Corporate Governance Index |The Corporate Governance Center

Purpose

Developed in collaboration with consultants from Harvard University, Kobirate International Credit Rating, and CG Service Inc. - the Corporate Governance Index was established to monitor and promote good governance practices in Saudi Arabia.

Components

The Corporate Governance Index (CGI) captures the governance of corporations in terms of their structure, policies, processes, and practices across the following equally-weighted categories:

Board of Directors
Shareholder Rights
Public Disclosure & Transparency
Stakeholder Rights

The development of a solid Corporate Governance Index (CGI) is essential in monitoring and promoting good governance practices among corporations doing business in Saudi Arabia. With the assumption of consistent improvement, the CGI will raise the country’s overall corporate governance standards and provide possible financial and investment benefits and opportunities on a micro and macro scale.

The Corporate Governance Center at Alfaisal University undergoes major assessments each year to develop CGI ratings for publicly listed corporations on Tadawul. In 2015, a dedicated team from the College of Business partnered with Saudi Arabia General Investment Authority SAGIA (Currently Ministry of Investment) with the support from well-experienced consultants to work on a project aimed at increasing the societal awareness of corporate governance and its value on the economy. The CGI is largely based on CG standards set forth by the Saudi Capital Market Authority (CMA), Saudi Central Bank (SAMA), and the Organization for Economic Co-operation and Development (OECD).

CGI is a way to assess companies in terms of their compliance to Saudi governance regulations and best global governance practices. Said regulations aim to promote equal treatment of shareholders; ensure transparency through constant flow of relevant information pertaining to shareholders and stakeholders; provide effective structure to hold decision makers accountable for business decisions; and ensure responsible acts in terms of complying with related laws and regulations. The ultimate benefit of effective governance is to promote efficient practices and long-term economic success. Companies are expected to develop certain written rules and culture for good governance. They are also expected to have strong-will, mechanisms, and institutions to implement those rules and report outcomes. Good governance particularly offers solutions for principle-agent problems and conflict of interest issues aligning the goals of everyone toward long-term corporate growth, profitability and social responsibility.

At the Corporate Governance Center, we provide data-based and independent guidance to Saudi Arabian companies that are members, as well as annual ratings of all public firms via our Index. We believe that the adoption of those principles will enable corporations to make better decisions and resolve problems between corporate executives, shareholders, and stakeholders.