Corporate Governance
The General Principles of CG
The subject of corporate governance occupied the forefront of economic departments in
various countries as a result of the financial crises, That effects a lot of shareholding companies
which led to shake the confidence in these companies management and the validity of its
declared financial results and the real value of the prices of these companies shares in the stock
exchange markets leading to negative repercussions. The global crisis during the last quarter of
2008 came to reaffirm the importance of the corporate governance standards as this crisis
revealed that the weakness in corporate governance standards in both the banking business
and the business of other companies was within the range of several factors that contributed to
the outbreak of the global financial and economic crisis.
The corporate governance in banks has a particular importance because of the magnitude of
the risks and consequences resulting from improper practices and non implementation of
corporate governance standards in the banking business in light of the important role banks are
playing in the economic life, and its deep relationship with the society as whole such as
depositors, borrowers, shareholders and employees, in addition to the importance of products
and services provided by banks to the national economy. These all factors make corporate
governance practices in banks are important for each bank and its financial system, which
makes it one of the important pillars of effective governance for financial stability.
Hence, and In line with the development and progress of the international control standards
designed to enhance corporate governance in banks, the Central Bank of Kuwait has issued on
June 20, 2012 new instructions (corporate governance standards in Kuwaiti banks) which
replaced the old instructions issued on May 2004. These instructions emphasized on developing
corporate governance standards in banking sector to match international standards issued by
relevant international organizations , taking into account lessons learned from the global
financial crisis.
Central Bank of Kuwait instructions included nine basic pillars of Corporate Governance:
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Board Of director’s and Board Members duties and responsibilities.
Corporate value, Conflict of Interest, and Group Structure.
Senior Executive Management.
Risk Management & Internal Control.
Remunerations’ Systems and Policy.
Disclosures and transparency.
7. Complex Corporate Structure.
8. Protection of Shareholders’ Rights.
9. Protection of Stakeholders’ Rights.
practicing corporate governance effectively is the most important key factors to boost
confidence in the banking system and it is necessary for the proper functioning of the banking
and macroeconomic performance, as any weakness in applying the governance standards will
affect the work of the banks, leading for high costs on the state, and negative consequences in
the economy sector, especially in case of incidence of systemic crisis which negatively affect
the payment and settlement systems.
To get sound practice of Corporate Governance, Banks should depend on distribution of powers
and responsibilities and arranging the bank affairs between the Board of Directors and the
Executive Managements, Such as the following:
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Set the bank Strategy and Objectives.
Identify the bank’s risk tolerance /appetite.
Operate the bank’s day to day business.
Protect the interest depositors, meet shareholders obligations, and take into account
the interests of other stakeholders.
Operate the bank business in safe, integrity and sound manner, and in compliance with
applicable laws and instructions.
Manage the bank, taking into account not to expose the banking sector to any system
crisis.