Governance is a system of principles, basic rules, standards and policies that governs the group work.
Governance is a system of principles, basic rules, standards, and policies that govern the Group's work. It allows the Board of Directors to exercise various ways in order to achieve the Group's goals and maximize the benefit returns of its shareholders, and protect the rights of all stakeholders.
These regulations establish the basic rules, standards, and policies for the Group management. It allows achieving the Group goals and maximizing shareholders’ interests, and protecting their rights and the rights of stakeholders.
These regulations distinguish between rules and governance standards, and the application of best practices. They verify that best practices differ from one Group to another and from one market to another and from one industry to another, and decide that, in order to maximize the interests of shareholders. The assessment of the best practices shall be left to the board of directors in order to achieve the Group’s objectives.
These regulations shall subject to the terms and conditions of the Articles of association of the Group, Saudi Companies Act, Saudi Capital Market Authority system and its regulations, and other applicable laws, and guided by the Saudi corporate governance regulations.
The Group shall disclose in its annual Board of Directors report on compliance or non-compliance with the Saudi corporate governance guide, issued under the CMA resolution No. 1-212-2006 dated 12/11/2006.
Group: Saudi Research and Marketing Group.
Board of directors: The Board of directors of the Group.
Chairman of the Board: The Chairman of the Board of Directors of the Group.
MD: is the CEO of the Group's management, and possibly called CEO or General Manager.
CEO or General Manager: is the delegated authority by the Board of Directors to head the executive staff of the Group
Board Member: is a member of the Board of Directors of the Group.
Independent Board Member: a member of the Board of Directors who has a full independence. The member is not independent if it:
1- Owns a controlling interest in the Group or in any of the group companies.
2- Being a senior executive during the last two years of the group.
3- To have a first-class relation with any of the Board of Director members of the Group or of any of the group companies.
4- To have a first-class relation with any of the senior executives of the Group or any of the group companies.
5- If the candidate has a Board of Directors membership of any Group within the Group companies.
6-To be employed during the past two years in any party associated with the Group as accountants, leading suppliers, or to own a controlling interest in any of these parties in the last two years.
7- Non-executive member: a member of the Board of non-executive employees of the Group.
8- First-class relatives: father, mother, wife, and kids.
9- Stakeholders: suppliers, employees, creditors, customers.
10- Contributors: shareholders.
11- Minority shareholders: the shareholders who do not have representation in the Board of Directors.
12- Body: CMA.
13- Market: The Saudi Capital Market Authority System apps (Tadawul).
14- System: The Foundation of the Group, and Saudi companies’ Act, and the Saudi Capital Market Authority law and its implementing regulations.
The General Assembly shall be held at least once a year during the six months following the end of each fiscal year of the Group.
The General Assembly shall meet upon the invitation of the board of directors and board of directors shall invite the General Assembly to the meeting if it has been requested by the auditor or shareholders who have at least (5%) ownership of the share capital.
The Group shall announce the date and venue of the Assembly and its agenda before at least twenty (20) days of the appointment. The invitation shall be published in the CMA applications site (Tadawul), and on the Group's website as well as in two widespread newspapers in the Kingdom. The Group aims to use modern technology in order to communicate with shareholders whenever possible.
The Group shall give the opportunity to the shareholders to participate effectively and vote in the general assembly of shareholders, and to inform them about the rules that govern those meetings and voting procedures.
The Group is committed to facilitate the participation of the biggest possible number of shareholders in the General Assembly meeting, and to choose the appropriate time and venue.
In preparing the agenda of the General Assembly, the Board of Directors is committed to take into consideration the topics in the agenda of the meeting. Shareholders who have at least 5 percent of the Group's shares can add a topic to the agenda of the General Assembly.
Shareholders have the right to discuss only the topics of the agenda of the General Assembly and ask questions to the members of the Board of Directors and the auditor. The Board of directors or the auditor shall answer their questions in a way that does not cause any problem to the Group's interest.
The Group is committed to support their topics presented to the General Assembly with sufficient information to enable the shareholders making decisions.
The Group is committed to shareholders that they will be able to review the General Assembly meetings minutes, and the Group shall provide the authority with a copy of the minutes within ten working days from the issuing date.
The Group shall notify CMA with the outcomes of the General Assembly.
1/24: The Group board of directors’ number is determined to be 12 members.
2/24: The general assembly shall appoint the members of the board of directors for the term stipulated in the Group's articles of association as long as it does not exceed three years. Board members may be reappointed unless otherwise stated in articles of association.
3/24: Non-executive members shall be the majority of the board members.
4/24: The minimum number of the independent board members shall be two or one third of the board members, whichever higher.
5/24: The articles of association stated how the board of directors' membership expires in addition to the fact that the general assembly at all times may remove all the board members or some of them even if otherwise stated in the articles of association.
6/24: At the end of the membership of any board member, the Group is committed to notify the authority and the market immediately along with the reasons.
7/24: A board member may not hold a membership of more than five companies at the same time.
8/24: It is not allowed for the other board members to vote for the member who has the right to authorize representatives for him in the board.
The board of directors shall hold regular and emergency meetings upon the President's request.
The Chairman shall consult other members and CEO while preparing a specific topic that will be presented to the board and send the agenda along with necessary documents to members before the meeting. If any Member has an objection to the agenda, the details of this objection must be written in the minutes of the meeting.
The board of directors is committed to document the meetings and prepare a register of discussions and deliberations, including voting and tabulate and keep them in an organized way.
The Board of directors is the Supreme Administrative authority in the Group nominated by shareholders to be responsible for all what it does. It has wider functions, powers and competences for the management of the Group. The Board powers might be delegated to the Chief Executive of the Group.
The most important functions of the board of directors:
1/28: Provide a business leadership within a framework of prudent and effective management of risks that might face the Group.
2/28: Setting the strategic orientation of the Group and review and modify it.
3/28: Provide necessary financial and human resources to achieve the Group’s objectives.
4/28: Review and evaluate the performance of executive management.
5/28: Setting the Values and standards of performance.
6/28: Make sure to clarify the Group's obligations towards its shareholders.
The Board of Directors is responsible for the Group and has all the necessary powers and authorities to manage it.
The Board is not allowed to sign a loan contract that exceeds three years, or sell or mortgage Group’s real estates, or discharge the debtors of their obligations, unless it is stated in the articles of incorporation. Otherwise, they must take the permission from the General assembly.
Duties and Responsibilities of the Board include, but not limited to, the following:
1/29: Group Management.
2/29: Approve Group strategy.
3/29: Approve the operational budget, capital and cash to the Group, and any amendment thereon.
4/29: Oversee the Group's business to make sure that:
1/4/29: management is efficient.
2/4/29: planning is systematic.
3/4/29: internal control system is efficient.
4/4/29: Accounting and financial system is efficient.
5/4/29: Commitment to legal requirements.
5/29: Review the Group's performance in light of the Group's strategy, its goals, and business plans, and annual budget, and ensure that any necessary corrective action is being taken.
6/29: Expand the Group's activities to new industry, or new countries.
7/29: approve exiting of any substantive activity of the Group.
8/29: Suggest modification of the structure of the Group financing including reduction of capital, issuing new shares and purchase of shares of the Group.
9/29: Approval of restructuring of the Group organizationally and functionally.
10/29: Approval of any change that might occur on the registration status and the inclusion of the Group in the financial market.
11/29: Approval of the Declaration of Final Performance Outcomes.
12/29: Approval of the final draft accounts and report of the Board of Directors.
13/29: Approval of the dividend policy.
14/29: Suggest distributions of initial dividends and recommend annual distribution and gets approval on this from the General Assembly.
15/29: Approval of any significant changes in accounting policies and practices of the General Assembly.
16/29: Ensure the adequacy of the internal control system, risk management, including receipt of audit reports, the effectiveness of these systems, and the adoption of the necessary disclosure in the annual report.
17/29: Approval of contract with intrinsic value in the areas of procurement, contracting, funding, renting, and buying and selling of investment assets, and sale and purchase of fixed assets and consulting contracts and the like.
18/29: Approval of any contract that has an obligation on the Group for more than one fiscal year.
19/29: Approve the agenda of the General Assembly and projects of resolutions submitted for voting and any accompanying presentation or explanation documents.
20/29: Approve the rules and fundamentals of forming required experiences and skills of its members upon recommendation of the nomination and remuneration Committee.
21/29: Changing the structure of the board of directors, or restructuring, upon recommendation of the nomination and remuneration Committee and approval by the General Assembly.
22/29: Making sure that there is adequate succession plan for Board members and executive management.
23/29: Choosing a Chairman and Vice Chairman, and Managing Director.
24/29: Appoint members of the Board committees, and appoint the Chairmen of these committees and approve their regulations.
25/29: Setting a policy for compensation of non-executive directors, Group Secretary and senior executives on the recommendation of the Committee of nominations and remuneration, and approval by the General Assembly.
26/29: Setting a policy of compensation for non-executive directors by memorandum on the recommendation of the nomination and remuneration Committee, and approval by the General Assembly.
27/29: Set and modify, the system of ownership of Board members, staff, and their shares of the Group.
28/29: Approval of the report of the independent Board Member.
29/29: Make full and detailed annual review of the performance of the Board of Directors and its committees, and each Member of the Board of Directors.
30/29: Review the arrangements for compliance and governance applications.
31/29: Approval of all fundamental policies governing Group performance:
-- Internal control system
-- Work ethics system
-- Board Conflicts of interest policy.
-- Risk management policy.
-- Dividend policy.
-- Annual disclosure policy.
-- Continuous disclosure policy.
-- Corporate social responsibility policy.
-- Stakeholders Rights policy.
-- Charity policy.
-- Group’s organizational manual.
32/29: Nominate the board of director members based on the recommendation of the Committee of nominations and remuneration.
33/29: Approval of basic standards.
34/29: Prepare final accounts of the Group, and the report of the board, and submit them to the General Assembly.
35/29: Approve loans and banking facilities with core value.
36/29: Approve litigation, arbitration, reconciliation and release and authorize others in this regard.
37/29: Appoint, remove and compensate members of executive management, and monitor their performance.
38/29: Recommend amendment of the Group's articles of association.
39/29: Approve establishment, purchase, and sale of companies, and investments with others.
40/29: Approve investments outside the borders of Saudi Arabia.
41/29: Approve financial allocations to meet the obligations of credit risks and inventory and Zakat, and ensure efficiency, and disposition thereof.
42/29: Approve continuation of members of the Board after the expiry of their memberships and re-elect them or appoint others.
43/29: Approve continuation of membership of the Executive Board members after the expiry of their contracts with the Group
44/29: Appointment of an alternate member of Board if any board seat becomes vacant for any reason and present this appointment to the next General Assembly for approval.
45/29: Appointment or removal of the Group Secretary and determine its salaries and scope of work.
46/29: Approve the Audit Committee recommendation to appoint or reappoint the Auditor, and determine its fees, and present this to the General Assembly.
47/29: Appoint members of the Boards of the Subsidiaries, the members of the Board of Directors of the Group that represent it in the boards of other Groups.
The Member of the Board of Directors is committed to the following duties in the performance of its functions and responsibilities on behalf of the Group:
1/30: Honesty: This duty requires that the member of the Board of Directors practice its job in good faith and integrity and loyalty, and not to seek illegal profit from the Group's business and to be bound by the Group's announced scope of work stated in articles of association, and as supplemented.
2/30: Due Diligence and Skill: This duty requires general knowledge, skills and reasonable experience of members of the Board of Directors. Negligence is considered a breach of that duty. That duty does not impose on the Member spending time outside meetings of the board and its functional committees in the Group.
3/30: Fair Dealing: This duty is related to the dealing of Board member with the Group and requiring compliance with the conflict of interest policy in the Board.
4/30: Knowledge of laws and regulations relevant to the Group and industry in which it deals.
5/30: Primary Loyalty: A board member shall be loyal to all shareholders and not to the one who hired it only.
6/30: Commitments to the three values of governance (Liability, Honesty and Transparency).
7/30: Independent thought and critical review.
8/30: Giving priority to board tasks and attendance.
9/30: Protection of minority rights.
10/30: Social responsibility.
11/30: Protection of stakeholders.
The articles of association state the way of remunerating the board members. Such remuneration can be a fixed salary, meetings attendance allowance, benefits in kind or a certain percentage of the profits. It may be a combination of two or more of these benefits. If it is not stated in the articles of association, the Companies Act will apply within the regulations adopted by the Ministry of Commerce and Industry.
No member of the Board of Directors - without authorization issued by the General Assembly and renewed annually - may have any substantial interest in the business and contracts of the Group except for the works conducted through public tender if the board member has the best bid. A board member shall inform the Board of his personal interests in the business and contracts made to the account of the group. Any member who has interest is not allowed to vote on the decision taken in this regard.
No member of the Board of Directors - without authorization issued by the General Assembly and renewed annually - may participate in any action that would compete with the Group or to trade in any of the activity branches practiced by it.
The Group shall not provide a cash loan of any kind to the members of the Board of directors or to guarantee any loan entered into by one of them with others.
Appointment of the secretary enhances chances for optimizing values of integrity, transparency and ethical conduct.
The secretary’s scope of work, term of office and salary and benefits shall be specified by a resolution issued by the board of directors. The work of the secretary shall relate to the chairman of the board, unless he holds another executive position.
The tasks and responsibilities of the secretary, in its capacity as a secretary of the board of directors, include the following:
1/37: Make sure of the regular flow of information from the Board and its committees and between executive management and non-Executive Board members.
2/37: Giving advice on corporate governance to the Board of Directors, through the Chairman of the Board of Directors.
3/37: Answer the Board member’s questions.
4/37: Assist the Chairman in the preparation for Board meetings, attend Board meetings, record the minutes of the meeting, prepare the reports and follow up the implementation of its resolutions and recommendations.
5/37: Receive disclosures of Board members regarding the ownership or trading of the Group shares, and must inform CMA as required by the listing rules and disclosure rules.
The Group Secretary shall appointed a secretary for all Board committees
The Board of directors approves the formation of an appropriate number of committees, according to the needs and circumstances, so that the Board of Directors can perform its functions effectively.
In the composition of board committees, the group shall comply with the general procedures established by the board which states the mission of the committee, its duration and the powers granted to them during this term and how to control the board of Directors. The Committee shall inform the Board of Directors of the resolutions with absolute transparency, and the Board shall oversee the committees periodically to check their work. The Board of Directors must approve the regulations of all standing committees including the Audit Committee and Committee of Nomination and Remuneration.
Appointment of a sufficient number of non-executive board members in committees concerned with tasks that may result in a conflict of interests, such as ensuring the integrity of financial and non-financial reports, reviewing the deals of stakeholders, nominations for membership of the board of directors, and appointment of executives and specify remunerations.
The board of directors shall form a committee of non-executive members named the audit committee. The number of its members shall not be less than three members; one of them shall be in charge of financial and accounting affairs.
Based on a suggestion provided by the board of directors, the general assembly shall issue the criteria of selection of the members of the audit committee and term of their membership and method of work of the committee.
The board of directors shall suggest the tasks and responsibilities of the audit committee as set out below subject to the approval of the general assembly:
1/44: Overseeing the internal audit Department of the Group in order to ascertain their effectiveness in implementing business tasks set by the Board of directors.
2/44: Studying the system of internal control and write a report and recommendations thereon.
3/44: Study internal audit reports and follow up the implementation of the corrective actions for the remarks contained therein.
4/44: Recommend to the Board the appointment and removal of accountants and determine their fees, and take into consideration their independence upon recommending such appointment.
5/44: Follow-up works of chartered accountants’ and approve any work outside the scope of the audit work assigned to them during the audit work.
6/44: Studying the audit plan with the chartered accountant and show remarks on them.
7/44: Study interim and annual financial statements before submission to the Board of Directors and show opinion and recommendation in this regard.
8/44: Study accounting policies, show opinion and give recommendations to board of directors.
The Board of Directors shall form a committee called the nomination and remuneration Committee.
Upon recommendation of the board of directors, the general assembly shall issue the rules of selection of members of the nomination and remuneration committee and the term of office and method of work of the committee.
The Board of Directors shall suggest the system of the committee as set out below subject to approval by the General Assembly:
1/47: The majority of the members of the Committee shall be non-executive directors and shall be appointed for a term of three years.
2/47: The Committee shall be chaired by one of its members. This member can be Chairman of the Board of Directors. In all cases, the committee member shall withdraw from any discussion about matters related to the committee.
3/47: Duties and Responsibilities of the Nomination and Remuneration Committee:
1) Recommend to the Board of Directors regarding the nominations for membership of the board in accordance with the policies and standards taking into considerations not to nominate anyone that previously convicted of a crime of honor and honesty.
2) Annual review of appropriate skills requirements for Board membership and prepare a description of the capabilities and qualifications for Board membership, including a limitation of the time needed to be devoted to the work of board of directors member.
3) Review the structure and composition of the Board and make recommendations on changes that can be made.
4) Identify weaknesses and strengths in the board of directors, and suggest the best ways to deal with them in line with the Group interest.
5) Check, on an annual basis, the independence of directors, and absence of any conflict of interest if the Member holds membership of the Board of Directors of another Group.
6) The board shall authorize the committee to search for new board members in accordance with the rules and terms of reference of experience and skill required for a group.
7) The committee shall propose rules and qualification requirements for candidate selection for membership. These rules shall be approved by the Board of Director. Then, they shall be published.
8) Evaluate the outcome of skills, knowledge and expertise available to the Board annually. Based on the results of the evaluation, the committee shall establish a description of the skills and capacities required for each appointment or nomination for Board member selection.
9) Meditate and show opinion in the field of planning for senior executives’ succession in the Group.
10) Regular review of the structure, volume and formation of experiences and skills in the board and provide recommendations in this regard.
11) Ongoing review of the needs of the executive and non-executive seniors to keep the Group in a good competitive position.
12) Prepare the annual disclosure on the work of the Committee, according to articles of association and submit it to the Board of Directors.
13) Notify the new non-executive members of the board of their work requirements in the Group in cooperation with the secretary.
1) Notwithstanding the provisions of article (17), the general framework or the policy governing the remunerations of the Chairman of the Board and senior executives, determine the responsibility of the Chairman and non-executive directors under approval of the board. No member of the Board of Directors or executives further reverts to any decision for compensation.
2) Determine targets of senior executives who require motivation programs to achieve specific goals.
3) Ensure that employment contracts and provisions between the Group and the employee is fair enough and contain provisions stating not to reward employee who fails in his mission and affirms duty to reduce losses under any circumstances.
4) Determine the total rewards, incentives and salaries of Executive Board members and senior executives in the Group under the provisions of the policy of rewarding senior executives, including members of the board of directors.
5) Advise on any substantial changes in the structure of wages and compensation of the Group or any of its affiliates.
6) Confirm the adoption of expenses policy for the Chairman and CEO and compensate them.
7) Ensure the commitment to the rules of remunerations and salaries and compensation of senior executives.
8) Exclusive responsibility for approval of the scope of work of any external consultant who works against rewards and remunerations and appointed to give advice to the Committee.
9) Ensure the commitment of the Committee members to attending the meetings, and disclosing this in the annual report of the Board of directors or as required by articles of association.
10) Protection and maintenance of Committee Regulations.
The Group is committed to develop, maintain, and preserve the disclosure policies and procedures and the supervisory regulations in writing according to articles of association.
In addition to what is stated in the rules of registration and listing on the contents of the annual report attached to the Group's annual financial statements, the annual report shall include the following:
1/49: What have been applied of the provisions of these regulations and what have not been applied, and the reasons for it?
2/49: The names of the companies where the board member might be a Member of its Board of Directors.
3/49: The composition of the Board of Directors and membership classification as follows: Executive Board Member or Independent Board Member.
4/49: A brief description of the terms of reference of the Board committees and their missions such as the Audit Committee, nomination and remuneration Committee, with the names of these committees and their Chairmen, members and meetings.
5/49: Details of the paid remunerations and compensations for each of the following:
- Board of Directors member
- Five senior executives who received bonuses or compensations from the Group plus CEO and CFO if not of them.
6/49 Any punishment or penalty or restrictions imposed on the Group by CMA or any other supervisory, regulatory or judicial authority.
7/49: The outcomes of the annual review of the effectiveness of the internal control procedures.
8/49: Disclosure of the Board's commitment to the protection of the rights of the minority and stakeholders.
Group's management is committed to develop, protect, and maintain control of continuous disclosure policy in accordance with the rules of registration and listing.
The Board of directors shall approve these regulations and become effective upon approval.
The Board shall approve any amendments to these regulations as long as they don’t conflict with the powers of the General Assembly.
The Board of Directors shall have the exclusive right to change or clarify the articles of these regulations, in way that does not conflict with the powers of the General Assembly.
The Group shall make it easy for shareholders to obtain a copy of these regulations. In achieving this, the Group may publish these regulations on its internet website and on its website on the application of the CMA (Tadawul).