Governance in the public and private sectors in Saudi Arabia

We will review the concept of governance and the importance of Governance in the public and private sectors in Saudi Arabia, in addition to the basic principles and relevant regulations.

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The importance of Governance in the public and private sectors in Saudi Arabia

Governance is of great importance in the government and private sector in Saudi Arabia.

Here are some of the important ones:

1. Enhancing transparency and credibility: Governance helps increase the transparency of operations and decision-making, thus enhancing credibility and building trust among investors, partners and society.
2. Improving the performance of institutions: An effective governance system contributes to enhancing the performance of institutions and companies, achieving operational efficiency and sustainable growth.
3. Protecting Shareholders’ Rights: Governance works to protect the rights of shareholders and ensure their participation in important decision-making, which enhances their confidence.
4. Compliance with laws and regulations: Governance ensures compliance with relevant legislation and regulations, which limits legal and financial risks.
5. Sustainable Development: Governance contributes to achieving sustainable development and environmental sustainability by promoting sustainable and responsible business practices.

Governance principles

The principles of governance in the Kingdom of Saudi Arabia were explained in detail in the previous article, so we will summarize these principles here,

as the principles of governance depend on establishing strong foundations for the management of companies and institutions.

Some of these principles include:

1. Transparency: related to the dissemination of information and decisions in a clear and understandable manner to the concerned parties.
2. Accountability: Those responsible for making decisions are held accountable and are held accountable to the organization and shareholders.
3. Fairness: The treatment must be fair and just for all parties involved, including shareholders and employees.
4. Shareholders’ rights: Shareholders’ rights must be protected and their participation in important decision-making encouraged.
5. Compliance: related to adherence to relevant legislation and regulations and ethical standards in all aspects of work.

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Benefits related to corporate governance

In our article, we will review governance in the public and private sectors in Saudi Arabia, the most important benefits related to corporate governance, which are:

1. Attracting capital: A good corporate governance system is a strong indicator for investors, and thus helps to attract capital and increase confidence in the company.
2. Improving relationships with stakeholders: Corporate governance enhances relationships with shareholders, customers, employees and business partners, thus contributing to building a strong collaborative network.
3. Minimizing potential risks: A good corporate governance system effectively identifies and manages risks, reducing exposure to financial, legal and reputational risks.
4. Enhancing Integrity and Ethics: Corporate governance encourages ethical practices and integrity in all aspects of work, which enhances the company’s reputation and the trust of stakeholders.
5. Achieving Operational Efficiency: A good corporate governance system improves operational efficiency and achieves better business results and financial performance.

Corporate Governance Regulations in Saudi Arabia

The General Authority of the Capital Market in the Kingdom of Saudi Arabia regulates the regulations related to the governance of unlisted and listed joint stock companies.

Among the important regulations:

1. Governance Regulations for Unlisted Joint Stock Companies: This regulation sets out the governance and disclosure requirements for unlisted joint stock companies.
2. Listed Companies Governance Regulations: This regulation includes the governance requirements of companies listed on the Saudi Stock Exchange, including the formation of the board of directors,

The difference between corporate governance regulations for listed and unlisted companies in Saudi Arabia

The following table shows the most important differences between the corporate governance regulations for listed and unlisted companies, which were organized by the CFOONLINE team and are as follows:

aspects	Listed companies	Unlisted companies
Disclosure	It adheres to the advanced disclosure standards set by the Capital Market Authority (CMA).	There may be more flexibility in disclosure requirements.
Management structure	An independent board of directors should be formed according to the specified criteria.	The management structure and specific requirements can vary by company type and size.
Shareholders’ equity	Protect shareholders’ rights and enhance their participation in decision-making.	The protection of shareholder rights may differ according to the organizational structure of the company.
reports	Periodic and transparent financial reports must be submitted in accordance with international accounting standards.	The law may require that financial reports be submitted only to the relevant regulators.
Audit	An independent audit by an accredited audit firm is required.	There may not be strict requirements for an independent audit.
Enhance transparency	Requires disclosure of any information of importance to the company and shareholders.	Disclosure of information may be required only to identified related parties.
Moral rules	Listed companies must abide by the principles of professional ethics.	There may be specific ethical requirements that depend on the company’s activity.

Principles of corporate governance in the government sector

The principles of corporate governance in the government sector are slightly different from those applied in the private sector.

Some important principles include:

• Enhancing accountability and transparency in government decision-making.
• Work to achieve public interests and achieve sustainability in the government sector.
• Formation of independent supervisory bodies to monitor and evaluate the performance of government companies.
• Provide mechanisms for employee and public participation in important decision-making.

What is the difference between governance in the public and private sectors in Saudi Arabia?

The following table shows the points of difference between government in the public sector and governance in the private sector, which are as follows:

aspects	Government sector	private sector
ownership structure	The government enjoys full or majority ownership in the companies.	Ownership may be diversified and spread among individuals and private investors.
Supervision and control	It is subject to the supervision and control of government agencies and concerned bodies.	There may be a lower level of government oversight and oversight.
Management structure	May witness government interventions and appointments in the management structure.	The management structure is more independent and diversified.
Transparency and disclosure	Transparency and disclosure requirements are more stringent and detailed.	There may be greater flexibility in requirements for transparency and disclosure.
Social Responsibility	There are significant emphasis on social responsibility and sustainable development.	Companies’ levels of commitment to this responsibility may vary.
political interference	There may be political interference in corporate operations and decision-making.	Political interference is less common in private companies.
Link to interest	Reflection can be done on the general interest and national economic goals.	The link is centered around shareholder interest, profitability and growth.

Challenges facing family business governance

Family business governance faces some unique challenges, including:

1. Difficulties in balancing family interests with company interests.
2. Poor separation between the personal lives of family members and the affairs of the company.
3. Pressures of trust and communication between family members and executive management.
4. Difficulty applying governance and transparency standards in a family environment.

The role of IT governance in organizations

IT governance plays an important role in ensuring that information technology is used in an efficient, secure and standards-compliant manner.

Its role includes:

1. Developing an information technology strategy that is compatible with the organization’s goals and future directions.
2. Develop and implement security and protection policies to protect sensitive information and data.
3. Manage technical services and systems to ensure their availability and efficient and effective use.
4. Monitor and evaluate technical performance and compliance with applicable standards and requirements.

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Is there a difference between corporate governance and banking governance?

Yes, there is a difference between them, and we at CFOONLINE have summarized this difference in tabular form for ease of understanding.

aspects	corporate governance	bank governance
organizational structure	It consists of a board of directors and an executive management.	It consists of a board of directors, an executive management, and a board of partners or the general assembly.
Oversight and monitoring	External and internal parties have a role in monitoring and monitoring.	It is subject to the supervision and control of financial regulators and central banks.
Risks and their management	Require analysis and management of financial and non-financial risks.	Require analysis and management of financial, credit, liquidity and operational risks.
Liquidity and financing	You may rely on the capital markets for financing and access to liquidity.	It relies on friendly financing and deposit markets to provide liquidity and financing.
Regulation and requirements	The companies are committed to the financial market regulations and corporate governance standards.	Banks are compliant with banking laws and regulations and banking governance standards.
strategic decisions	Strategic decisions are taken by the Board of Directors and Executive Management.	Strategic decisions may require the approval of the Partners Council or the General Assembly.

The basic tasks and responsibilities of corporate governance management

Corporate Governance Department carries out the following tasks and responsibilities:

1. Develop and implement internal governance policies and procedures.
2. Provide guidance and support to the Board of Directors and Executive Management in the area of corporate governance.
3. Monitor and evaluate the organization’s performance and ensure compliance with laws and regulations.
4. Communicating with shareholders, partners and concerned institutions regarding governance.
5. Develop and update governance policies and procedures in line with legal and industrial developments.

The most common questions related to governance in the public and private sectors

CFOONLINE collected the most frequently asked questions related to governance in the Kingdom of Saudi Arabia:

• What is the meaning of corporate governance?

Corporate governance is the framework that defines how companies are managed, monitored and decisions are made. Governance principles include transparency, accountability, fairness, and shareholder rights.

The governance system aims to enhance trust and achieve the common interests of shareholders, employees and society.

• What are the basics that must be taken into account in implementing governance?

A2: Implementation of governance requires some important basics such as:

1. The existence of an effective and clear organizational structure for the company.
2. Determine the roles and responsibilities of the members of the Board of Directors and the executive management.
3. Develop internal policies and procedures for the company and ensure everyone adheres to them.
4. Set up a robust internal control system to check compliance and evaluate performance.
5. Provide transparent and accurate financial reports.
6. Dealing with integrity and credibility with shareholders, employees and customers.

• What is the importance of governance in the public and private sectors?

3: Governance plays a vital role in both the government and private sectors as follows:

1. Promote transparency and reduce illegal practices and corruption.
2. It contributes to enhancing the trust and credibility of shareholders, customers and partners.
3. It enhances the institutional and financial performance of companies and government institutions.
4. It protects shareholders’ rights and provides them with a means to participate in decision-making.
5. Promote sustainable development and environmental sustainability.

• What are the benefits of corporate governance?

A4: The benefits of corporate governance include:

1. Increasing transparency and credibility among investors and shareholders.
2. Improving the company’s performance and enhancing its ability to attract capital.
3. Minimizing potential risks and enhancing compliance with legislation and regulations.
4. Achieving a balance between the interests of the various parties to the company.
5. Promoting integrity and ethics in business.
6. Improve company management and achieve operational efficiency.

• What are the regulations related to the governance of unlisted joint stock companies?

Regulations regarding the governance of unlisted joint stock companies vary from country to country. In Saudi Arabia,

the Corporate Governance Manual issued by the Capital Market Authority is considered a major reference in this regard.

Conclusion of our article:

We mentioned the most important points about Governance in the public and private sectors in Saudi Arabia for the year 2023 AD,

so the importance of governance in the government and private sectors in Saudi Arabia cannot be ignored.

Corporate governance is an essential pillar of growth and sustainability. Rely on our CFOONLINE certified accounting team in the Kingdom of Saudi Arabia

to apply governance standards and achieve outstanding institutional performance.

And benefit from the services provided by the best accountants and specialists in Saudi Arabia, and try to communicate with us and obtain free accounting advice directly.

The most important sources:

wikipedia

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