The Capital Markets Authority’s Code defines a binding model framework for the management and regulation of all public joint stock companies, to promote transparency, accountability, fairness, and responsibility.
Oman’s Capital Markets Authority has issued its new Code of Corporate Governance for Public Joint Stock Companies (“Code”).
The Code will apply to all public joint stock companies (SAOGs) listed on the Muscat Securities Market.
The Code was issued on 22 July 2015 and will not come into force until 22 July 2016. However, Principle 8, regarding independent directors, will apply to each publicly listed joint stock company upon the expiration of the validation period of the board of directors (i.e., regardless of whether the validation period expires before or after 22 July 2016).
The purpose of the Code, as stated, is to define a binding model reference framework for management, regulation and control of SAOGs through a series of clear and definite policies, processes and procedures. There are four key elements underlying the purpose of the Code, namely:
- Transparency: all relevant information is provided to the relevant stakeholders in a timely and appropriate manner
- Accountability: the board members are accountable to the shareholders for their decisions and actions;
- Fairness: shareholders, employees and related parties to be treated fairly and equitably; and
- Responsibility: in discharging its duties, the board must act with honour, integrity and dedication not only to the company, but towards the economy and community in general.
The Code has been divided into a set of 14 principles. Each principle comprises an initial guiding statement followed by explanatory and guiding procedures.
Whilst we will focus in more detail on specific aspects of the Code in future articles, below is a summary of some of the key new rules introduced by the Code:
Functions of the board
The Code requires the board to designate a spokesperson and prohibits any of its members to disclose information without the prior written consent of the board or chairman. As for its composition, all members of the board should be non-executives. In an attempt to raise the professional benchmark of board members, the Code looks to introduce tougher criteria for selecting them. Further, the Nomination and Remuneration Committee is now responsible for recommending suitable board members.
The Code has introduced tougher criteria for selecting the company secretary and has in turn sought to impose greater responsibilities on him or her. With regard to the appointment of the CEO, it prohibits a CEO of any SAOG to act as a CEO of an affiliate of that company, regardless of whether the affiliate is in the Sultanate of Oman or abroad.
Code of business conduct
The Code has a new independent section and an additional appendix dealing with professional conduct. Here, the Code seeks to raise the standard of professionalism of both board members and executives. This section also includes provisions about conflicts of interest and access to information.
Nomination and Remuneration Committee
The Code contains provisions concerning the establishment of the Nomination and Remuneration Committee to assist the shareholders in nominating and then electing competent members for board membership and executive positions. The Nomination and Remuneration Committee will also assist the company to produce clear and credible policies on remuneration, in accordance with administrative decision No. 11 of 2005.
Whilst the primary concern for the board must be the company’s interests, it should be noted that there is also an emphasis for the board to consider the company’s social responsibility, that is, to act as a good corporate citizen and to minimise any adverse impact of its activities on the national economy, surrounding community and environment.