MODEL OF CORPORATE GOVERNANCE IN SAUDI ARABIA
Saudi Arabia’s corporate governance approach is mostly built on a blend of legal frameworks, recommendations, and optional practices. The Capital Market Authority (CMA) is the principal regulatory body in charge of policing corporate governance in Saudi Arabia that develops regulations, rules, and recommendations. The Corporate Governance Regulations (CGR) and Converged Generation Communications (CGC) published by the CMA, offer a thorough framework for corporate governance procedures in Saudi Arabia, including auditing, internal controls, risk management, disclosure and transparency, function and make-up of the board of directors, shareholder rights and treatment, disclosure and openness, and risk management as the main topics.
SOURCES OF CORPORATE GOVERNANCE
In order to build and encourage effective governance practices, corporate governance in Saudi Arabia draws from a variety of sources. These resources include worldwide standards, codes, recommendations, and regulatory frameworks.
The laws and regulations that stipulate corporate governance requirements in KSA include but are not limited to:
- Capital Market Authority (CMA) Law: The Capital Market Law issued by Royal Decree No. (M/30) dated 2/6/1424 AH.
- Companies Law: The Companies Law issued by the Royal Decree No. (M/132) dated 1/12/1443 AH.
- Corporate Governance Regulations: The Corporate Governance Regulations, which were published by the CMA, are the main source of governance standards for Saudi Arabian listed firms. In terms of board composition, shareholder rights, disclosure, risk management, and internal control, the Corporate Governance Regulations (CGR) lays down the necessary requirements.
- Corporate Governance Code: The Corporate Governance Code, which the CMA introduced, offers corporations optional guidelines and best practices for enhancing their governance processes. The CGC includes topics such as board structure, shareholder rights, disclosure and openness, and risk management.
- Listing rules: The prerequisites for businesses wishing to list on the Saudi Stock Exchange (Tadawul) are outlined in the CMA’s listing rules. These regulations include clauses that deal with governance, including board independence, transparency demands, and CGC compliance.
- International standards and guidelines: Saudi Arabia bases its corporate governance system on international norms and standards. These include the rules and regulations established by international bodies like the International Corporate Governance Network (ICGN), the International Finance Corporation (IFC), and the OECD.
- Shari’ah principles: Shari’ah principles heavily influence KSA’s corporate governance standards because the Saudi Arabia is an Islamic country. Companies are supposed to run their businesses in accordance with Islamic ideals, such as morality, justice, and social responsibility.
- Best practices and industry guidelines: The best practices and rules for corporate governance may be created by professional groups and sector-specific organisations in Saudi Arabia. These sector-specific resources offer supplementary information that is adapted to the special traits and difficulties of certain industries.
- Case law and legal precedents: As Saudi Arabia’s legal system expands; judicial precedents and case law may have an impact on corporate governance procedures. Interpretations and recommendations on issues relating to governance can be found in court rulings and judgments.
The landscape of corporate governance in Saudi Arabia is influenced by these sources collectively, and they serve as a guide for businesses and other market actors as they seek to implement sound governance practices.
CORPORATE AUTHORITIES IN SAUDI ARABIA
Saudi corporate authorities monitor and control many different aspects of corporate governance and commercial operations. These agencies are in charge of establishing rules, giving instructions, and ensuring that corporate laws are followed. Some of the corporate authorities in Saudi Arabia are:
- Capital Market Authority (CMA).
- Ministry of Commerce (MoC).
- Saudi Arabian Monetary Authority (SAMA).
- Saudi Organisation for Certified Public Accountants (SOCPA).
- Saudi Stock Exchange (Tadawul).
- Zakat, Tax, and Customs Authority (ZATCA).
TAKEAWAY
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