A Report on the Observance of Standards and Codes on Corporate Governance for Morocco was conducted in 2001 and was published in French in 2003. According to the report, summarized in a 2003 International Monetary Fund (IMF) assessment, significant progress in improving corporate governance, mainly at the legislative level, had been made in the years up to 2001. The assessment notes, however, that the regulations alone do not suffice if they are not enforced by the regulators and courts. At the time of the assessment, the powers of the Securities Commission - Conseil Déontologique des Valeurs Mobilières (CDVM) were deemed too limited to address corporate governance issues. However, according to a 2007 IMF Working Paper by A. Tahari et al., the CMV law was amended in 2004 to strengthen its powers. The 2003 IMF assessment recommended that Morocco develop a code of best practices in corporate governance that includes a comply-or-explain clause for listed companies. It also recommended creating an institute of directors of Moroccan corporations. According to a March 2007 press release from the International Finance Corporation, Morocco has launched a national task force comprised of key actors in the field to formulate a national corporate governance code.

General Overview

The World Bank, in 2001, conducted an assessment of Morocco's corporate governance and, in 2003, the results were published in two formats: a Report on the Observance of Standards and Codes (ROSC) on Corporate Governance for Morocco, presented in French; and an International Monetary Fund (IMF) Financial System Stability Assessment (FSSA). According to the assessments, significant progress in improving corporate governance, mainly at the legislative level, had been made in the years up to 2001. The assessments note, however, that the regulations alone do not suffice if they are not enforced by the regulators and courts. The assessments expressed particular concern regarding the limited powers of the securities regulator, the Conseil Déontologique des Valeurs Mobilières (CDVM). The assessments recommended, first, that Morocco develop a code of best practices in corporate governance, including a comply-or-explain clause for listed companies, and second, that an institute of directors of Moroccan corporations be created that could play a coordination role to that encountered in other Civil Code-based jurisdictions.

In a 2007 IMF Working Paper, Tahari et al. note that corporate governance in the Maghreb region as a whole, and particularly in Morocco and Tunisia, has improved over the last few years, especially with respect to higher standards for managerial accountability and shareholders' rights. Concurring with the 2003 IMF assessment, Tahari et al. state that the limited power of securities regulators to address corporate governance issues at large remains a barrier to the effective application of these laws. The 2007 paper notes, however, that the 2004 amendment of the law governing the CDVM "is an interesting example of strengthening the powers of the supervisory authority" (p. 34).

Oxford Analytica, in a 2006 assessment, notes that the 2006 Banking Law has reinforced the role of the CDVM, which is now in a position to focus on the quality of data published by listed Moroccan companies. The new Banking Law also established a commission for the coordination of institutions in charge of financial sector supervision, the Commission de coordination des organes de supervision du secteur financier. This commission is composed of the Central Bank (Bank Al-Maghrib, or BAM), the CDVM, and the administration within the Ministry of Finance (MoF) in charge of supervising the insurance sector. The aim of the commission is to facilitate the exchange of information regarding supervision activities and supervised entities.

The other main corporate-governance recommendation of the 2003 IMF FSSA appears to be in the process of implementation. According to a March 2007 press release of the International Finance Corporation (IFC), Morocco has launched a national task force to formulate a code of corporate governance. The country's corporate governance commission, which held its first meeting on February 6, 2007, includes private and public sector leaders such as the General Confederation of Moroccan Companies (Confédération Générale des Entreprises du Maroc, or CGEM), the Center of Young Leaders, the BAM, the Association of Moroccan Banks, the CDVM, the Casablanca Stock Exchange (Bourse de Casablanca, or CSE), the National Agency for small- and medium-sized enterprises (SMEs), the Ministry of Justice, and the Ministry of Economy. The commission's work on developing this code is scheduled to continue through the end of 2007, and enjoys technical support from IFC, the Global Corporate Governance Forum, and the Organization for Economic Cooperation and Development (OECD).

Morocco has various laws and regulations that are explicitly or implicitly connected to corporate governance. These include the Law on Corporations, the laws of the Stock Exchange and of the CDVM, the Commercial Code, and the 2006 Banking Law. The IFC press release further elaborates that as of now, the "country's corporate governance is not in accordance with global standards and does not include the participation of all interested parties (such as corporations, banks, employees, investors, and the media)." The national corporate governance code of good practice should, however, complement existing Moroccan laws and regulations.

The CSE plays an important role in the endorsement of corporate governance in accord with international standards, according to a 2004 paper by Saidi and Nadal. The CSE includes a central market, a development market, and a growth market. Listing requires the initial and recurrent disclosure of information. The CSE was founded in 1929 and was re-launched as a private institution in 1993. According to the 2006 Doing Business Guide for Morocco by the U.S. Department of Commerce, the Exchange prospered during the early 1990s, but suffered a long, severe bear market with a near collapse in liquidity from late 1998 through 2002, including markedly reduced trading volumes, a decline in listings to approximately 50 companies and a reduction of market capitalization. Despite this decline, the CSE is the largest exchange in the Maghreb, and one of the largest in North Africa, with a market capitalization of 72 percent of GDP, according to the 2007 Working Paper by Tahara et al.. Among the approximately 50 companies listed in 2005, market concentration remains high (the top five stocks account for over half of capitalization and trading). Of much more economic relevance in Morocco is the SMEs, which constitute the vast majority of Moroccan enterprises. According to the Saidi and Nadal study, there are over 600,000 SMEs in Morocco, among which only 200,000 are linked to the formal sector.

In its 2008 Doing Business report, the World Bank also describes investor protection as being weak. The Investor Protection Index is a subcomponent of the World Bank's 2007 Doing Business Indicators, and consists of three dimensions of investor protection: transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index) and shareholders' ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index). The indexes vary between 0 and 10, with higher values indicating greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection. Morocco scores 6.0 in the disclosure index against a regional average of 5.8 and an OECD average of 6.4. It scores 2.0 in the Director Liability Index against a regional average of 3 and an OECD average of 5.1 and 1.0 in the Shareholder Suits Index against a regional average of 3.6 and an OECD average of 6.5.

The Principles

Principle I: Ensuring the Basis for an Effective Corporate Governance Framework

ID

Regulatory responsibility for the securities market lies primarily with the MoF and the CDVM. According to the 2003 IMF assessment, the CDVM was established by Decree-Law 1-93-212 of September 1993, with the objective of protecting investors' securities and proposing the necessary measures for this purpose. The MoF is responsible for regulating the securities market, and must in particular approve the specifications (Cahier de Charge) of the Stock Exchange, the statutes of the Central Depository, and the general regulations (Règlement Général) of those two institutions.

The 2003 IMF assessment notes that significant progress had been made in improving corporate governance up to 2001, mainly at the legislative level. The assessment notes, however, that the regulations alone do not suffice if they are not enforced by the regulators and courts. The main concern of the assessment was the limited power of the CDVM. The assessment further recommended that Morocco develop a code of best practices in corporate governance with a comply-or-explain clause for listed companies, and suggested the creation of an institute of directors of Moroccan corporations that could play a coordination role similar to that encountered in other Civil Code-based jurisdictions. According to a 2007 IMF working paper, the powers of the CDVM were strengthened with the 2004 amendment of the CDVM law. A code of corporate governance is in the process of being formulated by a national task force.

Principle II: The Rights of Shareholders and Key Ownership Function

II

According to a 2003 paper by the Middle East and North Africa Regional Corporate Governance Workshop, the tendency towards concentrated ownership in Morocco, Egypt, Lebanon, and Jordan is explained by an earlier version of commercial laws, which lacked adequate provisions regarding shareholder protection. The paper argues that Morocco, Egypt, Lebanon, and Jordan appear to have overcome this initial disadvantage, as their Company Laws have relatively recently been updated and revised. The paper tentatively concludes that basic legal protections for shareholders appear to be in place. However, it does not sufficiently address Morocco's compliance with this principle.

Principle III: The Equitable Treatment of Shareholders

II

The 2003 paper by the Middle East and North Africa Regional Corporate Governance Workshop states that provisions under the Company Law or the Securities Law in Morocco, as well as in Egypt, Jordan, and Lebanon provide for the protection of minority shareholders. The CDVM is entrusted with the enforcement of the law. However, the paper does not sufficiently address Morocco's compliance with this principle.

Principle IV: The Role of Stakeholders in Corporate Governance

II

There is no publicly available information as to Morocco's compliance with this principle

Principle V: Disclosure and Transparency

II

Oxford Analytica, in a 2006 assessment, notes that the 2006 Banking Law has re-enforced the role of the CDVM, which is now in a position to focus on the quality of data published by listed Moroccan companies. Accounting standards in Morocco are set by the National Accounting Council (Conseil National de la Comptabilité, or CNC). The World Bank noted in the 2002 ROSC that, since the establishment of the CNC, Moroccan accounting standards have improved significantly, but cautions that inadequate enforcement and flawed standard-setting processes impede further progress. One of the factors contributing to weak enforcement is the inefficient distribution of resources to the CNC. However, overall, there is insufficient publicly available information regarding Morocco's compliance with this principle.

Principle VI: The Responsibilities of the Board

II

There is insufficient publicly available information as to Morocco's compliance with this principle