Having the power to tell it like it is

Joe Saddi of Booz and Co doesn't like to drop names, but along with a small army of consultants he has the ear of nearly every ruler in the Gulf. The firm played a prominent role in developing Plan Abu Dhabi 2030, which aims to transform the UAE capital's economy. "We are reactive to GDP," Mr Saddi says. "Our clients are major companies." As these family-owned conglomerates work through the global financial crisis, management consultants such as Mr Saddi are in high demand. The advice comes down to one thing: risk management. "In flush times, you tend to relax your decision criteria," he says, speaking from his Beirut office with the Manhattan-like address of 2 Park Avenue. "Different families have different situations but what you see over time is the number of family stakeholders increasing almost exponentially. You need to set some rules for how decisions are made ? now it's about re-tightening, having the right due diligence." Shaking up a board requires tough decisions, such as how involved family members should be in running the business. "Suppose you have a family firm that is founded by an entrepreneur in the '70s," Mr Saddi says. "In the '90s, the sons and daughters become involved and before long you have second and third generations." In some of these companies, the ability to make decisions becomes diluted among an increasing number of owners, each with different perspectives and agendas. That can hobble a company in an economic environment that sometimes needs fast, smart decisions. Regulators have also been taking a harder look at this to protect the wider economy from companies that do not have the proper board and corporate governance structures in place. The Central Bank last month issued a set of recommendations for good governance at banks that is likely to lead to major changes in the boardrooms of financial institutions. These guidelines cover a range of topics, including basics such as how a board meeting should be run, to the need for independence and the importance of attending all meetings. One of the biggest issues the Central Bank addressed is the need to eliminate conflicts of interest in board structures. In the UAE, for example, there are people who are chairing competing banks. For Mr Saddi, it comes down to a board ensuring that when decisions are made, somebody takes responsibility. "Boards need to review performance and have consequence management," he says. "It's about holding people accountable." Giving executives an honest appraisal was the intent of Edwin Booz, who founded the US-based company in 1914. He believed companies would benefit from a knowledgeable outsider being brought in to evaluate operations. That idea gave rise to a multibillion-dollar industry that spans the globe today. Charles Willson, an executive ­recruiter, says companies like Booz come into a firm and "re-engineer what they are doing so it's more ­efficient and you can get the most of the economic environment you are in". These consultants are considered some of the top people in their fields, Mr Willson says. "The staff of a company like Booz are from Ivy League universities, but not just that," he says. "They want employees who did two degrees while playing professional basketball, having a job at the pizza parlour and training for a marathon." Those who have worked at Booz can be found in leadership positions across the world: from Indra Nooyi, the chairman and chief executive of PepsiCo; to Martin ­Redrado, the president of the ­central bank of Argentina. Mr Saddi says being a consultant gives him the power to talk straight to his powerful clients. There is no sugar-coating the situation, he says. The recent discussion of "green shoots" in the economy is premature speculation, and he lets his clients know he feels that way. "None of my clients are assuming that the worst is over," Mr Saddi says. "All of them are encouraged by the last couple of months, but it's a cautious optimism. No one is declaring victory and saying that we are through it." He says positive points for the region are that governments have not abandoned their efforts to modernise, and the global economic crisis will lead to Middle-Eastern companies taking a bigger stake in companies around the world. "A few big corporations in the region are starting to say that this is the right time for us to make a move and acquire assets," he says. "I do expect in the coming three years, companies will take advantage of depressed prices all around the world." Mr Saddi says when that happens, these companies will have to start introducing systems to manage those investments globally. "Building those capabilities is going to be the next important development." He says Dubai poses a unique challenge for the region. The emirate has been the most acutely affected by the financial downturn and that has had an effect in other countries such as Egypt and Jordan, which are seeing lower remittances from citizens working in the UAE. "Dubai has always been at the forefront of reforms, of the real estate and tourism booms," Mr Saddi says. "When things turned south, they got hit first. Saudi Arabia is a different example because its mix of GDP is very different. It has its oil and gas economy and less exposure to real estate." That Dubai is pushing on with its infrastructure projects is a positive sign, he says. It means that the emirate will be in good shape to bounce back when economic growth picks up in the region. "I wouldn't bet on the business model changing fundamentally," Mr Saddi says. "Dubai will continue to be a hub for the financial industry and a gateway for consumer goods throughout the region." bhope@thenational.ae