When you think of Middle Eastern companies, good governance isn’t often the first thing that comes to mind. For Imelda Dunlop, the executive director of the Pearl Initiative, that’s a perception she’s trying to shake.

Launched four years ago, the Pearl Initiative is the Gulf’s most significant non-profit organisation working specifically to improve corporate accountability, transparency and governance in the private sector. Founded by Crescent Enterprises CEO Badr Jafar, the agency has a formidable set of governors, including representatives from some of the Gulf’s giant trading families, the ‘Big Four’ accountancy firms, banks and local government.

“It’s the only initiative by the private sector across the region, and it’s a real example from the private sector that we need to start taking a lead by forging better practices around corporate governance and accountability,” Dunlop says.

“We don’t talk much about regulatory environments; what we’re talking about is the business reasons. So achieving a lower cost of capital, getting international investors, helping expansion — and why such practices make sense.”

The Pearl Initiative’s budget — about $1m in 2014 — is paid for by 43 companies around the region that invest an equal share. There is also help from outside firms. For example, at the end of last month, the organisation won $880,000 in funding from German industrial giant Siemens to help fund a new regional programme to increase transparency and fight corruption.

The seven-person team spends its time on an in-house research programme, which includes closed-door round table events held across the Gulf (about 20 per year) and insight reports and surveys. Such reports focus on areas such as family firms and women in business. It also works closely with local universities to engage with students and run workshops.

When looking at global rankings such as Transparency International’s corruptions perceptions index, it may seem as though the Pearl Initiative has its work cut out for it. Middle Eastern countries do not perform particularly well on the index, although the UAE (25th place) and Qatar (26th place) lead their peers in the Gulf by some margin.

In addition, only 52 percent of MENA respondents to an EY survey carried out earlier this year stated that they had an anti-bribery or anti-corruption policy and code of conduct in place. It also found that despite increasing international and regulatory pressure on business ethics and their connection to global and regional economic growth, 50 percent of MENA respondents justified financial mis-statements if it helped the business survive.

To that end, the Pearl Initiative plans to next year release the GCC Integrity Indicator, a methodology that will allow companies to benchmark their implementation of anti-corruption measures. It has also been working hand in hand with the National Anti-Corruption Commission (Nazaha) in Saudi Arabia, one way in which it attempts to foster closer ties between governments and the private sector.

“We talk a lot about anti-corruption practices,” Dunlop says. “It’s a very sensitive topic, but one of the things we have achieved over the last four years is to make it much more discussable. We put these topics forward in a very constructive and proactive way which makes people much more positive in terms of the ways the situation can be improved.”

Dunlop says this is especially important when it comes to family companies. These entities generate a significant portion of non-oil GDP, which accounts for nearly 80 percent of the Gulf’s economy, and are responsible for hundreds of thousands of jobs. In some cases, however, opaque accounting, tricky transitions between the generations and poor governance have resulted in weaker performances.

“A lot of family firms have been founded on a strong set of core values from the founder — we see that again and again,” Dunlop says. “As they have become more complex, they’ve turned into quite sophisticated organisations with an international reach. The step change is to implement much more rigorous practices and procedures.

“Once a company reaches a certain level of complexity — although the values have not changed — these new practices need to reach every corner of the organisation. And to do that, you have to have a culture that runs right through to every last employee — and that involves training your people, so they know what’s expected and what’s not. A bigger organisation requires a lot more detail.”

The perception for some private companies in the region is that better governance is a step to going public. But Dunlop says that implementing the kind of guidance offered by the organisation has benefits for any firm, whether or not they are considering an IPO. And after a busy 2014, the year so far has seen only a trickle of listings on local bourses, and several large family companies have reined in a long-expressed desire to go public.

“I don’t think an IPO is an end point or a given for many of the family firms – they work very effectively as privately held firms,” she says. “But if any of them want to access fixed-income markets, as we saw Majid Al Futtaim do recently [the Dubai-based retail and leisure developer is using bonds to finance its ambitious five-year expansion plan], then it’s different.

“They [Majid Al Futtaim] have self-imposed the UK dual corporate governance code, and they say quite publicly that it allowed them to get a higher rating and a lower cost of capital in their bond issue. So it’s those types of examples that show you don’t need to be a listed company to take these things seriously.”

Another consideration to bear in mind is that companies that wish to do business in other jurisdictions, or who are seeking tie-ups with multinationals based elsewhere are more likely to be subject to greater scrutiny due to legislation such as America’s Foreign Corrupt Practices Act.

Earlier this month, French industrial giant Alstom was fined $772m over a worldwide bribery scheme by a judge in the US, the largest penalty ever issued under the law.

“If you look at the biggest Gulf companies — like Aramco and SABIC — they are requiring due diligence audits from their suppliers,” Dunlop says. “You get your own house in order, and then you need to be starting to ask your suppliers — you want them to be meeting your integrity standards as well.”

Dunlop prefers not to discuss specifics when it comes to individual companies, demurring when questioned what advice she would have given Arabtec to avoid the mismanagement catastrophe that led to the collapse of the firm’s share price last year.

She also doesn’t single out good performers, apart from referencing five case studies (featuring the UAE’s Majid Al Futtaim; Saudi Arabia’s Abdullatif Alissa Group and Zamil Group; Lebanese firm SABIS; and Oman’s WJ Towell) that made up a report on good governance in family firms, which the Pearl Initiative published last year.

Another major area of focus for the Pearl Initiative is the employment of women in the private sector. According to the organisation’s own research, female labour force participation in the GCC is extremely poor, especially when compared with other parts of the world. Only 19 percent of women in Saudi Arabia are employed (compared to 77 percent of men), while even the best performing country, Qatar, only has 52 percent of its women in work (compared to 96 percent of men).

When it comes to the participation of women on boards, an issue the UAE has sought to improve, the figures are even worse. Just 0.1 percent of board seats in Saudi Arabia are held by women, and only 1.8 percent in Oman, the best-performing country in the Gulf. The numbers look bad, but Dunlop says the outlook is promising.

“If you look at the Gulf region, the number of examples of women in leadership roles is increasing, so there are those role models out there,” she says. “What the Pearl Initiative is focusing on is what the CEO’s agenda should be to ensure that the pipeline of women coming up through the ranks is strong. There are plenty of women in junior levels, but there’s a massive fallout along the way in terms of this pipeline of talent.”

The solutions, according to a survey of 600 women recently carried out by the organisation, are to improve the work/life balance for women in the workplace; to create a more balanced corporate culture; to invest in building career paths; and to adopt HR policies that ensure equality.

“Companies are losing most women when they are barely in their 30s, and if you identify high-potential, high-performing women in your organisation you want to keep, you’ve got to work out how to do that at that critical point,” Dunlop says. “It’s important that every CEO and the top executive team of every company takes this seriously and actively espouses it.

“It’s actually about the culture of the organisation and making sure that at those middle levels — the most important relationship anyone has in their career is with their line manager — and at those levels you’ve got to make sure there’s no gender bias.”

But as Dunlop readily admits, actually quantifying the contribution the Pearl Initiative has made over the previous four years is not easy.

“It’s a difficult thing to do — we’re working out how to do that at the moment,” she says. “At the moment, all we have is anecdotal evidence from the companies we are reaching; there are more and more examples of companies that are adopting for the first time due diligence practices, who are putting into place more training on ethics policies, and more effort in trying to affect the culture of their company.

“I can see that that’s having an impact, but I only have anecdotal evidence. Hopefully by the end of next year, we’ll be able to start measuring that impact.”

In the near future, Dunlop says the Pearl Initiative’s research will focus not only on larger conglomerates, but the SME sector, as well. In addition, she thinks the organisation may also gain a wider geographical remit.

“The feedback that I get globally, from the United Nations and the World Economic Forum, tells me that the Pearl Initiative is quite a unique model in terms of how the private sector can start taking the lead,” she says.

“I’d like to see the Pearl Initiative start to have a wider Middle East remit, but I also think it’s a model that can be replicated in other parts of the world.

“At the same time, when it comes to accountability, transparency and governance, we have to be careful to make sure we don’t get mission creep and be pulled off course. They are often quite sensitive topics, and where I think we bring a lot of help is to help bring construction solutions to those topics. There’s a lot to be done within that.”