A Practical Approach


Maldivian Context

Where are we?


State owned enterprises

Corporate Governance is an effective tool to improve the “state” of State Owned Enterprises (SOEs). The evolving governance structure within the country has created many types of legal entities. Ranging from 100% government owned enterprises to enterprises in which government holds a minority stake.

The breadth of the business activities carried out by ‘public interest entities’ impact our economy. Any corporate entity, which is of major significance in the economy and society - resulting in the need for increased monitoring and supervision can be defined as a public interest entity. Failure of such entities impact the entire economy.

Reforming SOEs is a universal dilemma faced by every country. It is important to understand two elements here. The principle-agent problem and the free-rider problem. An SOE is run by managers who do not own the company. Because these companies are under state control, regardless of business performance, executive remuneration is guaranteed. This affects the extent to which resources are maximized.

However, if SOE Governance and Accountability system is designed to ensure that they are used in the ‘right context’, in all the government’s toolbox for public value creation and societal benefit, SOEs shall engage in the provision of fundamental services such as water, electricity and transportation that will enable private companies to operate and increase their competitiveness - resulting in efficient management of assets, increase overall competitiveness of the private sector, attain economic growth and overall economic sustainability. In addition to this, SOEs can play a vital role in diversifying the economy by engaging in the development of new sectors and industries.

Poor corporate governance has negative consequences on the countries’ economy, therefore it is imperative that every government clarifies its stance on improving corporate governance of public interest entities.

Some SOEs voluntarily adopt the relevant provisions of the CMDA Corporate Governance Code, however, we are at a stage where a ‘rule based approach’ (through regulations) has to be taken to improve governance of SOEs.


In 2018, CMDA introduced “Best CG Efforts Award” - first of its kind, a form of recognition to those companies that adhere to the principles of CMDA Corporate Governance Code.

In order to promote gender equality on Corporate Boards, President Yameen introduced a quota system that enabled 40% women to be appointed to Corporate Boards of State Owned Enterprises.

Micro, small & medium sized businesses

Private Sector is the lifeline of our economy. Corporate Governance ecosystem continues to shape the way micro, small and medium sized businesses evolve. Where do we start?

All types of business organizations runs the risk of governance. Be it a Sole Proprietor, a Company, Partnership or a Cooperative Society. However, the degree of risk exposure varies from one type to another.

Corporate law lays down the basic framework for business entities to function. This means, all entrepreneurs should read and understand the Business Registration legal framework as the first item in their to-do-list to start up a business.

The most common problem among Maldivian Entrepreneurs is not knowing the stretchability of the business structure they choose. As a result, the growing demand by external stakeholders such as Banks, Government Agencies issuing approvals, licenses and permits, State Revenue Authority and foreign investors - imposes a transparent system to be built in for the proper conduct of business affairs of Micro, Small and Medium Sized Enterprises (MSMEs).

Therefore, its prevalent that most businesses enhance their governance system based on external demands. Corporate Regulatory Authorities and other stakeholders should engage with the private sector to improve governance - with a view to enhance transparency and accountability in business dealings.


Given the changing economic environment of the country, and the growing world attention on sustainable investments, the Corporate Governance Code was amended to introduce a voluntary section on Sustainability Reporting.

It was viewed as the first step in enabling companies to develop a strategy that can help them understand the impact on its stakeholders, and ways in which negative impact on the economy, society and the environment can be mitigated.


During President Nasheed’s Administration, SOE workshops were conducted to deepen the understanding of the Corporate Environment, Governance and Accountability. Corporate Governance problem was discussed with MDs and an action plan was drawn up to assist them to improve governance at their institutional level.

Public Enterprises Monitoring & Evaluation Board and CMDA collaborated to run regular training programs.


CMDA directed more resourced to conduct Directors Training Programs, World Bank recognized international experts facilitated these programs. A Director’s Database was also developed within CMDA to assist the Government and Private Sector Companies in approaching and nominating potential candidates who has completed the training.

Public Companies

Effective Corporate Governance systems acts as a pillar for any successful business. It is important to understand both internal and external environment of the company to identify what kind of systems, processes and procedures are relevant and practical.

The size, nature, characteristics and scope of business activities of public companies in Maldives are very different from what we find in other developed nations.

In understanding the corporate governance problem, we need to dive deeper into the formation of the company, how it has been bred over the years and also understand the tone set by the policy makers in improving the governance system in matters that are of importance for the general public.

Although public companies itself plays a vital role in reforming their governance structure, intergovernmental agencies such as the Office of the Registrar of Companies, Securities Market Regulator, Government Ministries, Anti Corruption Commission can complement Corporate Governance Initiatives in the Country. In addition to this, Non Governmental Organisations, advocacy groups and investor associations can also lobby for improving governance in the corporate environment.

Nevertheless, the foundation for corporate governance shall be laid by the parliament, by passing laws that govern companies and corporate conduct.

Whilst the corporate regulatory bodies ensures that there is adequate monitoring and enforcement mechanisms, the Court system shall adjudicate and resolve governance disputes, and take relevant measure withing their prerogative to maintain law and order.


The Seventh National Development Plan (2006-2010) titled ‘Creating New Opportunities’ - Trade & Investment Policies sets out the regime’s focus on Corporate Governance, as it stated that a Corporate Governance Index will be created. Furthermore, the plan also emphasized on the need for improving governance and accountability of State Owned Enterprises.

In May 2006, Economic and Legal Section of the Commonwealth Secretariat’s Special Advisory Services Division conducted a preliminary assessment of the Maldivian business environment to assist in the development of a Code of Corporate Governance. The Capital Market Development Authority (CMDA), an independent institution tasked with regulation, supervision and development of the Capital Markets in the Maldives acted as the key implementing agency of this project. A questionnaire survey and high-level discussions were carried out with a view to understand the ‘corporate governance problem’ in the country. A draft Corporate Governance Code was compiled, to which, stakeholder consensus building exercise was conducted in July. A finalized code was released in December 2006.

In 2007, the Corporate Governance Code was introduced to all listed companies, state owned enterprises and private companies as a voluntary code. All listed companies were encourages to adhere to the principles of the code, since CMDA has indicated that the Code will become mandatory to all the listed companies following an amendment to the Listing Rules of the Maldives Stock Exchange.

To enhance awareness of high-level executives, a Corporate Governance Awareness Seminar and subsequent working sessions were facilitated in collaboration with Commonwealth Secretariat and Global Corporate Governance Forum (GCGF).