Is corporate governance maturity measurable?

• Pages: 601-619
• DOI: https://doi.org/10.1108/CG-07-2019-0220
• Date: 10 April 2020
• Published date: 10 April 2020
• Author: Ali Rehman,Fathyah Hashim
• Subject Matter: Corporate governance,Strategy

Is corporate governance maturity

measurable?

Ali Rehman and Fathyah Hashim

Abstract

Purpose –This study aims to intend toward the measurement of corporate governance to identify its

maturity levels within Omani public listed companies and also propose to identify whether corporate

governance maturity(CGM) levels vary significantly between sectors or not. CGMis an innovation in the

field of corporate governance, which assists organizations in achieving their objectives and satisfying

shareholders.

Design/methodology/approach –This study used descriptivecross-sectional survey design. Dataare

collectedby the internet-based tool and analyzedvia SPSS.

Findings –This study found that corporate governance is measurable and can be measured to the

levels of maturity.Moreover, this study identified that CGM does not differ among differentsectors. From

a total of 107 organizations, none of the organizations falls under the forming level and mature level.

However, majority of organizations falls under normalizedlevel followed by developing and established

levelsof maturity.

Practical implications –This study integrates significant empirical research and literature to broaden

the potentials ofCGM. This study provides a framework along witha calculation tool, which can be used

by organizations,regulators and policymakers.

Originality/value –To the best of the authors’knowledge, the maturity levels of Omaniorganizations are

never being measured before. Moreover, past studies demonstrate single constituent relationship with

CGM and not all four. Therefore,this study is distinctive from others by testing all four major components

or constituentstoward CGM.

Keywords Corporate governance maturity, Good corporate governance, Corporate governance,

Public listed companies in Oman

Paper type Research paper

1. Introduction

In current business environment, existence of organizations is not possible without

implementation of basic corporate governance requirements. These basic requirements

can be referred as mere compliance with the codes of corporate governance (Fernando,

2009). It is dependent on organization that whether they want to use corporate governance

as compliance check box (Zhu, 2016;Abdel-Meguid et al., 2014) or measure it to know its

maturity levels (Rehman and Hashim, 2018). Financial and occupational frauds are

increasing every year (ACFE, 2018), despite the availability of corporate governance

(Bhasin, 2013). Continuous and rigorous frauds necessitated the innovation in the field of

corporate governance (Vinita et al.,2008) and this innovation can be termed as corporate

governance maturity (CGM).

Commonly used terminologies for corporate governance are “poor,” “good,” “aspirational”

and “best practices.” Scholars also consider the business culture, business environment

and social aspects of corporate governance for it to be considered as good corporate

governance. To provide assurance toward positive and honest relationship between

organization and stakeholders; measurement of good corporate governance is required

Ali Rehman is based at the

Department of Internal

Audit, A’Sharqiyah

University, Ibra, Oman.

Fathyah Hashim is based at

the Graduate School of

Business, Universiti Sains

Malaysia, Penang,

Malaysia.

Received 22 July 2019

Revised 1 December 2019

10 February 2020

2 March 2020

Accepted 16 March 2020

DOI 10.1108/CG-07-2019-0220 VOL. 20 NO. 4 2020, pp. 601-619, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 601

(Nerantzidis, 2016;Schumpeter, 2010;Kocmanova and Simberova, 2012). It is worth

mentioning that good corporate governance does not offer organized road map toward

implementation of strategies and also do not define measurable steps (Massie, 2012;

Bramont, 2012). It is the maturity of the corporate governance within the organization which

is required to be identified enablingthe evaluation of good corporate governance.

It is one of the common understandings in Oman that only financial sector is well-regulated

and controlled (Lars Hodel, 2017), thus financial sector always demonstrates mature

corporate governance. However,it is not necessary that the mature organizations or sectors

will always have mature corporate governance and immature organizations or sectors will

always have immature corporate governance. As stated by O’Connor and Byrne (2015),

maturity of the governance defines organizational maturity and not the organization or its

related sectors define maturecorporate governance.

It is widely understood and has been mentioned by many scholars that poor corporate

governance leads to fraud, misappropriation of assets and dissatisfied shareholders

(Bhasin, 2013); furthermore, no country is invulnerable to fraud (Johnson et al., 2014).

History and recent past is filled with events where organizations demonstrated poor

corporate governance and end up either in filing bankruptcy or incorporate huge losses in

their financial statements (Costa, 2017;Nwagbara, 2012). Poor corporate governance can

also be considered as immature corporategovernance.

All organizations conduct compliance, risk and governance authentication regardless of

whether they use similar acronym or not. Organizations also adopt certain approach

enabling them to identify how their organization is governed, which could be scattered in

silos and disconnected among departments or it could be highly cooperated and

integrated. However, organizations should not concentrate on the existence of governance

but they should focus on how mature their organization is toward governance and how it

can be improved (OECG, 2017). To obtain desired level of maturity, organizations should

continuously measure governance maturity. Organizations which are mature demonstrate

continuous improvements and also add value to stakeholders (Wessels and Wilkinson,

2016).

There is no common or defined structure for corporategovernance and CGM measurement

(Roberta et al.,2008;Massie, 2012). CGM is a term found in research conducted by

organizations outside of the academic publishing and distribution channels; these areoften

referred as “grey literature.” These research studies are conducted by practitioners, audit

firms and governmental bodies established for this specific purpose. Moreover very little

focus is provided by academic literaturein the field of CGM (Massie, 2012;Wilkinson, 2014;

Wilkinson and Plant, 2012). This study is an additional attempt toward enhancing the body

of knowledge related to CGM.

CGM is measured by developing a framework which comprised of attributes, levels of

maturity and related description which connects attributes with levels of maturity.

Furthermore, major constituents in any organization which requires measurement toward

CGM are board of directors (BOD), audit and risk committee (ARC), remuneration

committee (RC) and senior management (SM) (Rehman and Hashim, 2018;CMA, 2016).

Probable results of CGM measurement are forming (immature), emerging, regulated,

founded and mature (OECG, 2007). Likert scale logic can be used for the measurement of

maturity levels (L

opez et al.,2016;Vidal et al.,2012;Ahmed and Capretz, 2011).

New codes of corporate governance are introduced in Oman in 2016 whereas previous

codes were issued in 2002 (CMA, 2016). There are very few studies available in the area of

corporate governance related to Omani market. Furthermore, the developed codes for

corporate governance still requires many amendments and alterations as it should be

aimed for attaining mature governance and to provide much needed security to investors,

shareholders and other stakeholders. There are 15 per cent public listed companies in

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