What is Corporate Governance?
Corporate governance is the system of rules, practices, and processes by which a company is directed, controlled, and held accountable. It balances the interests of shareholders, management, employees, customers, suppliers, financiers, regulators, and the community. Key pillars are board composition and independence, transparency, accountability, internal control, and risk management.
How It Works
- Establish a board with appropriate skills, diversity, and independence.
- Form key committees: audit, nomination and remuneration, risk.
- Adopt and disclose policies on related-party transactions, ethics, and whistleblowing.
- Maintain robust internal control and internal audit.
- Publish governance disclosures in the annual report per CMA Corporate Governance Regulations.
Saudi Context
The Saudi CMA’s Corporate Governance Regulations (latest version updated 2023) prescribe board structure (one-third independent directors), key committee composition, mandatory written policies, and detailed annual report disclosures. SAMA imposes additional governance standards on banks and insurers. The Saudi Companies Law (2022 update) reinforces directors’ duties and minority shareholder protections.
Example
A Tadawul-listed company has an 11-member board: 4 independent, 3 non-executive shareholder representatives, 2 representing institutional investors, and 2 executives. The audit committee (3 independents) reviews financial reporting, the risk committee oversees enterprise risk, and the remuneration committee sets executive pay, all in line with CMA Corporate Governance Regulations.