Corporate governance refers to a system in which companies in a given region are directed and controlled. It involves a set of relationships existing between the board, management, shareholders and any other stakeholders of the company. Corporate governance as well is instrumental in the provision of a structure of setting the objectives of a company, the means of attaining the set objectives and monitoring performance of the company. Corporate governance lies on four pillars which include accountability, transparency, fairness and responsibility (Sharar, 8). A corporate governance framework is necessary to safeguard the interest of the various stakeholders in any organization. The interest of various stakeholders often conflicts. For instance, shareholders are interested in maximizing their wealth while management is interested in maximizing their earnings. Therefore, the corporate governance framework provided a mutually beneficial framework that incorporates the various conflicting interests. Most importantly, a corporate governance framework is central to the success of any organization. Corporate culture and risk are integral in any corporate governance framework. Therefore, a good corporate governance framework ensures that the organization has a strong culture that prevents greed and a robust risk management. An OECD report on Corporate Governance revealed that the financial crisis was largely attributable to corporate governance weaknesses and failures. The corporate governance framework in those affected financial institutions failed to live up to the expectation of safeguarding against taking excessive risks (Mallin, 10). It is on this background that this paper seeks to evaluate the corporate governance framework at the Qatar Financial Market Authority.
The Qatar Financial Market Authority (QFMA) was established in 2009 (Sharar, 8). QFMA core mandate is to supervise financial markets and the various players in the Qatar Financial markets. It offers an oversight role over the capital markets to safeguard the public (QFMA). Consequently, to execute its mandate, QFMA developed its Corporate Governance Code commonly referred to as the QFMA Code after it was established. The introduction of the Code was owing to the desire to create a regulated and well-structured corporate governance framework that would provide a basis for market efficiency, integrity and ensure the promotion of Qatar's economic growth. The Code applies to all the companies that are listed on the Qatar Stock Exchange. The QFMA Code provides the minimum benchmark corporate governance standards that companies that are listed on the Qatar Stock Exchange should incorporate in their respective corporate governance framework. The Code provides direction on such issues as control mechanisms, the role of the Board of Directors, disclosure and the rights of shareholders and any other stakeholder. Besides, the Code emphasizes the need for separation of powers in a company. It, therefore, calls for a clear division of managerial responsibilities between the Chief Executive Officer and the Chairman. The sections and the issues addressed by the QFMA Code regarding corporate governance in Qatar Financial Market are discussed below (La Porta, Rafael, et al., 8).
Section I: Introduction
The introduction section explains the approach that has been taken by the listed joint-stock companies on all markets in Qatar. The section provides meaning for several definitions including an independent Board member, Non-Executive Board member, and Related Party are given (Nesheiwat, 12). They are meant to guide the reader on commonly used vocabulary in the code.
Section II: Compliance to the Corporate Governance
This section explicitly points out the parties that bear the responsibility for the compliance with corporate governance. The code indicates that it is the responsibility of the Board of Directors to ensure that the company is committed to the provision of good corporate governance.
Section III: Board of Directors
This section is dedicated to defining the responsibilities pf Board of Directors and the standards of duty of care that is expected from them. It states that the board charter should be drafted in such a manner that it complies with the provisions of the code. The responsibility and mission of the Board are also highlighted. The Board is responsible for approving the firm's strategic plans, overseeing management, appointing management, ensuring that the firm is compliant with the set laws and regulations and delegating its functions as necessary. Fiduciary duties of directors are as well outlined under this section which includes loyalty, compliance, and duty of care. This section also touches on the separation of the powers of the Chairman and the CEO and their duties. It calls for the existence of a clear division of the duties of a CEO and a Chairman. Board composition is also addressed in this section. It states here that at least a third of the Board members should be independent, and that majority of the members of the Board should be Non-executive as defined in section I. The provision is meant to ensure objectivity in board decisions and independence of thought. The roles of the Non-Executive Directors and appointment of the Board Secretary are as well defined. The Non-Executive Director participates in Audit Committee and oversees the firm's development and its compliance. The Board Secretary should be appointed by the Board through a resolution and should preferably be accredited, a practicing lawyer or a graduate having at least three years of working experience in a public listed company(s). This section also touches on inside trading and conflicts of interest. It requires a company to develop and avail in public the rules on conflict of interest and inside trading. Induction programs for the newly appointed members of the Board, and training of the existing Board members is addressed under this section. The roles of the Board Committees are also defined. These committees include nomination committee, remuneration committee, and audit committee (Sharar, 8). In summary, the section outlines the minimum duties that are expected from the board of directors and how those duties should be executed.
Section IV: Internal Controls
This section of the QFMA discusses the compliance, internal controls and the role of the internal auditor in a listed company. It requires a company to adopt a wide internal control system for implementation of the corporate governance code, risk management, implementation, and compliance. It calls for the system to include effective and independent risk assessment, financial audit and administration. The company should have at least a single internal auditor who is appointed by the Board. It requires that an internal auditor should every three months prepare the Internal Audit Report (Al-Akra et al., 22). The provision is meant to ensure adequate risk management structure by constantly assessing risks that threaten the going-concern of the organization.
Section IV. External Auditors
The Code calls for an external auditor to exercise independence and be qualified. His/her appointment must be upon recommendation to the Board and the General Assembly by the Audit Committee. To ensure that the external Auditors exercise independence, the Code demands that the External Auditors should be changed by the Company after a tenure of three years (Al-Akra et al., 34). An external audit report provides an objective third party opinion as to the accuracy and fairness of the financial statements that the company has prepared. It is based on the fact that management has the incentive to engage in creative accounting to create an impression that the company is performing better than it is. Therefore, the external audit report prevents and detects any attempts of creative accounting thus ensuring integrity and transparency.
Section VI. Corporate Governance Report
The Board should prepare the annual Corporate Governance Report. The Chairman should sign the report, and it should be submitted to the authority in charge. Compliance of the company with the Code's provision and other good Corporate Governance practices should be assessed by the Board. This section also demands that the financial reports prepared by the company should comply with the IFRS and the ISA standards. The financial reports ensure transparency of the organization. The organization has to periodically provide information about its affairs to the public regarding its financial performance and existing resources.
Section VII: Shareholder Rights
This section outlines that it is the responsibility of the Board to ensure that the rights of all shareholders are protected. The term "one-share, one-vote" is commonly used to refer to this. The company is as well responsible for ensuring that the share ownership records kept are valid and up to date. During regular office hours, shareholders have a right if access to the shares register and no one should deny them this right of access. This section outlines that the procedures of accessing information should be incorporated in the company's by-laws and articles of association. It as well requires the posting of all the relevant and public information on the company website (Mansoor, & Ishaq, 21). The section provides a framework for the interaction of the company with its shareholders.
Section VIII: Employee Rights
Under this section, the rights of the stakeholders and their role in the Corporate Governance process are recognized. It is the responsibility of the Board to ensure that the employees are equitably and fairly treated. There should be no discrimination on the basis of their gender, race, or religion. It requires that the Board adopts "whistleblower" mechanism and ensure that there are protection and confidentiality to those employees who report fiduciary of the firm (Shleifer, & Robert, 7). Employees are also part of the stakeholders of the company. Therefore, this section ensures that their interests are safeguarded.
Section IX: Corporate Governance Report
This section outlines that the CG report should be prepared by the should be prepared by the Board, signed by the Chairman and the report should assess the compliance of the company with the provision of the QFMA Code. The prepared report should be submitted to the Authority in charge and be made public.
Section X: Code Enforcement
In conclusion, the Qatar Financial Market Authority Code (QFMA Code) for companies has addressed the core principles of corporate governance. The QFMA Code highlights the duties of the board of directors, internal control, external auditors, shareholder rights, corporate governance reports, financial reports and employee rights. The code is tailored to protect the investing public, promote fairness and efficiency in the financial market, enhance market integrity and transparency as well prevent deceptive conduct and misleading information. The Code is in line with the prevailing corporate governance frameworks that are applied internationally in various jurisdictions. This has an effect of enhancing and strengthening Qatar's operating framework for corporate governance in line with the best international guidelines and practices.
Works Cited
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