The development of Corporate Governance practices in the Middle East specifically in Saudi Arabia and Yemen

Abstract

The concern of corporate governance system has been driven in recent years primarily as a result of a series of corporate scandals and failures in a number of countries. This concern is to protect not only shareholders but stakeholders as well. Investors believe that better corporate governance will bring them higher rewards and they are more confident and consider that a company which implements corporate governance is a safe place to provide them with an appropriate return on their invested capital. In addition, creditors will trust that their rights are protected. In the Middle East there is a great concern to attract as large amounts as possible of domestic and international investments, and in order to achieve this aim, corporate governance system should be adopted. This study aims to examine the current developments of corporate governance in two countries of the Middle East which are Saudi Arabia and Yemen comparing them with international corporate governance principles of best practice such as the OECD principles. Additionally, it makes a comparison between the two countries. The study used primary data which was a questionnaire distributed to 58 listed companies in Saudi Arabia and the 52 largest companies in Yemen. To fulfill the objectives of the study, seven important factors of corporate governance were employed as the measures, namely, board of directors, Duality of CEO and Chairman, Second Man ( Deputy CEO\GM), Audit Committee, Internal Auditing, Risk Management and Disclosure and Transparency. The results generally showed that corporate governance practices do to some extent exist in both countries. However, some aspects of corporate governance are implemented to a higher degree while some other aspects are practiced at a lower degree. Furthermore, there is a difference of implementation of corporate governance principles between the two countries and generally, Saudi companies look better than Yemen companies in terms of corporate governance practices.