Question

Either pension plan you choose is only beneficial for you if your employer is transparent. Contributions made by the employer need to be relayed to the employee. Ongoing revisions and projections are a necessity to ensure planning is adequate for future needs. European countries are constantly focusing on transparency to provide high quality financial information. Organizations like the World Bank and the International Federation of Accountants (IFAC) require reporting very similar to the United States to require organizational transparency. However, Arab countries appear to be behind the wave with transparency or does it only appear this way? Evaluate the transparency in Arab countries to see what the similarities and differences are with the United States.

Answer 1

Pension schemes in most countries of the Middle East set up their current national pension schemes in the 1970s and, given that no major changes or reforms have been introduced since then, they are in urgent need of sustainable reforms.

Arab corporates have long been criticized for lack of transparency and shortcomings in corporate governance. Family companies continue to avoid the capital markets and seek other means of financing for the usual reasons of maintaining confidentiality and flexibility. As nonrated, largely non-listed entities, they do not need to respond to shareholder demands to maximize return on equity. Moreover, the owners of such companies may find it difficult to realize value from their investments. These factors, among others, limit transparency and disclosure standards, in particular, and corporate governance practices in general. Although the corporate governance framework is already in place in many Arab countries, there is room for improvement in transparency, disclosure, protection of non-controlling shareholders, directors’ independence, qualifications, and compensation. The challenges the region is facing regarding legal and regulatory frameworks and property rights can also be considered barriers to proper corporate governance.

On the other hand, the pension schems in United States are very transparent. Most of them are invested in public funds and individuals can regularly keep track of their savings as well.