Note: This is unofficial translation and the Arabic text is the official one
Corporate Governance (CG) has attracted the general attention on local and international level due to : its significance impact on maintaining healthy and safety environment for the companies, its relationship with the concerned parties in particular and the economy in general, its material influence on Companies shares prices and their liquidity status, its abilities to achieve its financial goals in a cost effective manner and the direct link between shortcoming of the CG principles, its implementations and large corporate collapses worldwide.
The idea of gathering all STC CG principles in one document was initiated in the beginning of 2004, where it covers world wide generally accepted Corporate Governance requirements, STC issued resolutions related to corporate governance, laws and its related by-laws issued in Saudi Arabia, because most of principles have been covered in a way or other in the company law, Capital Market law and related by-laws, regulation and resolution, and other related laws,
Nevertheless it has been detected that the majority of the principles are covered in the KSA regulations before being applied in the other countries, for example article 130 of the Company Laws has prohibited external auditors from providing consulting services to any company where they are appointed as external auditor of that company, and generally none of the Board of members are company employee (principal no 7)
To avoid duplication and to get the most benefits (to the best effort), CG principles are linked with the relevant articles specified in the by-laws and resolutions, where it can be accessed by clicking the proper link that appears in the underlined blue color (if applicable).
Following to what have been mentioned earlier, a thorough consideration for an ideal approach to implement CG practices was undertaken, different alternatives were considered, this has resulted in forming two teams: one of them; from inside the company, in charge of documenting and studying the company current status, and preparing for the implementation, and second; out side (consultant), who is responsible to summarizing the CG practices in the GCC, three Arab countries, and three foreign countries. This was also included international institutions issues, professional organizations within these countries and three trading companies.
A specific procedure was established to coordinate the two team efforts in order to benefit STC from international best practices, Saudi Laws and STC experience. In addition, the CG principles were linked as a pilot case with the related procedures and decision points in the company. This is considered to be a very important step on principles practical implementation.
STC Board of Directors has approved the CG Principles, and a plan was developed to implement and update the CG Principles in order to reflect the development that took place in this field, this include the continuation of what have been started in the pilot case, together with the best practice of disclosing policy and procedures to all stake holders and its implementation, code of ethics, and Succession Planning/Management Development.
It is worth to note that even though some principle are not important to Saudi environment , for example, limited employee to be as part of Board of Directors, however they are included in the CG in order to match with the globally accepted best practice.
Further, some principles were focusing on some issues that is not critical to foreign countries such as Definition of “Independence” when there is control shareholders (Principle 6). STC in the future endeavoure to adopt the items that would match with the Kingdom environment through legal mechanism that govern it, this include reconsidering definitions that have been used terminologies, provided that these terminologies are of a foreign origin and have not been arabized yet in a formal manner.
The company wishes that the past efforts provide high benefits to the company which includes: developed strong and well-built CG to be implemented, to safeguard the achieved benefits in the short run and to enhance it to provide opportunities to the company for continuous growth.
Establishing CG authority: Since other countries practices reveal that there is a great benefits of having professional authority in charge of matters related to the corporate governance, STC has drafted a project to create a professional authority similar to the one that exist in the other countries, it will be submitted to the concerned authorities, specialist, concerned and related parties.
Comments and Recommendations: STC is requesting the concerned parties in general, shareholders and specialists in particular, to provide their comments and remarks using, as much as possible, the form available on the STC website to the following STC address:
