Corporate governance is a two-word term for a complex set of topics. It covers protection for minority shareholders, the structuring and behaviour of company boards, financial transparency and regulation. Some of the standards recommended by the report deal with hypothetical events, such as hostile takeovers involving quoted joint stock firms. So far, none has occurred in the GCC. But these are changing times and these events surely will happen.

More relevant are the rules for boards of directors. There is a suspicion of extensive insider trading in Middle East markets. Proper corporate governance would make it almost impossible.

The Hawkamah/IIF report, published ahead of Hawkamah's first Middle East corporate governance conference in November, calls for stronger government commitment to best practice. It also recommends that the principles should be extended to the state-owned enterprises that dominate Middle East economies. But there are areas of excellence. Bank regulation is well established and has helped make GCC banking the world's most profitable.

The report says that GCC states should co-operate to strengthen equity markets. It calls for the creation of a GCC corporate governance taskforce involving regulators and market participants. The goal is standardised laws and regulations for the whole region.

Speedier application of existing securities laws requires special courts that would also reduce the cost of litigation. Hawkamah and the IIF rightly argue that the harmonisation of financial reporting requirements across the GCC would make it easier for shareholders to track trends. Finally, GCC countries should set up registrars holding information about all companies, including sole proprietorships.

Hawkamah is evidence of the early impact of its executive director, Nasser al-Saidi, the former Lebanese Economy & Trade Minister and vice-governor of Banque du Liban (the Lebanese central bank), who joined the Dubai International Finance Centre (DIFC) in June. He has injected a welcome note of urgency into thinking about regional business developments.

The report is, however, just the beginning. Higher standards depend on the quality of company boards and senior management. GCC chairmen have traditionally crossed the boundary separating shareholders from managers for the simple reason that most corporations are still family-owned. In the past, this gave local firms coherence and quickened decision-making. But this arrangement looks increasingly redundant in a high-growth region aiming to attract long-term institutional investors and top-quality managers. The model of an independent and non-executive chairman working with a full-time professional top manager is not perfect. It slows decisions. But it works and is familiar to international portfolio investors.

The problem GCC banks and companies now face is finding enough people with the right qualities to chair company boards. Elsewhere, the gap is filled by former chief executive officers (CEOs). In the West, there is a system for ensuring talented people are not lost when they reach retirement age.

There is also no GCC system for identifying and training people to be non-executive directors. In other regions, it is common to have the CEO of one major quoted corporation sitting on the board of another in a different sector. There is not a single example of this happening in