Current practices of Saudi corporate governance: A case for reform

Abstract

One of the most debated issues is that of corporate governance. The topic has been investigated by scholars from several scientific fields including the legal. Indeed, corporate governance has been examined by a great number of law scholars, with particular regards to the improvement of various aspects. For example, effective corporate governance focuses on protecting and advancing aspects related to shareholders’ rights, the board of directors and corporations’ internal and external audit systems. The main objective of this research is to suggest reformation to the Saudi corporate governance framework in order to achieve satisfactory corporate governance practices. The second purpose of the research is to investigate the current practices involved in Saudi corporate governance arrangements. The final aim is to determine how a Saudi corporate governance framework would most benefit corporate governance from the Islamic perspective. This study intends to provide a regulatory analysis to influence those regulations that should be implemented to adjust corporate governance practices as they affect the Saudi capital market. The researcher found that Saudi corporate governance has been promulgated in accordance with principles of on-going international corporate governance. Alternatively, the Islamic perspective on corporate governance has been debated more recently, as an idea that needs to be progressed in order to provide associated benefits to the corporate governance framework in Saudi Arabia. Therefore, Saudi corporate governance provisions can be seen as based largely on positive man-made laws. The researcher further discovered that Saudi corporate governance as an institutional framework is divided between several institutions, whether internal or external, which might result in some ambiguity when it comes to implementing good corporate governance practices. However, the research results revealed that Saudi corporate governance provisions have to be reformed in accordance with popular worldwide corporate governance principles, namely the UK Corporate Governance Code, the UK Companies Act and the OECD principles of corporate governance produced.