CMA Presents the Code of Corporate Governance  in preparation for Obligatory Implementation

Al Salmi: Obligatory Implementation in July and governance is based on integrity

Al Makhaini: Amendments were introduced to enhance technical competence and for building strong economy

Al Busaidy: Oman Centre for Governance and Sustainability  will contribute to implementation of the Code

HE Abdullah Salim Al Salmi, Executive President of the Capital Market Authority has said the new Code of Corporate Governance will be implemented on all listed companies and investment funds in July this year.

He expressed his happiness for the constructive response of listed companies with the directions of CMA and regulatory requirements especially with regard to wise management and active participation in the development of the code during the consultation process as CMA had received a number of ideas and opinion which contributed to the final version of the Code.

He said, in an opening speech in the workshop organized by CMA to introduce the new Code of Corporate Governance, that the need for amending the code resulted from the endeavors to contribute to the economic development process through regulating and streamlining  sustainable economic performance of pubic joint stock companies  due to the direct impact in attaining  strong, transparent and competitive economy.

Al Salmi added that we live in a rapidly changing era which require continued review and revision of our legislations and regulations including the Code of Corporate Governance to improve the local practices according to best  international practices to limit any violations which would have positive impact on the quality of  corporate management.

HE added that the  Cord of Corporate Governance Development Committee was guided by certain international codes and charters and the recommendation of the Organization for Economic Cooperation and Development and the Internal Financing Corporation.

Al Salmi asserted that the aim for the institutions was to reach a self- contentment that the requirements of governance when implemented would lead to expansion of the confidence and transparency base. If the ethics make right the human behavior the  standards of corporate governance makes right the performance of companies and institutions, improve the work, hence the idea of governance is based on self- integrity which ensures better performance, continuity and ability to encounter the challenges and risks.

The workshop was organized to prepare for obligatory implementation of the code which will be in July and coincides with the timings of annual general meetings of companies which will witness constitution of boards of directors which require observing the requirements of the code in its new version when constituting the boards and subcommittees.

The workshop included an open  discussion session  by representatives of public joint stock companies and investment funds.

Mohammed Said Al Abri, Director General of Issues and Disclosure managed the session with the participation of Sayyid Hamid Sultan Al Busaidy, Executive Director of Oman Centre for Governance and Sustainability and Ahmed Ali Al Makhaini, Expert at the Office of the Executive President of CMA.

The questions and queries focused on  the role of company secretary and the required qualifications and experience for such role beside the  external commitments toward related parties

It was emphasized that the company secretary shall be of high caliber, qualification, ability and vast experience in the nature of company business.

The discussion also touched on the new definition of independent director, implementation method and the challenges facing the companies in selecting independent directors and how to identify the related parties in view of the social composition and social relations in the local communities.

There were a number of questions on the nomination and remuneration committee and how to separate the executive management from the board of directors and the issue of excluding executive directors, the extent of implementation of this matter, as well  as constitution of committees and the new rules in this respect.

Further questions were  made on the mechanism for appraisal of the directors, the term , powers of directors and appraisal standards.  It was emphasized that the object is to create  efficient boards with directors capable of delivering and set out strategic plans and paths for the company business.

Ahmed Al Mukhaini reviewed the clauses of the code and showed the differences between the  new and old code. 

He said the basis of the amendments  are three pillars i.e. transforming the companies to better levels of managerial competence and sustainability, building strong, competitive and transparent economy and enhancing good citizenship of corporates.

He explained that the first pillar focuses on the constitution of the board of directors , its role and responsibilities  as the code has identified all the directors to be non -executive directors and prohibited combination of the roles of the chairman and chief executive officer which was not the case  in the code before the amendment, and that the ratio of independent directors shall not be less than third with a minimum of two directors.

He explained that  the board of directors shall adopt clear policy on providing the directors with the information they need on request outside the routine course of the board meetings and to assign such policy to the company secretary. He asserted the code included the terms and conditions and requirements regulating the board meetings including video-conferencing setting out the rules for such meetings.

On the qualifications of directors Al Makhaini said the code urges the boards to  acquaint the directors with the company business and encourage them to participate in specialized training courses so as to acquire the skills for strategic vision, ability to direct and to give opinions  in matters of importance to the company and impacting its interests beside personal characteristics.

The code was keen to highlight the role of the independent director who is able to weight the issues wisely and objectively, thus, the code identified  new definition for the independent director as the time was increased from one year to two years and gradually to five years at a later stage.  In addition to inclusion of new terms and conditions to deepen the continuity of  independence. New terms and conditions were added to the specialized committees as the combination of chairmanship of the board and audit committee was prohibited as well as chairing two subcommittees and the audit committee and membership of other committees.

On the related party transactions Al Makhaini pointed out that one of the main principles of the code, especially from the practice in Oman, is relating to related party transactions whereas the company shall observe maximum degrees of transparency with regard to such transactions to curb the risk  of the influence of related parties on the soundness of company transactions and its financial position. This principle is concerned with  disclosure of relationships, transactions and obligations toward any person or establishment related to the company. Such transactions shall be reviewed by the audit committee prior to execution and shall be approved by the board of directors or the general meeting as the  case may be.

Al Makhaini talked about the one of the  key issues  in the new code which is social responsibility which emanates from the company objects and business. He said the company shall endeavor  transparently  to exercise its role as good citizen and to prevent any negative impact of its business and activities on the national economy, the community or the environment in general and to set out internal policy, strategy and priority work plan rather than focusing on the traditional practices of social responsibility.

Sayyid Hamid Sultan Al Busaidy, Executive Director of Oman Centre for Governance and Sustainability talked on the Centre and the services provided to various institutions and how the OCGS can contribute to enhancing the level of corporate governance practices and principles through specialized training programmes or through  guidance manuals identifying the policies of each institution as per the nature of its commercial business.