The Concept of Governance
I. Definition of Corporate Governance:
- The British confectionery company “Cadbury”, one of the most famous proponents of corporate governance, identifies the concept as a "set of financial and other monitor systems that guide and control the company's activities."
- "Governance is the set of relationships between the Board of Directors, its shareholders and other stakeholders. It also provides the structure through which company objectives are defined, the means of achieving them, and the parties to monitor their performance," as defined by the Organization for Economic Co-operation and Development (OECD).
- It is therefore good governance that provides both the Board of Directors, and the executive management, with the appropriate incentives to reach the goals that benefit the company shareholders and stakeholders, and facilitate the creation of an effective monitoring process, thus helping the company utilize its resources efficiently and effectively in line with shareholders' objectives.
II. The importance of governance:
- Companies need to have clear and comprehensive policies to establish foundations for a transparent governance system, and to ensure the determination of the rights and obligations of their shareholders and stakeholders. The Board of Directors is responsible for ensuring that the company is managed effectively and that all control, compliance and auditing procedures are implemented in accordance with the prevailing laws and regulations.
- The current global financial crisis has highlighted the failure of many local, regional and international financial institutions, due to the lack of implementation of the principles of governance. Hence the urgent need for companies to make radical changes in their vision and practices and the need to adopt the principles and concepts therein.
- Al-Tijaria's management believes in the need to adopt and adhere to the principles of governance, which includes the adoption of best practice and the application of the highest international standards that can contribute to the growth, success and development of its business and activities.
III. Governance objectives:
- Preserve shareholders' and stakeholders' rights.
- Achieving the desired goals effectively.
- Enhance trust and credibility in the company and its departments.
- Ensure proper administrative organization and the strengthening of regulatory procedures.
IV. Governance Benefits:
- Increase the competitiveness of the company.
- Reduce corruption and its negative effects.
- Maintaining the company's reputation and leading position in the field.
- To create a healthy and effective work environment based on equal opportunity, transparency and teamwork to achieve performance integration.
- Compliance with regulatory laws and regulations and avoiding the imposition of company to violations or fines.
V. Governance Factors:
- The application of corporate governance depends on the availability and quality of a range of external and internal factors:
- External factors:
External factors depend on the overall climate of investment in the country, which includes, for example:
Laws and regulations governing economic activity (such as the laws and regulations of the Capital Markets Authority, the Stock Exchange, the Companies Law and other regulations and regulations).
The efficiency of supervisory bodies and bodies (such as the Capital Markets’ Authority, the Stock Exchange, the Ministry of Commerce and Industry and other regulatory and supervisory bodies) in tightening the control of companies.
2. Internal factors:
The rules and principles that determine how decisions are taken and the distribution of powers within the company between the General Assembly, the Board of Directors, and the executive management, on the one hand, and on the other hand the methods adopted to reduce the conflict of interest between these three parties, moreover the right to obtain information on the extraordinary operations affecting the company and what the requirements are for disclosure of material information and unusual processes.
VI. Basic Principles of Governance:
- Disclosure and transparency:
- The Governance Manual states the need for strict and adequate internal and external disclosure of all financial and material information relating to the company. This data includes the statement of financial position, performance, ownership and any practices relating to the control of the company or its decisions. Such transparency creates an atmosphere of confidence both internally and externally and eliminates conflicts of interest with relevant parties. Transparency also ensures clear and informed communication between shareholders, the Board of Directors and the executive management, and creates an effective climate of credibility in the work environment, which is the responsibility of all parties to achieve the following:
- Protection of minority rights by disclosing their rights in financial statements.
- Disclosure of the risk of concentration of shares in the hands of small groups of major shareholders.
- Disclosure of transactions with related parties including major shareholders.
- The right to obtain information on exceptional operations affecting the company to provide disclosure requirements for material events.
2. Justice and Integrity:
- The company's Board of Directors follows the highest standards of fairness, fair treatment and equality for all shareholders regardless of their contribution, share or ownership. This is one of the most important principles of governance concepts and principles. All shareholders enjoy equal opportunities to receive compensation for any violation of their rights. This principle recognizes that the shareholders have the right to retain their shares in the company, or to transfer them, and exercise their rights to protect their interests and shares by available means in accordance with the laws of the State of Kuwait, and in accordance with the company's Memorandum of Association. This includes, but is not limited to, filing a complaint and / or grievance for any violation of their rights, selecting the Board of Directors, obtaining a return on profits, reviewing the financial statements and the right of shareholders to participate effectively in meetings of the General Assembly.
3. Management and strengthening of regulatory procedures:
- Al-Tijaria’s Board of Directors aims to enhance professional and technical competences and follow the proper managerial approach through the application of best practice by way of modern management methods. It also aims to have a work team that is experienced and of high technical competence. In addition, it aims to assure that all functions, powers and responsibilities are adopted through an approved system, which regulates the methodology of decision-making within the company, moreover, it ensures that work advances according to the company's policy, and strategic goals and that regulatory policies and procedures enable it to be overseen effectively.
- The Board of Directors and executive management seeks to work to bring about the desired balance between the shareholders and stakeholders on the one hand, and the Board of Directors and executive management on the other hand, and the requirements needed to ensure the protection of the company and its assets. Al-Tijaria prioritizes its strategic objectives and the developmental performance indicators through:
- Ensuring the executive management and company staff are clearly aware of their role and responsibility.
- Work is assessed through a set of metrics and performance indicators.
- Being accountable for the values ??and goals that have been achieved.
- The preparation by the Board of Directors of an annual report on the company's achievements and performance in general, and a comparative report with the leading institutions in the same field.
5. Social Responsibility:
- Social responsibility includes, creating jobs and training graduates to provide skills in the labor market, as well as promoting the use of technology and contributing to raising the level of living, through initiatives and contributions to social, health, educational, cultural and environmental fields.
- The Board of Directors must establish policies and procedures to define the standards and scope of Corporate Social Responsibility (CSR) to suit the company's potential and strategy. Based on the recommendations of the Board of Directors, a specific budget is being proposed to the shareholders to enhance the role of Al-Tijaria in the field of "Social Responsibility”. The proposal will be put up for approval during the General Assembly.