How to Create Good Corporate Governance for Businesses in Lebanon

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Understand how to create good corporate governance in Lebanon with the Lebanese Transparency Association's article on The Lebanese Code of Corporate Governance.

Summary:

This Lebanese Corporate Governance Code developed for Lebanese Joint Stock companies, establishes principles and practices to improve the quality of corporate board governance as well as the company’s performance, competitiveness, and access to diverse forms of capital. Accordingly, this Code also supports the long-term value creation and sustainable growth strategies of Lebanese companies.

The principles embodied in this document are drawn from and inspired by various international sources of good governance best practices, including the Organization for Economic Cooperation and Development (OECD) corporate governance principles. In that sense this Code is ambitious in its aspirations to guide Lebanese Joint Stock companies in their development. However, the provisions of this Code are practical and have been specifically adapted to the realities of Lebanon’s existing commercial laws, and other aspects of the Lebanese business and legal systems.

The typical company envisioned in this Code is currently a private, relatively closely held company, with a number of employees of approximately one hundred persons and duly formed as a “SAL” Lebanese Joint Stock Company under the provisions of the Lebanese Code of Commerce and other applicable Lebanese laws. The rationale for the focus on this type of companies that qualify as Small and Medium Enterprises (SME’s) is simple: SMEs, many of them family- owned and operated, constitute the backbone of Lebanon’s private sector and the improvement of SME corporate governance is essential to ensuring economic growth and stability as Lebanon continues to evolve economically and politically. Although this code is tailored for joint stock companies, the principles contained therein are crucial for Lebanese “sarl” (limited liability companies) and other Lebanese companies.

Broadly conceived, corporate governance is the system by which companies are directed and controlled. The concept of “corporate governance” embodied in this Code addresses the internal business rules as well as the related laws that establish, promote, and protect the management and ownership rights and responsibilities of corporate managers, employees, and owners (shareholders) of businesses.

In this respect, corporate governance is concerned with how companies ought to be run, directed and controlled - and how to hold accountable those who direct and control the management. As defined in the 2004 OECD Principles of Corporate Governance, “Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.”

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