CEO Corner: Badr Jafar

Mr. Badr Jafar, Co-Initiator of the Pearl Initiative, is Executive Director of the Crescent Petroleum Group of companies and CEO of Crescent Investments, the Group’s non-oil and gas investment company. He is actively involved in business development at Dana Gas PJSC, and is Chairman of Gas Cities LLC, and of Pearl Petroleum. Badr Jafar is also Vice Chairman of Gulftainer Ltd., a board member of Gama Aviation, Enshaa, Abraaj Capital and Growthgate Capital. Badr Jafar graduated from Cambridge University with a Masters Degree in Engineering and a Business Degree from the Judge Business School of Cambridge University. He recently became Chair of the Judge Business School Alumni Council.

The Pearl Initiative is a private-sector lead initiative, developed in cooperation with the United Nations Office for Partnerships, that is creating a regional network of business leaders and policy makers within the Gulf Cooperation Council countries in order to improve corporate governance and achieve better public reporting and accounting of their activities, leading to a more open and transparent business environment.

10 Questions

1. Why did you initiate the Pearl Initiative?

The current financial crisis has brought to the fore weaknesses in governance and reporting structures, and highlighted the need for more robust governance mechanisms. Globally, the Private Sector is increasingly focused on enhancing accountability and transparency of publically-listed and privately-held organizations. Good governance is key to the integrity of corporations, financial institutions and markets, and central to the health and stability of economies and ultimately the welfare of society at large. We initiated the Pearl Initiative as a result of these trends and the growing consensus that a more open, accountable and transparent business environment is an effective pre-condition to sustained foreign and intra- regional investment, with attendant consequences on development and poverty alleviation.

2. What are the main objectives of The Pearl Initiative?

The main objectives of the Pearl Initiative are to 1) enable social dialogue and input from stakeholders, such as business leaders, investors and the media, and create a culture of transparency and accountability, 2) serve as a leadership model for business and academia throughout the region, 3) promote and support ethical behavior and business practices that comply with international standards, codes of conduct and ethical behavior, 4) train and educate future generations of business leaders and policy makers on the importance of corporate social responsibility and personal social responsibility, 5) provide a platform for global business and policy leaders to develop new ideas and trends in the field, and 6) serve as the region’s premier think tank and an incubator for innovative partnerships to convert corporate responsibility into concrete action.

3. How do you see Corporate Governance (CG) and Corporate Responsibility (CR) evolving in the GCC?

I see it evolving rapidly and moving in the right direction. Several initiatives are being taken in the GCC that address CG and CR as we speak. Many business leaders and organizations recognize the need to improve governance structures. The debate has started and there are various excellent training programs available in the region that focus on issues such as corporate governance, corruption etc. This will lead to better knowledge and consequently a change in behavior.

4. Do you believe CG and CR can improve business performance or do you see them as more as reputation building endeavours?

I am very much convinced that CG and CR do improve business performance when taken seriously. If the motivation for engaging with CG and CR is reputation building, it won’t work. Let me be clear: improved governance, good corporate citizenship and greater transparency in public reporting are good for business. They lead to a more open and transparent business environment which in turn will improve business and investment confidence, to which I alluded to before.

5. What do you see as the role of voluntary standards in advancing the CG and CR agenda?

We need the right balance between private sector-led initiatives leading to voluntary standards and government regulations setting the standard across the board. However, I do believe that it is important that the private sector takes the initiative in the first place. Compliance to voluntary standards will be so much more effective. The Pearl Initiative is an example of that approach, being a private-sector led initiative that brings together business leaders and policy makers to convert value principles into sustainable initiatives.

6. Every company has a multitude of stakeholders with diverse opinions on the most urgentCG and CR issues. How do you go about reconciling these different views?

Different views are good and every company should decide for themselves where the priorities are. Every company has a distinct and individual culture and will need to deal with a variety of stakeholders.

7. What is the role of governments in promoting the CG and CR agenda?

As I mentioned before, a good regulatory environment is key and the role of the government is very important. Cooperation between government and the private sector is essential.

8. What steps have you taken to advance CG and CR in your organization?

I believe that the basis of good corporate governance is a healthy and open relationship between the Board and our management and it is clearly seen in the positive way that the Crescent brand is understood by all our employees both in headquarters and “in the field”. Good communication has always been a paramount at Crescent and even though, as members of the Executive Board, we are seen to be providing strong and effective leadership, we also maintain an open door policy at all times allowing any of our employees to discuss, challenge and even provide a degree of oversight on our decision making. By doing so, we are ensuring a live interface with all Crescent employees and benefitting from the wisdom and experience that resides across the organisation.

In terms of a specific example, I would refer to the work I led for Dana Gas, the Middle East’s leading private sector natural gas company, the company which we founded in 2005 and in which Crescent is the largest shareholder. Right from inception, Dana Gas had set itself very high standards including the attainment of best practise standards in corporate governance. This was absolutely essential as the Company was looking to tap the capital markets for finance to fund an acquisition and growth program.

To identify the changes that needed to be implemented to achieve our goal, I worked closely with the International Financial Corporation (IFC) and we focused on improving board effectiveness, management control and disclosure/transparency. Each of the IFC recommendations were implemented over the following year. I am happy to say that our achievements were very well received locally; the Abu Dhabi Stock Exchange awarded us its annual prize for Corporate Transparency a year later; and, in the same year, we successfully raised $1.5bn of capital from international investment banks. This to us was clear proof of the benefits of good corporate governance and transparency from an investor perspective.

9. What advice do you have for CEOs who are facing internal resistance to a robust CG and CR agenda?

Show leadership by example. It is important to engage all management layers within the organizations in the process and spend time explaining why better governance is good for business.

10. What companies do you admire most for their CG and CR efforts?

There are many great companies here in the Middle East at different stage of implementing CG and CR initiatives. One good example is the Abu Dhabi Commercial Bank (ADCB) which has been continuously improving its corporate governance framework to remain in line with best international practice. This has been rewarded by helping the bank access USD$ 1-2bn in the past year. Another good example is Kashf, the micro-finance lender to women in Pakistan. Kashf has always placed good governance high on its list of priorities and actively put in place a number of reforms which have been a strong factor in helping it raise finance of USD$25million in commercial loans as well as pursuing negotiations with international donors.

Looking further afield, the developed markets provide further great case studies of companies with enlightened CG/CR practices. For example, in the UK, two such companies which I follow closely are Centrica, the energy company and Marks and Spencers, the retailing giant, both of whom have very strong brand names that are respected for their enlightened management and strong investor relations functions.

There are many lessons that we continue to learn from these companies and many more as we continually implement ideas that have been successfully adopted overseas.