If one good thing has emerged from the debacle, it is that companies, especially large ones, should take it on themselves to ensure they have an adequate system of corporate governance to avoid similar mishaps. If directors and executives adhered to a set of strict codes and policies, similar scenarios could be avoided.

Over recent years, firms in the US and the EU have introduced their own systems of corporate governance, laying out how their senior management should act and behave. But the trend has been slow to reach the Middle East. Few companies have acted to establish a code of conduct, and while the region has not suffered from the mega-collapses seen elsewhere, it has not been immune from its own smaller-scale corporate scandals.

One institution to have suffered this fate is Burgan Bank, which underwent an extensive management restructuring in 2003 after alleged fraudulent accounting practices were uncovered by the bank's auditors. The incident led to the bank reporting a KD 5 million ($16.2 million) loss in its 2002 income statement.

Since last year, the bank has been working on establishing a policy of transparency in its operations. It recently became the first listed Kuwaiti company, and one of the first in the region to publish its corporate governance policy, releasing the details in its 2004 annual report.

At only 10 pages long, the policy is still very much at an embryonic stage, as the bank's vice chairman Tariq AbdulSalam readily admits. But it will be developed more fully over time, he says. 'Developing a fairly complex structure of checks and balances gives the board a chance to stop things before they go wrong,' says AbdulSalam. 'It will take a bit longer to complete, but it is definitely a step in the right direction.'

One change initiated is the revision of the board and management committee structure (see chart) - particularly the removal of the chief executive officer (CEO) from the board. 'We decided the CEO should not be a director,' says AbdulSalam. 'He now reports to the board through independent committees, allowing them to have direct supervision. Interestingly, this is not the way in which most EU or US influenced systems are developing, where the CEO is normally a full board member. However, Burgan believes it is a hybrid approach that suits the situation of a bank in Kuwait, and expects it will be followed by other institutions in the region.'

The bank has also decided to segregate its executive committee - which handles strategy, risk and investment - from its credit committee. The latter will oversee a board recoveries committee, which will review strategy for delinquent debts. A board appointment and remuneration committee has also been formed to handle board and supplementary remuneration, the appointment or dismissal of the CEO, human resources (HR) policy and remuneration disclosure.

Management decisions, rather than being left to individuals, will now be exercised through a formal scheme of delegation, assisted by a network of management committees.

'The three main factors are appointment, risk and control,' says AbdulSalam. 'If ther