Non-financial corporations in Lebanon: Who governs? “The governance myopia”

Abstract

The purpose of this paper is to study governance practices in non-financial enterprises in Lebanon, and it is the first time that such enterprises are studied in the Lebanese context. Only three non-financial institutions are listed in the Beirut Stock Exchange (BSE), which constitute the whole population of this research. Built on Principles, Governance is based on transparency and on accurate, relevant, and timely information in order to support the Board members’ decision-making (OECD, 2015). Balanced between Jensen and Meckling’s (1976) agency theory and Donaldson and Davis’ (1991) Stewardship theory, the results of our Qualitative study showed that the main problems faced by the enterprises are not in the quality of information but rather in its selection and filtering, which opens doors to “Governance Myopia”. Face-to-face interviews showed that the primary conflict in our case is between the non-financial enterprises and the BSE, since the BSE is controlled by the enterprises and is not controlling them. The main reason of such practices come from the fear of the BSE of losing a potential position in the MENA Exchange Market, doubled with the fear of losing potential investors. All these reasons weigh heavily on the Administrators of the BSE in Lebanon, forcing them to choose the “Laisser passer” way. Referring to the soft Law when dealing with the companies, the BSE is playing the double role of a marketer and a controller, thus not willing to impose restrictions. A need for “harder laws”, for “Privatization” of the BSE, and a call to the Capital Market Authority (CMA) to put more restrictions on Corporations should be observed.