The Arabtec Holding CEO unethical behavior cause troubles

Introduction

Arabtec construction is a multinational construction firm based in UAE.  The firm has its headquarters in Dubai, where it is among the top firms in the construction sector. Arabtec was founded in 1975; this company is involved in varying sectors such as hotels along with hotel interiors, high-rise developments, and commercial developments, offshore gas along with oil installations, residential complexes, major airport developments, drainage works, stadiums, office blocks and industrial projects.  Arabtec is mainly popular for its hand in the construction of the tallest building on earth Burj  Khalifa, Burj Al Arab (the fourth highest hotel on the planet), Lakhata Center (the tallest structure within Europe), and Dubai Central International airport (Arabtec, 1). The company’s growth within Dubai was accompanied by steady geographic expansion into the international platform. Arabtec Company possesses associated firms based in Saudi Arabia, Qatar, Russia Abu Dhabi, Jordan, and Syria. Arabtec currently functions under company name Arabtec Holding PJSC. Arabtec holds the record of being the first firm to go public within UAE. In 2005, Arabtec got listed in Dubai Financial Market (DFM). The stock has persisted as the highest traded in UAE since the IPO. Dubai Financial Market listed Arabtec Holding as being the highest traded stock between 2000 and 2010 (Arabtec, 1).

Article discussion

In June 2014, the company’s stock faced the nastiest period of all times. This was motivated by the CEO’s unethical behavior.

1. Proof of unethical behavior

 This was as a result of the CEO’s unethical secret accumulation of 30% percent stock without the knowledge of company board and later resigning. Ismalik the CEO additionally wanted to sell the stock double the price he acquired them disregarding how this will impact the company’s.

1. Conduct ramifications to the company

The Arabtec shares lost greater than half of its value given that these shares had hit a record high in May 14 2014. The decrease of the company’s share value drastically decreased Dubai Financial Market General benchmark index; the DFM index fell by about twenty-two percent. The investors have recently been absolutely scared of decreasing share value and that the company will be incapable of accomplishing an enormous accumulation of works (Petroff, 2).  This unethical conduct by the CEO led to Aabar which is second largest shareholder disposing off of some Arabtec shares (initially 21% to 19%), Aabar’s actions being a state financed investment fund significantly increased the panic. Aabar constitutes the second largest Arabtec shareholder and a primary contract source. Additionally, there were rumors that hundreds of jobs will be terminated disabling the company’s operations (Petroff, 5).

Analysis and application

The company moved fast to dispel the fears that the CEO resigned as a result of company related issues. The statement by Khadem Al Qubaisi, the chairperson indicated that the CEO resigned due to personal reasons. Another pressing matter regards how the former CEO build up self-owned 30% stake without being declared publicly.  The United Arab Emirates Securities and Commodities Authority asked investors to disregard gossip and emphasize on firm’s performance. Khadem Al Qubaisi has indicated the company will foster greater international rated transparency (Petroff, 2).

Despite the hiccups the Arabtec shares regained their value, on July 2 2014; the stock went up 15% after the reassurances by Al Qubaisi. He additionally stated that Aabar would not sell its shares any longer. The company would also start undertaking the $40 billion Egypt’s housing project (Petroff, 3). Al Qubaisi also reiterated that Arabtec would remain being publicly traded along with continuing its fundamental construction businesses. If the firm had not taken drastic steps it would have encountered critical financial problems.

Recommendation

In order to assure investors of the security of their money the company should sue the unethical CEO and reclaim the shares. This is because his actions were performed in his self-interest and benefit disregarding their impact of the firm’s operations. Additionally, the company should in future carefully manage its stock and regularly monitor its market in order to ensure search unethical issues never happen.

Conclusion

Despite the rise in stock value, analysts are still worried with regards to what Ismaik would do with his shares taking into account the firm’s poor corporate governance record. The company has pledged international upgrade that is usually accompanied by global scrutiny. The fund managers are worried that the firm might be incapable of achieving this considering Ismalik unethically accumulated 30% of the stock devoid of firm or DFM knowledge.

Works Cited

Arabtec. Arabtec Construction L.L.C. N.p., 2014. Web. 14 Sept. 2014. <http://www.arabtecuae.com/>.

Petroff, Alanna. “Dubai construction firm on shaky ground – Jul. 2, 2014.” CNNMoney. N.p., July 2014. Web. 14 Sept. 2014. <http://money.cnn.com/2014/07/02/news/companies/arabtec-dubai/>.