Improving Corporate Governance in Saudi Arabia - Essay Example

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Improving Corporate Governance in Saudi Arabia Name Institution Introduction Corporate governance is a system in which there is direct control of companies. This banking law proposal relating to improving cooperate governance in Saudi Arabia; it involves regulating and improving the relationships between the bank's management, shareholders, the board, and other stakeholders1…
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Improving Corporate Governance in Saudi Arabia
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Download file to see previous pages The key theme in cooperate governance is the nature and the extent of accountability of individuals in the banking sector, and the tactics they use to suppress principal-agent problem2. Background Information Saudi Arabia is the 2nd largest state in the western Asia in relation to the area. It is also the second largest Arab world after Algeria3. The state has a large economy in reference to other nations in the region with a GDP of over US$450 billion. It has the capability to maintain its economy, with sustained economy4. Saudi’s banks are among the leading banks in the GCC banking sector. Their average annual return is between 14% and 31%. This is as a result of a favorable banking environment prevailing in the region. In the recent years, banks analysts in the regions propose the use of Basel II as it will impact the growth and development of the industry. However, the banking sector has different challenges regarding to governance and transparency. This calls for amendments of the structure of banking governance of the banking sector as this will impact on the growth, and development of the banking industry5. Research question The proposal gives possible solution in Saudi’s banking system, as it has reluctant corporate banking principles. The sector is deteriorating, as a result of reluctance on the part of the law bodies, leading to neglect of some key principles in banking world. This is evident from the fact that board members are engaging in activities, which compromise their role. Shareholders have not been playing their roles because they have been taken up by the management. This calls for change to enhance growth in the sector. Research Objectives The proposal aims at giving suggestions, which will improve corporate banking in Saudi Arabia. This will impact the growth and development of the sector as it will attract investors both locally and internationally. The changes will motivate shareholder as they will trust the board members and the management at large. Methodology Corporate governance is an international issue; it calls for ideas from all areas of study. The proposal recommends the incorporation of both qualitative and qualitative research methodologies to enhance the reliability of the results. Detailed research is also significant. Empirical studies will also enhance in designing the most appropriate model of dealing with banking corporate governance in Saudi. Such research includes debates on the same issues in different nations, changes adopted by other nations, as well as, suggestions from bank analysts. Below are some of the areas targets, in the process of changing corporate banking governance. 1. Principles of banking corporate governance It is advisable for the banking sector to adopt the suggestion put forward in the Sarbanes-Oxley Act of 2002-2003 in USA, Cadbury Report of 1992 in UK, and the principles of Corporate Governance of 1998-2004 (OECD). 2. Corporate governance guidance in reference to Asian Policy Brief These are important guidelines put across to ensure that banking in Asia get to another level. It entails different suggestions which will impact on changing corporate governance in Saudi Arabia. 3. Banks’ board and management should perform their duty in relation to their fiduciary duty This entails the duty of care. The board together with the management should ensure that they respect that duty. They should be keen on ensuring ...Download file to see next pagesRead More
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