In the context of corporate governance in Saudi Arabia, how do organisations approach board diversity and inclusion, and what strategies are in place to foster diverse perspectives at the leadership level?
There are two approaches in our country in this regard with listed companies and non-listed companies. Let’s talk about the listed companies in the Kingdom of Saudi Arabia (KSA). The main regulator in the KSA is the Capital Market Authority which is responsible for updating the corporate governance laws regulation, updated on January 18, 2023, which aims to govern many aspects, and one of them is to ensure the diversity and inclusion. In article 18 ‘conditions for the membership of the board’, chapter one which is on the ‘formation of the board”, from part three ‘the BoD’, says that “a member of the Board is required to be professionally capable and has the required experience, knowledge, skill and independence, which enable him/her to perform his/her duties efficiently. He/she shall have the following qualifications in particular: 1) Ability to lead, 2) Competency, 3) Ability to guide, 4) Financial knowledge, 5) Physical fitness.”
Given the global emphasis on sustainability, how are companies aligning corporate governance practices with sustainability goals, and what specific initiatives are in place to ensure responsible and ethical business practices in Saudi Arabia?
As you know, the main goal of corporate governance is to achieve sustainability by ensuring the ESG is central to organisational strategy. Our Crown Prince, may God protect him, gives sustainability a high priority, and his instructions are very clear through his chairmanship of the BoD of the Saudi Public Investment Fund (PIF) regarding helping the companies that have turned profitable to be listed companies, according to the Saudi corporate governance regulations, which are updated periodically according to the best global practices.
With the rapid technological advancements, how are organisations incorporating technology into their corporate governance framework, and what digital strategies are being employed to enhance transparency, accountability, and decision-making?
Tone at the Top is key. While the Middle East Risk in Focus 2025 report which is issued by the Internal Audit Foundation in collaboration with the Arab Confederation of Institutes of Internal Auditors has ranked the governance/corporate reporting priorities and compliance and transparency as the fourth out of the top five risks, and digital disruption as the fifth. While it is noteworthy, Saudi Arabia ranked second globally among G20 countries in the 2021 digital competitiveness report, which is issued by the European Center for Digital Competitiveness based on the Global Competitiveness Index issued by the World Economic Forum, and on the supported data provided by the World Bank and the International Telecommunication Union. This ranking comes after a lot of the hard work that is a result of our national ambition called the Saudi Vision 2030 – ‘A Pioneering Top 10 Digital Government for a Vibrant Nation’ with a mission “to achieve seamless and integrated digital government services by leveraging the value of technologies and placing beneficiaries at the heart of the delivery.” This will be achieved through six factors and 16 strategic objectives. One of the six factors is Digital Transformation, which means to transform government by embedding digital solutions into its operations and decision-making process. Pursuant to that, companies must keep pace with this ambition to ensure they remain competitive by working hard on their strategy to enhance transparency, accountability, and decision-making to be in alignment with this ambition, especially considering the state’s support in empowering companies.
In Saudi Arabia, where family businesses are prevalent, how do organisations approach governance structures to balance family dynamics with professional management, ensuring longevity and success in the business?
In Saudi Arabia, the Ministry of Commerce issued the Guiding Charter for the Saudi Family Companies, May 2018, and Article 11: “Partnership Agreement and Family Charter” from the companies’ law, June 2022, which came as a guidance – not mandatory measures – to maximise and develop the value of companies, and to also support their expansion and opportunities for their success. This charter concludes a family charter that includes the regulation of family ownership in the company, governance and management, work policy, employment policy of family members, distribution of dividends, and disposition of interests or shares, procedures for the settlement of disputes or disagreements, and other matters. Most importantly, this charter, if any, shall be binding and may be part of incorporation or articles of articles of association, provided it does not violate this incorporation or articles of association.
Can you discuss the unique challenges organisations face regarding regulatory compliance in Saudi Arabia and how they navigate the diverse regulatory landscape to maintain governance standards?
You know, there are many regulators based on the industries. This makes a specialised regulator with concerned regulations based on the industry and its risks. Recently in Saudi Arabia, the Cabinet issued a decision approving the updated national framework for regulating governance, risk, compliance, and internal audit departments for the government sector. Such a decision will ensure the alignment between the private and government sectors. Moreover, most of the organisations currently, except for the highly regulated organisations such as those in the banking and financial sectors, have adopted the integration of second-line defence departments into the GRC department. However, some of them are still working independently in governance, risk management, and compliance, and for sure the Internal Audit is independent for both categories.
How do companies actively engage with shareholders in the Middle East, and what measures are in place to address their concerns and expectations, fostering a strong relationship between the company and its investors within the governance framework?
Briefly and obviously, Transparency and Tone at the Top are the keys. And to this end, the Saudi Ministry of Finance issues the performance of the state’s budget through quarterly reports.
Sattam Sindi, Executive MBA, CIA®, is the Functional Internal Audit Manager of the Binladin International Holding Group (BIHG) in Saudi Arabia. BIHG is owned by the Ministry of Finance through Istidama Holding Company & Binladin Company for Development and Commercial Investment, and it manages its subsidiaries. Sattam is passionate about internal auditing and has a demonstrated experience of working over 13 years in the financial services, banking, construction, contracting, and food services industries. He is experienced in governance, risk management, internal control, and internal auditing.
