The Compliance of Corporations to the Disclosure Requirements of Corporate Governance Regulations in Saudi Arabia: A Survey Study

Abstract

The current research aims to investigate to what extent Saudi corporations disclosure complies with the corporate governance regulations issued by the Capital Market Authority on 21/10/1427 AH (corresponding to 21/11/2006). The research examined 52 out of 77 companies listed in the Saudi capital market at the release time of the corporate governance regulation. The study reviewed the disclosure of governance issues in the published reports of the Board of Directors issued in the financial reports in 2006 and 2007. The review included many requirements of the corporate governance regulations such as: the composition of the board of directors and its members' classification, the number and names of corporations in which one person acts as a member of its board of directors, a brief description of the jurisdictions and duties of the board's main committees such as the audit committee, the nomination and remuneration committee; indicating the names of committees' members and chairmen, the aggregate number of their respective meetings, the compensation paid to each member of the board of directors and the highest ranked five of executives, in addition to the executive manager and financial manager in each corporation. The study also investigated other requirements included in the corporate governance regulation.

The results of the study revealed considerable variations among the Saudi companies regarding their disclosure levels, where few companies showed a compliance with corporate governance requirements. The results also revealed slight improvements in the disclosure levels have been observed in 2007 comparing with 2006. Such low disclosure levels could be due to the recent and short age of regulation, the lack of interest of some officials in the culture of disclosure and informing the beneficiaries of what is going on inside; as well as the absence of the imposed sanctions in case of compliance failure. The study recommends to do further research in the area of corporate disclosure in correspondence with the requirements of corporate governance regulation, which expected to enhance the Saudi corporation performance to meet stakeholders' expectations.