The preceding articles examined the legal framework of corporate governance in Saudi Arabia and the important elements of the institutional framework for Saudi corporate governance. The discussion in this chapter first focuses on government and government-regulated institutions established to enforce compliance and see that the actions of corporations are in line with corporate governance law. This chapter then examines minority shareholdings interests and rights and investigates minority shareholder protection under the CL. In addition, the board of directors is described, which controls and guides firm operations in compliance with corporate governance standards and regulations.
OverviewIn this article, disclosure and transparency issues in Saudi Arabia are discussed as they pertain to the Saudi capital market. Disclosure provisions in the CML and problems that result from inadequate disclosure are examined. Insider dealing, price manipulation and possible reforms of Saudi law are addressed. Finally, a brief account of voluntary disclosure and its impact on the mandatory disclosure of financial information by SSE-listed companies is given, as well as the WB's findings on Saudi companies' disclosure practices. Saudi Arabia's Approach to Disclosure and TransparencyFrom the earlier discussion of general corporate governance in Saudi Arabia, there appears to be in place a regulatory framework that sets the conditions for the adoption of effective corporate governance. However, this framework has shortcomings. The CL and the CGR, the two legal frameworks that establish corporate governance requirements for business corporations, are sometimes complementary and consistent but, in other cases, are contradictory or inconsistent and interfere with each other.Transparency and the disclosure of information are determinants of development and economic growth and without them economic progress cannot be sustained. The robustness of activity in a market economy depends to a great extent on complete, timely and accurate information which determines resource allocation, improves the efficiency of market activity and increases production, which drives the economy. The preceding chapters, particularly the discussion of scandals and disclosure, demonstrated that SSE listed companies still fall short of the standard of transparency desirable for an efficient market, in part because Saudi Arabia is an emerging economy and Saudi corporate culture is still assimilating the corporate governance culture. The behaviours of individuals involved, such as board members, executives and investors, are conditioned by the customary Saudi social relations and have yet to be adjusted to the constraints of abiding by international standards that are different to accustomed behaviour. Disclosure Provisions in the Capital Market LawThe CMA Listing Rules aim to protect investors and contribute to the development of the capital market. They are more specific and detailed than the earlier rules under the Ministry of Commerce, which were ambiguous, restricted market access and were time consuming.1 The CML LR describe the information disclosure required for companies to list their securities in the stock market. The law also orders listed companies to abide by periodic reporting and disclosure requirements.The CML disclosure rules meet the international standards set by the IOSCO, Basel Committee on Banking Supervision and the London Stock Exchange (LSE). The comparability of the Saudi and London stock exchanges is qualified by the innate structural differences between an emerging market only a few decades old and a developed, mature market. Emerging markets are prone to problems not present in developed markets, such as a lack...
The preceding article described the notions of disclosure and transparency and their purpose and importance in practice. An understanding of the requirements and elements of the practice of disclosure leads to a discussion of its benefits and advantages, as well as the consequences of a lack of transparency during financial scandals. The Saudi approach to disclosure and transparency is also examined based on the evidence given in board annual reports. This paper highlights the way the Saudi legal system evaluates corporate governance and its legal basis.
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