Corporate governance refers to the systems of rules, practices as well as systems through which a corporation is directed and controlled. Essentially, corporate governance entails optimizing the interests of numerous stakeholders in a corporation. Such stakeholders can be shareholders, customers, financiers, suppliers, community, management, and government. Good corporate governance contributes to the sustainable economic progress in a nation by promoting the continued performance of corporations as well as their access to external funding. This essay discusses the effectiveness of corporate governance and its effects in minimizing the corruption rates affecting the United Kingdom of Saudi Arabia (KSA).
Corporate Governance in Saudi Arabia
In Saudi Arabia, the rights of shareholders of different corporations are normally protected by the judicial system, corporate governance or the regulatory control measures (Alzahrani 2013). Most companies in the nation have recently started adopting the codes of corporate governance as the effective strategy of protecting the stakeholders rights inside a corporation. Today, it is considered as among the most imperative strategies of shareholder protection. This is because corporate governance offers a great deal of advice to all stakeholders of a corporation. That is the corporations that are already listed in the nations stock exchange market.
The Need to Have the Government in the KSA Listed Corporations
Saudi Arabias equity market has grown immensely over the past few years. Today, the nations equity market is the largest in the whole Arabic nations, since it features a market capitalization value of USD$ 519 billion. This was the market value as at 2007, and it was well ahead of other nations such as UAE (USD$ 224 billion) as well as Qatar and Kuwait (USD$ 95 billion) (The World Bank 2009). This shows that the nations economy is large, with diversified, competitive multi-billion dollar corporations. As such, corruption, which is a major impediment to development is highly likely to occur. As an essential strategy to shun away this problem, there is a need for the KSA listed corporations to have the government with a 25% operating share revenue in their establishments.
How Corporate Governance Has Fought Corruption in Saudi Arabia
The involvement of the government and other major corporate bodies in Saudi Arabia has greatly enforced the action of corporate governance in fighting corruption. This has been achieved through the efficient delegation of various rights and responsibilities to the corporations anti-bribery programs. The corporate leaders and government representatives representing various listed corporations have also enacted great bribery control strategies that support sound financial accounting and reporting systems. Such regulatory systems are able to alert the corporate management team of any financial misdoings and abuses. This has been immensely effective in curbing any loopholes that may expose the listed corporations from corruption incidences.
Corporate governance has not only controlled the level of corruption in the nation, but it has also generated numerous advantages to emerging markets in the nation. The improvement of corporate governance in the nation has developed numerous public policy objects. It has reduced the emerging companies market vulnerability from the financial crisis. It has also facilitated the reinforcement of property rights, minimized the corporations transaction costs as well as the cost of capital (The World Bank 2009). Ultimately, it has greatly contributed to the capital market development.
A weak corporate governance poses numerous advantages to the nation. It discourages the investors confidence in making investments and in most cases, it also discourages outside investment. Today, as most pension funds continue to invest their assets in the equity market in Saudi Arabia, corporate governance has played a key role in safeguarding the publics retirement savings. If all these factors are not regulated, corrupt corporations and fraudulent persons in the nation may take advantage of the troubling situations facing persons and the whole economy of a nation.
Saudi Vision 2030 Strengthening Corporate Governance in Public Sectors
The effectiveness of corporate governance in the KSA has also been seen in the Saudi Vision 2030 manifestos. The vision manifesto was announced on April 25, 2016, and it was keen on promoting the economic development of the nation via corporate governance to eradicate. For instance, the vision stated that it would strive to restore public agencies in an effort to streamline corporate procedures and define corporate responsibilities. In addition, all agencies would be held accountable for any misconducts in corporate performance as a way of promoting business continuity.
The vision statement also stated that the KSA government will have a zero-tolerance approach to all forms of corruption in the nation, whether financial or administrative. The vision would also enforce measures to ensure that nation will attain the highest levels of governance and transparency in all sectors of its economy. This way, the nations goals and performance indicators will be publicly monitored to ensure the highest level of transparency. All these aspects strongly indicate the government influence on defacing corruption in the nation by the using the concept of corporate governance.
Corporatization and Corporate Governance
There is a close link between corporatization and corporate governance in the KSA. As part of the Saudi Vision 2030 goal, the KSA government made a bid to improve transparency and competition in the healthcare sector as a strategy for promoting quality health provision to the general public. The emphasis of promoting transparency among the numerous healthcare institutions is a fundamental indication of the vigorousness of the KSA government in enforcing corporate governance. To achieve the goal, the nation plans to transfer the responsibilities of managing healthcare institutions to a network of public corporations who will compete with each in ensuring the highest delivery of medical services to the public. This is through equal treatment of all persons irrespective of economic status and without corrupt means.
In conclusion, corporate governance has had a great impact in promoting the economic development of the KSA government. This is by suppressing the chances of the occurrence of corruption in the corporations listed in the capital market in the nation. Corporate governance has immensely fought corruption in the nation by enforcing the usage of transparency and accountability in all sectors of the economy. In addition, the Saudi Vision 2030 has also strongly supported the employment of corporate governance in the operations of all public sectors of the nations economy. Ultimately, the corporatization of the public healthcare institutions in the nation has also boosted the aspects of accountability and transparency in public service delivery. This has also enhanced the appropriateness of corporate governance enforcement in the KSA.
Alzahrani, Y. A., 2013. The Corporate Governance in Saudi Listed Companies. International Journal of Humanities and Management Sciences (IJHMS), 1(4), Pp. 243-245.
The World Bank, 2009. Corporate Governance Country Assessment Kingdom of Saudi Arabia. The World Bank Report of the Observance of Standards and Codes (ROSC), February Pp. 1-36.
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