3rd Compliance and Anti Money Laundering Seminar
Kingdom of Saudi Arabia
The Changing Landscape of Corporate Governance
March 23, 2011
J. Chris Razook
Program Manager, IFC –World Bank
IFC Corporate Governance Program
Press
Regulators
Market Transparency
is improved;
Encourages good CG
Regulators promote
sound CG (codes,
regs)
IFC
IFC
Companies Improve
Performance
Investors
Sustainable Private
Sector Growth
Companies
Investors
incorporate CG in
investment process
Take action to improve
their CG
IFC
Companies Improve
IFC
Access to Capital
Institutes
Consultants
Sustainable institutes
equipped to continue
CG advocacy
Consultants
equipped to help
companies
IFC
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IFC
Changing Landscape of
Corporate Governance
Sharper Focus on Risk
Board Composition and
Functioning
Director Duties
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 Financial Sector – Basel, Walker Reviews
 Role of Board and Risk Committee
 Elevation of CRO & RM
 Independence and Skillsets
 Diversity
 Functioning of Committees
 Increased awareness
 Push for accountability
Changing Landscape of
Corporate Governance
Evolving Disclosure
Practices
 Risk Reporting
 Governance
 Non-Financial Intangibles & Sustainability
Investors Stepping Up
 Stewardship Code
 Sustainability Push – PRI, IFC Perf Stds
MENA: Awareness to
Implementation
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

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Successful Institutes promoting CG agenda
Numerous Codes developed (most voluntary)
Need further progress with FOEs and SMEs
Need more local success stories
Case Example:
Abu Dhabi Commercial Bank
Key Challenges
 Composition: Comprised nine directors, six of which
were government officers and no ‘independent’
directors; Needed stronger risk management skills.
 Roles: Board vs. Management roles were blurred in
some areas due to existence of an Executive
Committee that included reps from both.
 Structure: Had several working committees, though
some were performing management type tasks (e.g.,
loan collections and recoveries).
 Risk Management: Risk management needed to be
better coordinated centrally to improve information
flow.
 Public Disclosures: Subpar compared with
international standards.
 Director Shareownership: The Bank’s articles
required board members to own a minimum number
of shares in the bank.
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Key Changes
 Changed composition adding one-third independent directors;
Enhanced their risk management and banking experience.
 Clarified distinction between Board and Management,
emphasizing the Board’s role to monitor performance of the
latter; Removed directors from the combined Executive
Committee.
 Adopted a revised committee structure including Audit, Risk,
Nomination/Remuneration, and Corporate Governance
Committees; Removed management duties (e.g., loan
recoveries), and ensured adequate independent composition.
 Established a management-level Risk Committee and hired a
Chief Risk Officer to oversee all Risk Management activities in
the ban; Adopted more advanced tools for market risk and
operational risk.
 Improved disclosures significantly including in its Annual Report
and on their website to include ample information related to its
performance and its governance framework.
 Modified SH Rights – removed prohibitive article.
Case Example:
Abu Dhabi Commercial Bank
Source: IFC, Corporate Governance
Success Stories, 2010
 CG played a significant role in helping the bank access debt financing
 Bank was awarded “Gold Category” for submission of financial statements by ESCA
 The bank has also reported that the Board is more vigilant and actively challenges management
Thank You
www.ifc.org/corporategovernance
crazook@ifc.org
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