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Selection and Composition of the Board of Directors

Board Structure and Size Guidelines

 

  • The Board shall comprise a minimum of three (3) and maximum of 11 members.
  • One of the Directors shall serve as the Chairman of the Board.
  • The Chairman of the Board shall be selected by the affirmative vote of the majority of the Directors.
  • The Shareholders’ General Assembly is responsible for appointing the members of the Board for a period that is in accordance with the Company’s bylaws. However this period should not exceed three (3) years. It is permitted to reappoint the same members at the end of the period as long as it does not conflict with the Company’s bylaws.
  • The majority of the members of the Board of Directors shall be non-Executive members.
  • The Chairman of the Board should not have an Executive role in the Company such as; President, Vice President or General Manager.
  • The independent members in the Board should not be less than two (2) or one-third of the total numbers of Board members whichever is the greater.
  • The Company’s bylaws should state when the Board membership expires and that the Shareholders’ General Assembly has the right to terminate all Board members for due cause reason, or some of them, at any time even if the Company’s bylaws do not give them this right.
  • At the end of the term of a Board membership, regardless of the means of ending the term, the Company shall immediately notify the CMA and the Exchange with the reasons thereon.
  • Members should not hold Board memberships for more than five (5) listed companies simultaneously.
  • Judicial Person who is entitled under the Company’s Articles of Association to appoint representatives in the Board of Directors, is not entitled to nomination vote of other members of the Board of Directors.

 

Board Member Nominations

 

  • The Nomination & Remuneration Committee is responsible for identifying individuals qualified to become Board members and recommending to the Board the nominees for Directorship. These persons should be appointed at the next General Assembly Meeting of the shareholders to oversee the organization of the Board as to discharge the Board’s duties and responsibilities properly and effectively.
  • The Nomination & Remuneration Committee shall conduct an annual review of the required skills, competencies and qualifications, of individuals to be nominated for Directorship, and of existing Directors.
  • The Nomination & Remuneration Committee shall also assist the Board in determining on an annual basis, the compliance of each Director to the Company’s code of business conduct and ethics and the independence of each Director as may be required under the applicable securities laws and stock exchange regulations.

 

Director Qualifications:

 

  • Directors shall meet the independence and experience requirements to the extent required under the applicable laws, rules regulations.
  • Directors shall be individuals of high integrity focused on enhancing long-term shareholder value.
  • Directors should be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serve on the Board for an extended period of time. Directors may serve on other Boards of public companies provided they are able to perform responsibly all of their Directors’ duties and responsibilities.
  • The most important skills that the Directors should possess are: vision, strategic perspective, good managerial judgment, an ability to manage and supervise an organization, knowledge of law and/or finance as well as some knowledge specific to the Company area of business (e.g. industry knowledge).

 

Criteria for the Composition of the Board

 

  • One of the Board’s most important responsibilities is evaluating and selecting candidates to serve as Directors of the Board. The Board shall seek members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have had experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated and be selected based upon the contributions they can make to the Board.
  • The assessment should also include issues of judgment, diversity, age and skills such as understanding of financial and investment companies, international background, etc. – all in the context of an assessment of the perceived needs of the Board at that point in time. Individual Directors should possess the personal characteristics including; Integrity and Accountability, Informed Judgment, Financial Literacy, Mature Confidence and High Performance Standards. Effective Boards are composed of individuals who are experienced in their respective fields of endeavor and whose knowledge, background and judgment will be useful to the Company. Directors must have the ability and willingness to learn the Company’s business and to express their personal views.

The factors to be considered by the Nomination & Remuneration Committee and the Board in its review of potential candidates should include:

    • Whether the candidate has exhibited behavior that indicates he is committed to the highest ethical standards and the values are adhered to.
    • Whether the candidate has had broad business, governmental, non-profit, or professional experience that indicates that the candidate will be able to make a significant and immediate contribution to the Board’s discussion and decision-making in an array of complex issues.
    • Whether the candidate has special skills, expertise and background that add to and complement the range of skills, expertise and background of the existing Directors.
    • Whether the candidate has had a successful career that demonstrates the ability to make the kind of important and sensitive judgments that the Board is called upon to make.
    • Whether the candidate will effectively, consistently and appropriately take into account and balance the legitimate interests and concerns of all of the shareholders and other stakeholders in reaching decisions.
    • Whether the candidate will be able to devote sufficient time and energy to the performance of his duties as a Director.

 

The application of these factors involves the exercise of judgment and cannot be measured in any mathematical or routine way.

 

Independent Directors

 

  • The Board shall at all times be comprised of a majority of Directors who are independent of management and of all entities having a material business relationship with the Company (a "Non-Executive Director"). Accordingly at least two members or one third of the members (whichever is higher) shall be independent Directors.
  • A Non-Executive Directors are generally considered as being independent of the management of the Company. Non-Executive Directors are usually also expected to be independent of any interest or relationship which could (or could be perceived to) interfere with the Director’s ability to always act in the best interest of the Company. Moreover, Non-Executive Directors as such do not have a separate legal role to other Directors.
  • An independent Director:
    • Is neither employed by the Company in an Executive capacity, nor associated to such a person
    • Is not a former employee of the Company until two years after the employment at the Company has elapsed, or any other material connection, has ended
    • Is not a professional advisor to the Company during the presiding two (2) years
    • Is not a large depositor with or large borrower from the Company
    • Has no significant contractual or business relationship with the Company, which could be seen as to materially interfere with the Director’s capacity to act in an independent manner
    • Does not receive additional remuneration from the Company apart from Director’s fees; does not participate in the Company’s share option or performance related pay scheme; and is not a member of the Company’s pension scheme

 

  • As independence of judgment in decision making is expected from all of the Company’s Non-Executive Directors, the extent to which Non-Executive Directors meet the above definition of independence shall be reviewed regularly through the Company’s conflict of interest and Director Evaluation processes.
  • To maintain independence, the Director may not accept any consulting, advisory, or other compensatory fee from the Company (excluding Directors’ fees), or be an “affiliated person” of the Company or any of its subsidiaries. An “affiliated person” is defined as any officer or employee or any other person who owns 5% or more of the voting securities of the Company or any of its subsidiaries.

 

Term for Directorship

 

  • In accordance with Article 66 of the Companies Act, the regular General Meeting shall appoint the Directors for the term specified in the Company’s bylaws, which shall not exceed three years.
  • Accordingly members of the Board shall be elected for a three-year renewable term. An elected member of the Board may be re-elected upon the expiry of the term of office. Directors shall not have a limit on the number of terms served or a mandatory retirement age. The tenure of Directors shall be determined by the Board at its discretion upon the recommendations of the Nomination & Remuneration Committee of the Board.

 

Retirement from the Board

 

  • In accordance with Article 66 of the Companies Act, the Company’s bylaws shall specify the matter of retirement of a Director; but the regular General Meeting may, at any time, remove all or any of the Directors even if the Company bylaws provide otherwise, without prejudice to the right of a removed Director to hold the Company liable if the removal is made without acceptable justification or at an improper time.

 

Resignation

 

  • Resignation of a Director shall take effect from the time it is communicated to the Board, or any other agreed time.
  • Directors should offer their resignation in the event of any significant change in their personal responsibilities, including a change in their principal job responsibilities effectively on the Board or any of its committees. Directors are expected to offer their resignation at the time they retire or resign from the Company.

 

Limits upon Board Membership

 

  • Each person serving as Director must devote the time and attention necessary to fulfill the obligations of a Director. Key obligations include appropriate attendance at the Board meeting and an adequate review of preparatory material. Directors are also expected to attend the General Meetings of the shareholders.
  • In addition, in accordance with the Article 68 of the Company’s Act, a Director must own shares of the Company “whose value shall not be less than ten thousand riyals”, within thirty days of the date of appointment of a Director and such shares shall be deposited in one of the banks designated by the Minister of Commerce. According to the CMA regulations “members should not hold Board memberships for more than five (5) listed companies simultaneously”.
  • The Directors shall also be entitled to have the Company purchase reasonable Directors’ and officers’ insurance on their behalf, to the benefits of indemnification to the fullest extent permitted by laws of the Company’s jurisdiction of incorporation and the Company’s organizational documents.