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).
The Qatar Financial Market Authority (QFMA) was established in 2009 (Sharar, 8). After its establishment, QFMA introduced the Corporate Governance Code commonly referred to as the QFMA Code. The introduction of the Code was owing to the desire to 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 listed on the Qatar Stock Exchange. 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. In addition, 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
This is the introduction section. It explains the approach taken by the listed joint-stock companies on all markets in Qatar. It is here that several definitions including an independent Board member, Non-Executive Board member, and Related Party are given (Nesheiwat, 12).
Section II: Compliance to the Corporate Governance
This section points 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 deals with the Board of Directors. 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, ensuring that the firm is compliant with the set laws and regulations and delegating its functions. 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 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 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).
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 management. 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).
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).
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.
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 by the company website (Mansoor, & Ishaq, 21).
Section VIII: Stakeholder 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).
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. 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
Al-Akra, Mahmoud, Waleed Abdel-Qader, and Mamun Billah. "Internal auditing in the Middle East and North Africa: A literature review." Journal of International Accounting, Auditing and Taxation 26 (2016): 13-27.
La Porta, Rafael, et al. "Investor protection and corporate governance." Journal of financial economics 58.1 (2009): 3-27.
Mansoor Khan, M., and M. Ishaq Bhatti. "Islamic banking and finance: on its way to globalization." Managerial Finance 34.10 (2008): 708-725.
Nesheiwat, Faris K. "QFMA Issues New Listing and IPO Rules for Qatar’s Alternative Market." (2012).
Sharar, Zain Al Abdin. "Corporate governance in Qatar: A comparative analysis." (2011).
Shleifer, Andrei, and Robert W. Vishny. "A survey of corporate governance." The journal of finance 52.2 (2007): 737-783.
