon Hewitt on Compensation Foundations

January 21, 2017 By in HR, Executive Insight
Ray Everett of Aon Hewitt on Compensation Foundations
This entry is part 1 of 4 in the series Compensation Foundations

Compensation is a difficult management issue, not least due to the human element to it. Ray Everett. chief executive of Aon Hewitt in the Middle East, a position that he has held for the past year, and Asia-Pacific and Middle East and Africa regional head of McLagan (a division of Aon Hewitt focusing on financial services). Aon Hewitt is one of the world’s pre-eminent human resources consulting companies and there is a lot to learn from them in this series.