Corporate Governance in the Kingdom of Saudi Arabia: The Case of Multinational Firms

Table of Contents

1.          Executive Summary................................................................................................................. 4

1.          Introduction.............................................................................................................................. 5

2.          Aim of the Research Project.................................................................................................... 6

3.          Methodologies and Hypothesis Development.......................................................................... 9

4.          Literature Review.................................................................................................................. 11

5.          Discussion............................................................................................................................... 15

5.1.               Corporate Governance Code in KSA............................................................................ 16

5.2.               Corporate Governance and Multinational Corporations in KSA................................. 18

6.          Conclusion, Recommendations, and Implications.................................................................. 20

7.          References Cited..................................................................................................................... 22

Appendixes........................................................................................................................................................ 24

1.      Executive Summary

The concept of corporate governance entails laws, policies, and instructions that aim to influence organizational management. It majorly aims at providing transparency, credibility, and security between an organizations senior management, stakeholders, and other employees. Consequently, it provides credibility, responsibility, and accountability of a nation/organization’s financial reporting and transactions. This research project analyzes the case of the Kingdom of Saudi Arabia, identifying the country’s corporate governance code as well as its challenges/impacts to the nation’s multinational corporations. It is evident from the research that many multinational corporations in the country are advocating for a self-regulatory corporate governance system to allow them effectively balance their global and local corporate governance issues. Many of the international firms are employing the transnational corporate governance strategy, in which they manually adapt to a country’s corporate governance principles instead of integrating their own corporate governance structures. This research project has further ascertained that many multinational corporations in the Kingdom of Saudi Arabia advocate for the self-regulatory corporate governance model at the expenses of the set corporate governance standards by the nation.

Corporate Governance in the Kingdom of Saudi Arabia: The Case of Multinational Firms

1.      Introduction

The concept of corporate governance entails laws, policies, and instructions aimed at influencing how an organization is controlled and managed. Corporate governance encompasses frameworks of rules and regulations that provide transparency, security, and credibility between an organization’s senior management and all other stakeholders of a company. The concept further entails the internal and the external contracts between the employees of a firm and the shareholders, including the distribution of rewards, and the conditions necessary to prevent conflicts of interests.

Today, multinational companies have had to adopt corporate governance as a safeguard practice owing to the challenges presented by the 2008/2009 fiscal crisis. In adopting this concept, companies protect the interest of shareholders from the top company management who may have selfish interest by developing monitoring strategy implementation, setting up internal control mechanisms, and restating the roles for all the stakeholders of a firm. In addition, corporate governance stresses the significance of disclosure and transparency which are two accounting and finance practice that determine how a firm will fare. UNCTAD (66) viewed the corporate governance approach as a means to ensuring the organization instill the discipline of integrity to its financial transactions by emphasizing on those parameters that are invaluable to its stakeholders.

Ali (229) indicates that the Capital Market Authority (CMA) of the Kingdom of Saudi Arabia (KSA) in 2017 released a new regulation on the principle of corporate governance for firms with huge foreign investments and better share values listed on Tawadul. Ali explained that in adopting the new regulation, Saudi Arabia could trigger tense competition between multinational firms as they seek to promote their corporate performance and create a positive reputation of the company’s capacity to safeguard investor interests. Consequently, the adoption of the new guideline will also enhance investments by urging companies to align to the nation’s vision 2030 which aims at encouraging companies to move from the over-reliance on oil revenue and diversify their operations in other segments of the economy.

This research will examine corporate governance issues experienced by multinational firms in KSA. This research study is organized into six sections. First, it highlights the research objective. In the second section, the paper highlights the importance of the research project, the problem being investigated, and the questions it aims to answer. The third and the fourth sections of the research project will examine the methodologies used to achieve the research and its hypothesis and the literature review, respectively. On the other hand, section five of the paper analyses the results achieved in the research and their discussions. The last section of the paper provides the conclusion, recommendations, and implications relating to the research project.

2.      Aim of the Research Project

Corporate governance has proved significant since the 2008/2009 global financial crisis. The crisis made companies realize their role in the overall economy and hence they began restructuring their system to align with the metrics of ethics. The motivation behind this adoption being to support corporate governance development, organizations and nations striving to develop effective corporate governance principles that aim to lower financial risks while boosting stockholder benefits. According to Meteb (15), the world has adopted new countermeasures to global financial crises and corporate governance. Based on the case of the Enron Company and Worldcom as Meteb (15) indicates, the importance of corporate governance and its reforms cannot be emphasized towards addressing the financial crises. Consequently, Chakabuda (10) explains that Enron and Worldcom companies failed due to reckless trading activities by the senior management and exorbitant loans acquired as a result of financial mismanagement by the management. According to Chakabuda (10), the two scandals portrayed the major concerns of the agency theory as well various corporate management weaknesses that include reckless trading, financial reporting weaknesses, and poor compliance monitoring by key bodies like the board of directors and the financial advisors.

Furthermore, the issue of corporate governance has created two distinct groups; one comprising the developed nations while the other made up of the developing nations. Evidence suggests that one of the groups adhere to the principles of the Anglo-American stockholder model while the other emphasizes on the principles of the Japanese and European stockholder model (Aguilera, Williams, Conley, and Rupp, 147). The two corporate governance models are distinct in that the Anglo-American stockholder model focuses on the concept of maximizing the shareholder value/wealth and the capital growth. Hence, the model presumes that the shareholder interests are more significant in comparison to the other stockholders. On the contrary, the European stockholder model aims for socially responsible ways of operating the core business. In the model, stockholders are not viewed as a critical goal of a corporation but as a constituency of the stockholders among others. The KSA corporate governance systems are guided by the Anglo-American stockholder model as Al Kahtani and Faleh (3) elaborates.

Despite the model applied, the significance of corporate governance in developing and controlling the behaviour of businesses is a non-debatable concept. This is due to its aspects of fairness and disclosure between the stockholders, senior management, the employees, and the board of directors. Generally, numerous factors highlight the importance of corporate governance. For instance, inadequate control strategies and regimes negatively affect multinational organizations across the globe. To a nation like KSA, effective corporate governance systems are essential in enhancing FDI that boosts the country’s economy as well as the quality of its governance institutions. As indicated by Sabir, Rafique, and Abbas (para. 35), governmental institution effectiveness as well as quality of regulations statistically and positively impact FDI in developing nations. This indicates that governmental institutions that are independent from political pressure like the CMA of Saudi Arabia encourage entrepreneurial investments, implying that FDI directly depends on the stability of institutions of the host nation.

The adoption of the Anglo-American stockholder model also sets the expected and unexpected situations that the international economics of various nations, KSA included, must address. Among these situations is globalization, which is increasingly affecting financial markets and individual economies. Almadani (394) notes globalization is inevitable and while it has positive elements to the growth of the economy, it also has concerns such as job insecurity, currency fluctuations and price instability all of which are factors that get multinational companies concerned of their capacity to operate in a certain market. The need to have a mechanism of addressing these globalization concerns has seen companies seek an operating framework that guides how affairs of the company should be run. The Gulf Cooperation Council (GCC) countries have opted to converge the corporate governance systems with the nation’s practices such as the shariah laws thereby, increasing the pressure for organizations to practice transparent business systems. The adoption of these measures has increased the necessity for firms and nations to practise good corporate governance to create practical and efficient markets.

The need for the adoption of the corporate governance development plans has also urged economies to change governance model to achieve the necessitated attractiveness for foreign investments (Saheed, 5). A nation such as Saudi Arabia recognizes the role that multinational companies play in the FDI agenda, hence in an effort to accommodate such companies, the countries have created an effective corporate governance practice aimed at achieving economic growth and the success of multinational corporations. In return, the country sets the tone for governance to these companies.

This research will examine the existing corporate governance practices in the case of KSA based on the OECD framework and affirm the challenges impacting multinational corporations in the country. It will assess the difficult choices encountered by the multinational corporations in their bid to adhere to the local standardization of corporate governance and headquarter or global concerns. Consequently, it will determine whether the country’s corporate governance provisions need to be revised. 

3.      Methodologies and Hypothesis Development

This research project has utilized three methods to answer the below research questions. First, it uses a comparative method, comparing Saudi Arabia’s corporate governance systems and the required OECD principles based on the foundation of boosting multinational businesses. This proves significant to this research as it highlights the essential challenges met in other similar nations. Similarly, using a comparative methodology is important as a means of identifying and improving the legal scope of a system as it transplants the already proven legal scopes from the developed nations.

Secondly, the paper will utilize the critical analytical method, which will involve reviewing the existing literature on the topic of study, the laws and regulations guiding the principle of corporate governance in the country, and will recommend the most effective reforms that needs to be undertaken to achieve the required transparency, security, and viability of the nation’s financial markets. The research will assess the regulations by the CMA and other relevant bodies concerning the concept and practice corporate governance. The research project analyzes the case of Saudi Arabia and hence as a consideration, the research will accommodate the existing capital market regulations.

            As noted by Gashgari (14), the existing Saudi Arabia corporate governance laws are well-established on paper but weak in implementation. The legislations on corporate governance of the nation were amended in 2017, introducing new laws and regulations that focused on the country’s local context as well as addressing its market stability issues that majorly arose after the financial crises of 2008/2009.

This research project will identify and evaluate the current state of corporate governance in multinational firms in the Kingdom of Saudi Arabia, based on the following research questions:

  1. To what extent multinational corporations in KSA comply with the KSA corporate governance regulations?
  2. What are the main challenges encountered by the multinational firms in KSA in regards to corporate governance?
  3. What are the best practices of corporate governance for the multinational firms in the nation?
  4. Does the multinational firms experience issues in implementing corporate governance in KSA?

Based on the World Bank research findings, which explained that corporate governance in the region largely focuses on achieving the interests of the management and the investors and ensuring that organizations run to benefit the investors instead of the stakeholders and the employees. This research hypothesizes that the major issue impacting the country’s corporate governance system is globalization and that addressing the aspect of globalization is likely to lead to the availability of transparent and viable financial markets for both multinationals and local firms in Saudi Arabia, thereby, promoting best business practices in the country.

4.      Literature Review

The idea of corporate governance emanates from the concept of agency theory. Agency theory considers the significance of the stakeholders and the managers in the performance of an organization. Currently, corporate governance is viewed as complex since it accommodates laws, politics ideals, ethical codes, public and professional association guidelines.

The OECD Factbook highlights that an adequate empirical understanding of the business landscape to which corporate governance regulations will be applied is important in for an effective implementation and design of the corporate regulations (p. 11). In its review of the Asian stock market, the survey notes the significant positive changes the various stock markets have undergone in the last two decades (p.11). This includes the MENA region in which the Kingdom of Saudi Arabia is part. 

While investigating corporate governance, transparency, and financial performance of multinational firms in the weak environments, Chakabuda (118) indicates that multinational firms utilize strong corporate governance principles created by the headquarters in the parent nations. Many of the multinational corporations originate from the developed countries, and as such, employ strong corporate governance practices. According to Chakabuda (118), this though largely does not impact on their financial performance in the developing or weak nations. Chakabuda explains that it is imperative for the multinational corporations to create adaptive corporate governance practices, specifically for their operations in the developing countries. The markets in the developing countries such as KSA do not operate freely and logically, hence, utilizing relationship-based corporate governance practices is highly significant for high financial performance for the multinational corporations. Relationship-based corporate governance practice is a network-oriented model that aim to include the stakeholders in a firm’s decision-making structure. They are majorly characterized by weak capital markets and fails to bare the agency cost challenges as control and ownership of multinational firms in many cases are separated (Chakabuda, 28). Multinational Corporations tend to utilize the practice as an ethical way of gaining social recognition in the developing nations. Chakabuda (120) denotes that the practice is a threat to the inclusion of international businesses in the economy and therefore, it is imperative for their management structures to devise effective ethical techniques of achieving social recognition. Furthermore, effective internal governance practices alone do not guarantee financial performance and amalgamating it with effective external governance practices ensures the higher financial performance of the multinational corporations.

Ghabayen (174) indicates that the kingdom of Saudi Arabia, like other developing countries, practices weak and sub-par corporate governance. Ghabayen explains that the corporate governance regulations issued by the Capital Market Authority (CMA) in 2006 and later revised in 2009 was a desperate move to solve agency challenges in the country and also to attract more foreign investors. This though recognized the importance of shareholders in promoting transparency and eliminated the position of CEO duality (a situation where the chairman can become the CEO at the same time) in the country. Nevertheless, it is still experiencing a variety of weaknesses, which includes lack of experience of implementing the concept. For instance, Ghabayen (175) notes that the independent director is the director with no first relatives on an organization’s board and the relatives mentioned include the father, children, husband, and wife excluding the brothers, sisters, cousins, and uncles who are also first relatives. This contradicts with the Saudi culture, where there are strong family relationships. Ghabayen (175) further finds the gap between firm performance and corporate governance in KSA. He notes that the practice is new in the country compared to the sizes of the companies and Tawadul.

Another element prompting the need for the corporate governance codes is the nature of the country’s atmosphere in the GCC countries. As a requirement, GCC countries abide by the principles of Islam which are different from the governance code of ethics that are applicable in the west or in the developed nations. Muneeza and Hassan (124) notes that in the Sharia corporate governance, decision-making in organization are achieved through consultation/Shura, where in many cases, the corporations set-up an independent sharia board to control the firm’s Islamic concepts. The sharia board advices the CEO and the Board of directors on Islamic matters. Besides, a sharia audit is always undertaken to measure the transparency of the organization to God. On the contrary, in the west, the decision-making body of corporations is majorly its senior management (executives) and the enacted supervisory processes. The measures of the west would not be applied in almost all other sectors of the kingdom of Saudi Arabia which would mean that there is the need for the measures to be altered to fit the culture and the business environment in which they are being applied. For instance, in the US, most banks do not have Muslim products while in GCC countries, Islamic or Sharia-based products are the way to go for the companies there. Such principles call on the organizations to be proactive to come up with new measures as Dadgar and Mahmud (6) explained to comply with the guidelines in the country where they would like to do business.

Gashgari (108) highlights the globalization nature of the world and recommends that it is important to analyze the concept of corporate governance based on its worldwide perspective. She notes the involvement of the Saudi government in the ownership and management of the capital structure, thus, giving an example of the country’s future large-scale business practices. This involvement allows and supports policy implementation and business operations. Geshgari (108) further indicates that based on the information collected through government involvement, the adoption of corporate governance in the nation will vary based on industry even though the regulations will be similar.

Almadani (394) while examining the link between corporate governance and globalization, notes the rising influence of globalization in business operations in the last few decades-a phenomenon identifies as greatly impacting on the economy, the environment, the society, and business activities in diverse ways. The study identifies various effects of globalization, one of which is the human capital mobility (Almadani, 395). Due to globalizations, multinational firms require skilled and experienced international labor and rotation from nation to nation since they have subsidiaries, agencies, and partners in diverse countries. This is an important aspect for the multinational firms to achieve effective international business operations. In his view, multinational companies have to consider ethical, environmental, and social issues more than they did few decades back due to the increasing competition and consumer expectations as well as the international business practice standards and expectations (p.395).    

Brennan and Solomon (8) explains that corporate governance is critical to corporate decision-making. According to their study, good corporate governance have rapidly improved the effectiveness of many multinational corporations in both developing and developed nations. In particular, many multinational firms are made of a variety of stockholders who are responsible for the firm’s business operations, and therefore, good corporate governance practices provides the necessary regulations to be followed by the business professionals. It is imperative to constantly review the corporate governance regulations to offer the firm’s management effective governance practices to deal with issues they may encounter while implementing the standards of corporate governance.  

Based on the available literature, multinational firms and many nations practice corporate governance and with the desire to follow good and improved governance practices. Multinational corporations have included a variety of pillars of corporate governance to help promote and improve good governance. Different industries and firms follow divergent corporate governance practices at distinct levels, though there is still an enormous need to further improve the existing corporate governance standards in multinational corporations.

5.      Discussion

This section will provide an analysis of the Kingdom of Saudi Arabia’s corporate governance code as well as an analysis of the corporate governance practices employed by the country’s multinational corporations. This should allow us to understand the relationship between the existing corporate governance codes and how the impact the nation’s multinational firms-helping highlight the key challenges or effects to their operations.

5.1.Corporate Governance Code in KSA

Appendix 1 below presents the key elements of the latest corporate governance code of the studied nation. The Kingdom of Saudi Arabia, through the CMA board established the corporate governance code of the country in 2006 before amending it in the following years, with the last amendment occurring in 2017. The code was established to develop and regulate the Tawadul (Saudi Arabia’s stock market) and escalate the nation’s transparency, credibility, and security in financial transactions and reporting. The nation benchmarked its corporate governance code on the OECD principles and the Report on the Observance of Standards and Codes (ROSC) program under the International Monetary Fund and the World Bank. The framework as currently constituted includes the best practices for banks, the 2006 corporate governance regulations for listed corporations, and the strengthened supervisory roles in the finance sector.

Furthermore, another important corporate governance regulation in the country is the Saudi Companies Act of 1965, which regulates the operations of commercial firms; including joint stock corporations, partnerships, LLCs, liability companies, and foreign or multinational firms. As Ali (231) explains, the Saudi Companies Act was amended in 2016 and has revitalized the nation’s corporate governance sector, becoming the first attempt of the country to counter the challenges of corporate governance. Besides, the governance code under the Capital Market Authority is essential as it fills the gap in cases where the Companies Act laws and regulations are ambiguous. 

The two regulations, particularly the CMA are responsible for the creation, amendment, and regulation of the Saudi Regulations on Corporate Governance (SRCG), which utilizes the ‘explain or comply’ policy. The policy requires corporations to show in the board’s report the executed and not executed provisions with explanations for non-compliance. Multinational corporations are essential in a country’s business as they globalize it as well as boost the nation’s economic growth. As such, the SRCG allowed the international businesses to invest in the nation’s investment funds.

Ali (233) further explains that the idea of SRCG originates from the Anglo-Saxon Stockholder Model and is based on the concept of effectively utilizing stockholder resources and the agency theory principles. Just like in the Anglo-Saxon Model, the controlling parties in the SRCG are the stockholders and the board of directors. The executive board are in charge of the firm while there is an additional body; the supervisory council that monitors and controls the activities of the executive board. To ensure its effectiveness and uniformity in corporate governance, the CMA amended the existing corporate governance regulations in 2017. This offered better board and stockholder rights and transparency on their roles and duties. The desire to attract more foreign investment as well as incorporate the amendments in the Companies Law of 2016 was the key purpose for the 2017 CMA corporate governance regulations amendments in 2017. In this amendment, the CMA improved the corporate regulation of the listed corporations (both local and international) as well moved a notch higher in its desire to compete with other prominent and developed corporate governance authorities in the world.

As highlighted by the OECD survey of corporate governance in the MENA region, other important major laws and regulations of the Saudi corporate governance structure are the SAMA corporate governance code, the listing rules and merger and acquisition laws, among others. Figures 1and 2 in the appendixes highlight the main provisions of corporate governance in the MENA region.

5.2.Corporate Governance and Multinational Corporations in KSA

Best corporate governance practices improves businesses by providing effective administration and distribution of corporate resources, thereby, improving the performance of the firms involved as well as the shareholder earnings. Trade has interconnected nations, escalating the aspect of globalization. Saudi Arabia is much affected by the growing influence of multinational corporations, which are currently major players in its economy. The corporate governance structure of these companies must meet the corporate governance code of the nation and be in consistency and uniformity with the global standards. Al-Majed (47) indicates that Saudi Arabia is among the developing nations that have experienced tremendous development and changes in their corporate governance systems and provides an example of how globalization can escalate a nation to improve both formal and informal sectors to counter growing challenges.

Surprisingly, multinational corporations in Saudi Arabia and other developing nations continuously advocate for a self-regulatory corporate governance approach (Nourafchan, 8). This is American model of corporate governance, which is based on the theoretical framework of self-regulation. The model illustrates the significance of self-regulation in achieving corporate self-restrain in the market. Many multinationals insist that the stockholders should trust and comply with the firm’s statements. The internationals firms have employed various campaign strategies including lobbying, corporate giving, and public relations, thereby, inhibiting the creation of effective corporate governance measures in Saudi Arabia as explained by Nourafchan (8). Various multinational businesses now believe that voluntary governance codes provide the most effective corporate practices (p. 8). However, the model does not in many cases achieve the required compliance with the set legal and ethical behaviors as evident from the cases of WorldCom, Refco, and Enfron.

In fact, the need for multinational corporation management to adhere to the demands and expectations of a group of stockholders, both in the global and domestic markets have greatly impacted the concept of business ethics, corporate social responsibility (CSR), and corporate governance. Today, it is recognized that the international businesses must adhere to the pressure of domestic responsiveness as well as the global pressure of integration with respect to corporate governance and corporate social responsibility just like their strategies integrate and respond to the product markets. Therefore, multinational firms in Saudi Arabia continuously face the perennial challenge of balancing the need for global consistency in corporate governance and the sensitivity to the local stockholder and corporate governance demands. Many of the multinationals firms have chosen the transnational corporate governance approach, in which they utilize a manually inclusive integration and consistency in corporate governance and management in all their business operations worldwide. In many cases, stockholder expectations, political pressure, and economic factors demands that businesses respond to local and global issues simultaneously, affirming the usability of the transnational corporate governance approach by many multinationals. This allows the firms to simultaneously prioritize on their local and global operations, adhering to the corporate governance codes from their headquarters abroad as well as the local stockholder demands.  

Through globalization, businesses are increasingly testing new markets and together with the increasing business operations internalization, issues encountered by the business executives are substantially more demanding than those encountered locally. The global context introduces a new set of stockholders whose interest are considerably important and the ethical dilemma experienced by the executives. Besides, multinational corporations experience the challenge of balancing the need to adhere to the demands of the domestic stockholders as well as the need for the worldwide consistency in corporate governance. Determining the most effective balance between these two important aspects in many cases is less easy as can be observed in the case of the IKEA of the Saudi Market. The company had erased women images from its digital catalogue to please its local stockholders but did not consider that it would lit a media storm worldwide and tarnish its reputations.

6.      Conclusion, Recommendations, and Implications 

Corporate governance is an important aspect of ensuring transparency, credibility, and security of financial transactions and reporting of a business entity as well as promoting effective corporate management, providing transparency between a firm’s senior management, employees, and other stakeholders. This research paper has highlighted the key concepts of the Saudi corporate governance code (appendix 1), identifying the functions of the CMA and the Companies Act of 1984 (revised in 2016). These two Saudi government institutions are the key to the Saudi Arabian corporate governance code as they play a significant role of regulating and developing the nation’s corporate governance code and ensuring that they adhere to the set international standards like the OECD principles.

This research project has affirmed that organizational dynamics of the multinational corporations are the main challenges that impacts the international businesses, thereby, influencing their corporate governance practices. Consequently, to be able to effectively balance their domestic and global corporate governance and ethical challenges, many multinational corporations are lobbying for a self-regulatory corporate governance approach that would allow them to utilize either the global or transnational corporate governance approach to suit their international activities. 

This paper recommends that the multinational corporations should adhere to the existing corporate governance principles as it has been acknowledged by various major policy makers and all other key stakeholders. The concept of corporate governance has become a global issue escalated by globalization and is highly significant in creating economic development of a nation, as is the case with the Kingdom of Saudi Arabia. Therefore, it is important for the multinational corporations to embrace the attempts by the Saudi’s CMA to incorporate credibility and transparency in its financial market as well as attract other major businesses to boost its economy.

The major implication of the study is that it failed to employ a quantitative method-it suggest usage of such methods in future researches to clearly highlight the above mentioned challenges encountered by multinational corporations and the implementation of corporate governance principles and code in Saudi Arabia. 

This research enhanced the authors’ Executive MBA program by advancing their base skills on corporate governance particularly in the context of Saudi Arabian as well as career prospects for the their current organizations. The authors currently understand the structure and outlook of corporate governance in KSA, the influence of best corporate governance practices, and the concept of globalization and corporate governance. As indicated in the current research paper, Saudi Arabia is among the developing nations that have experienced tremendous development and changes in their corporate governance systems and provides an example of how globalization can escalate a nation to improve both formal and informal business sectors to counter growing challenges. Besides, the paper offers an exclusive analysis of the behavior of multinational corporations in regards to the nation’s existing corporate governance practices.

Understanding the aspects of globalization and multinational firms and their challenges to corporate governance refreshes the authors’ knowledge, expertise, and provides a deep understanding of the behavior of multinational corporations in relation to corporate governance. Through globalization, the business world is evolving at a faster rate and nations like Saudi Arabia are constantly updating their corporate governance laws and regulations to encounter the ever emerging business challenges. Refreshing the mind and expertise in these concepts boosts the authors’ professional career and introduces a new leader in corporate governance practices.      

7.      References Cited

Aguilera, Ruth V., et al. "Corporate governance and social responsibility: A comparative analysis of the UK and the US." Corporate Governance: an international review 14.3 (2006): 147-158.

Al Kahtani, Faleh Salem B. Current practices of Saudi corporate governance: A case for reform. Diss. 2013.

Ali, Hasani Mohd. "Saudi Arabia Regulations on Corporate Governance." International Journal of Asian Social Science 9.2 (2019): 229-239.

Ali, Hasani Mohd. "Saudi Arabia Regulations on Corporate Governance." International Journal of Asian Social Science 9.2 (2019): 229-239.

Almadani, Alseddig Ahmed. "Globalization and Corporate Governance." International Journal of Innovation, Management and Technology 5.5 (2014): 394-400.

Al-Majed, Fahad M. A conceptual framework for reforming the corporate governance of Saudi publicly held companies: a comparative and analytical study from a legal perspective. SABIC Chair for IFMS, 2008.

Brennan, Niamh M., and Jill Solomon. "Corporate governance, accountability and mechanisms of accountability: an overview." Accounting, Auditing & Accountability Journal 21.7 (2008): 1-40.

Chakabuda, Nancy. A multinational perspective: corporate governance, weak state transparency and financial performance. Diss. University of Pretoria, 2018.

Dadgar, Yadollah, and Mahmud Naderi. "Corporate governance in capital market of Muslim countries." Available at SSRN 1452818 (2009).

Gashgari, Reema. Exploring the implications of corporate governance practices and frameworks for large-scale business organisations: a case study on the Kingdom of Saudi Arabia. Diss. Brunel University London, 2017.

Ghabayen, Mohammad Ahid Mohammad. Board Characterstics and Firm Performance: Case of Saudi Arabia. Diss. Universiti Utara Malaysia, 2012.

Meteb, Alotaibi Mohamed. "The importance of corporate governance in Saudi Arabia economy." Journal of WEI Business and Economics 4.1 (2015): 14-27.

Muneeza, Aishath, and Rusni Hassan. "Shari'ah corporate governance: the need for a special governance code." Corporate Governance 14.1 (2014): 120-129.

Nourafchan, Nicolo. "Apartheid, profits, and corporate social responsibility: A case study of multinational corporations in Saudi Arabia." Dartmouth LJ 9 (2011): 1-84.

OECD. OECD Corporate Governance Factbook 2019., 2019. Accessed 30 Dec. 2019.

OECD. Survey on Corporate Governance Frameworks in the Middle East and North Africa. Paris: OECD Publishing, 2012. Accessed 30 Dec. 2019.

Sabir, Samina, Anum Rafique, and Kamran Abbas. "Institutions and FDI: evidence from developed and developing countries." Financial Innovation 5.1 (2019): 8.

Saheed, Zakaree S. "Impact of Globalisation on Corporate Governance in Developing Economies: A Theoretical Approach‖." Journal of Business and Management 2.1 (2013): 1-10.

UNCTAD. "Corporate Governance in the Wake of the Financial Crisis: Selected International Views." (2010).


Appendix 1

Key ElementSaudi Arabia
Audit Committee StructureThe audit committee of an organization should be made up of at least three independent personalities, with at least one having financial expertise.
Comply and Explain PolicyYes
RemunerationThe code allows for a performance based remuneration package
Directors independence criteriaYes
Board structureThe board of directors should be made of at least 1/3 independent personalities, with Non-Executive Directors being the majority.
Board of DirectorsThe code stipulates that fiduciary duties of the board members should be based on the principles of devotion, uprightness, and openness.The company should notify the authority the names of the board members 5 days before the commencement of their term.Board members should have the skills that will allow them to perform their functions effectively.  The code also provides key competencies for the chairman and members, their duties, and the roles of the independent directors.
Shareholder rightsIt advocates for fair and equal treatment among the stockholders. The rights against discrimination for stockholders of the same class.Equal rights of accessing corporate communication and informationFair distributionRight to vote and attend Audit member selections, Board and general assemblies.
Conflict of InterestThe board should create a written policy to address real and possible cases of conflict of interest, which may have possible consequences on the performance of various personalities of a firm.
CommitteesThe 2017 corporate governance code made remuneration and nomination as new separate committees for corporation in the country. The company should publish the nomination announcements on its websites, the tawadul, and any other means specified by the authority.
StakeholdersThe company should provide written policies indicating its transactions with employees and stockholders. The policy should further provide on how to protect their confidentiality, social contributions among other. The firm should also document stakeholder and employee incentive scheme and payouts.
General disclosure and transparencyThe corporation should provide the current and correct information to its stockholders as indicated by the capital market law and the companies act. The board should have consistent reports, together with the audit committee’s report.