An evaluation of the current rules and regulatory framework of corporate governance in Saudi Arabia: a critical study in order to promote an attractive business environment

Alshowish, Abdullah and Milman, David and Lawton, Philip (2016) An evaluation of the current rules and regulatory framework of corporate governance in Saudi Arabia: a critical study in order to promote an attractive business environment. PhD thesis, Lancaster University.

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The importance of a good awareness of the corporate governance system nowadays, as a mechanism that is helping towards achieving a successful and reformed business environment, is self-evident, especially in the light of the crises, recessions and corporate failures that the world is currently facing. However, the legal and regulatory frameworks of any country are important factors that contribute towards the success of the corporate governance system based on principles of justice, accountability and transparency, so that market participants can trust the market to establish effective contractual relations. Developing countries in this context are more likely to suffer from a lack of accountability and transparency, and are more vulnerable to having problems with the business environment; Saudi Arabia is no exception. The pursuit of improved corporate governance practices needs to be combined with improvements to legal, regulatory and enforcement tools, as well as institutional reform, in order to balance the interests of all parties involved in a company’s interests. Moreover, there are different levels of corporate governance frameworks, such as legal and regulatory, self-regulatory arrangements, and the history and tradition of the country which varies from one place to another. Therefore, corporate governance codes and regulations as a form of soft law could be used to complement the legislative and regulatory framework of corporate governance to provide more flexibility. However, not every successful aspect can be copied from one country to another country, as it may not work effectively due to the context varying according to the country's specific circumstances. Therefore, there is a very important need to review, reform, and adjust corporate governance framework provisions in order to ensure they are suitable and updated to meet the new surrounding circumstances, which will be reflected in the integrity of the market and the country’s economic performance. Likewise, there is a need to benefit from supranational organisations through international dialogue, such as with the OECD and the World Bank to learn from their experiences and benchmarks. There are different levels of legalisation and institutional frameworks that are related to corporate governance in the Saudi Arabian case, and the corporate governance code has been adopted from other jurisdiction after a series of arrangements to make it suitable and applicable in Saudi. Thus, the adoption of a new concept in a challenging and different legal and cultural environment needs to be examined. Starting with Sharia, the capacity to accept and absorb a new concept such as corporate governance, with the different structure of institutional and legal frameworks, could present a challenge; as well as society and culture also playing a crucial role in this context. This study aims to evaluate and critically analyse the current rules and regulations of frameworks of corporate governance in Saudi Arabia in order to create an attractive business environment. So, in this context, the UK corporate governance system has been used an example to draw lessons from and examine the ability of the Saudi legal system and its legal and regulatory frameworks to absorb and adapt to emerging concepts such as corporate governance as a Western concept. There is flexibility within Sharia and the Saudi legal system to adapt to modern concepts, which has been proven by the compatibility of corporate governance- to some extent- with international standards, such as OECD and UK regulations. Considering the local business environment of Saudi Arabia (even more so when adopting new regulations) will reduce the weaknesses and any negative side effects. Setting up committees in Saudi Arabia that specialise in corporate governance like the UK will contribute towards improvement in corporate governance practices. The importance of this research has become more apparent with the issuance of the new Saudi Companies Law in 2015, which will be enforced from May 2016. This Companies Law 2015 can be described as a new era in determining the functions and jurisdictions of the Ministry of Commerce and Industry, and the Capital Market Authority. Thus, this study could be the first attempt to examine the Saudi system of corporate governance with relation to Companies Law 2015.

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Thesis (PhD)
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14 Nov 2016 09:54
Last Modified:
13 Nov 2023 00:31