Corporate Governance

GRI 102-18, 102-19

SAIB’s governance structure is established upon three pillars: establishing strategic direction; executing strategy and managing risks; and stewardship through conformance with policy and established procedures, rules, and practices.

Good governance is ensured by the governance structure, which is underpinned by policies, procedures, and practices. The values, ethics, and integrity of the Bank help to ensure the implementation of the governance rules and procedures.

The Bank’s governance framework is defined in the Corporate Governance Manual, along with the Board and Executive Management structures, key policies, guidelines and control functions, and the duties of Board members and the restrictions placed on them. The Manual is available to the general public via the Bank’s website.

The Bank complies with the principles of corporate governance for banks operating in Saudi Arabia as issued by the Saudi Arabian Monetary Authority (SAMA) in March 2014, all provisions of the Corporate Governance Regulations issued by the Capital Market Authority (CMA) of Saudi Arabia dated 16/5/1438H corresponding to February 13, 2017 and all subsequent amendments, and the Basel Corporate Governance Principles for Banks.

The purpose of the Corporate Governance Manual of the Bank is to institutionalise clear, robust, and effective corporate governance as the foundations for the Bank’s future market leadership, continued profitability, and long-term stability. The General Manager of Compliance, overseen by the Board Corporate Governance Committee, is responsible for reviewing the contents of the Manual on an ongoing basis and ensuring it is up to date.

A full review of the Manual is conducted every two years by the General Manager of Compliance under the supervision of the Board Corporate Governance Committee. The General Manager of Compliance is accountable for ensuring that the Manual is in complete conformity with the SAMA and the CMA guidelines for corporate governance and complies with the principles for enhancing corporate governance as published in the latest guidelines by the Basel Committee on Banking Supervision.

New Board members receive the appropriate induction and training upon appointment. All Board members receive a copy of the Bank’s Corporate Governance Manual, its appendices, and major policies including the code of conduct, conflict of interest policy, disclosure and transparency principles, and governance charter issued by CMA and SAMA’s key principles of banks’ governance.

The Saudi Investment Bank’s corporate governance framework is based on six Board Committees, nine Management Committees, and seven Management Subcommittees. This governance structure is underpinned by a series of governance enablers which constitute the core to ensuring the required clarity and discipline of good corporate governance: corporate values, organization structure design, policies and procedures, the Bank's authorities' matrix and effective internal and external communication.

The Delegation of Authorities (DOA) matrix is regularly updated to accurately reflect internal approval controls.

The Board ensures the timely release of information as highlighted in the requirements of the SAMA and the CMA.

The Board of Directors shall have the ultimate responsibility for the success, soundness and solvency of the Bank, and is accountable for protecting depositors' and shareholders' funds. The members of the Board are responsible for the overall promotion and safeguarding of SAIB’s interests and upholding the highest standards of corporate governance across the Bank, its departments, and subsidiaries. The Board is responsible for setting the cultural and ethical tone of the Bank and developing its strategy, approving and overseeing implementation of the overall risk strategy, monitoring and overseeing Bank Managers’ performance, and organizational responsibilities such as the appointment and removal of the CEO and the Deputy CEO. They are accountable to the Organization’s shareholders.

Board composition

The Board of Directors comprises an appropriate number of Directors who have the relevant and diverse range of skills, expertise, experience, and background and who are able to effectively understand the issues arising in the Bank’s business. The Chairman of the Board should be a non-executive member.

The Board Members are appointed by the General Assembly for a term of three years and ideally should serve for no more than 12 consecutive years as per SAMA’s key principles of banks’ governance. At least two of the Board members are independent and no more than two members can be executives of the Bank, in line with SAMA and CMA principles. Through a simple vote, the Board chooses a Non-Executive Director for the positions of Chairman of the Board and Vice-Chairman. Board members must inform the Chairman of the Board and Corporate Governance Committee about their participation in other boards outside of the Bank and the executive positions they hold in other corporations; no board member can serve on the board of another Saudi bank licensed and incorporated in the Kingdom of Saudi Arabia to avoid conflict of interest, or on the boards of more than four other listed companies which must be disclosed to the Chairman of the Board and the Corporate Governance Committee.

The members of the Board must collectively possess the appropriate skills, expertise, and experience to ensure the proper oversight and management of the Bank. The Corporate Governance Manual defines the following guidelines for the collective skill set of the Board:

All Board members must maintain a high standard of honesty, integrity, competence, capability, financial soundness, and autonomy. They must always be diligent in conducting their directorship role and maintain loyalty to SAIB by prioritising the Bank’s interests and reputation. Each Board member has a responsibility to uphold the confidentiality of all information obtained over the course of their duties or seek the written permission of the Chairman of the Board to divulge confidential information during or after their tenure. Board members are prohibited from using any information for personal gain or for the benefit of any parties internal or external to the Bank.

The following table provides details about the members of the Board:

The Board shall hold the minimum number of meetings in accordance with the laws and regulations of Saudi Arabia and the meetings should be scheduled at the beginning of the year. Additional or extraordinary meetings can be arranged upon the request of the Chairman or two or more Board members. The agenda and information packs for Board meetings must be sent to members at least seven days in advance, with the exception of extraordinary meetings, in which case the materials should be sent as soon as possible. Board meetings can take place either face-to-face, by teleconference, or by video conference. The conditions for a Board meeting quorum are met when all the following conditions are satisfied:

• The Chairman or the Vice-Chairman of the Board are present at the meeting.
• At least five Board members attend in person or through representation by a Board member by means of a written notice. A Board member may not represent more than one member.

Board decisions are conducted through a simple majority of the votes of attending and represented Board members, with the deciding vote lying on the side of the Chairman of the Board (or in his absence, the Vice-Chairman) in the event of a tie.

In 2019, five Board of Directors’ meetings were held, and the details of Directors’ attendance are provided in the following table:

The Board Secretary, who is appointed by the Board, must support the Chairman in ensuring the smooth functioning of the Board, including assisting in the logistics of the Board and Board Committee meetings, ensuring the meeting agenda and information pack is sent to members at least seven working days in advance, maintain detailed meeting minutes and decision records of the Board, including discussions, votes, objections, and abstentions from voting. The Secretary must distribute the final meeting minutes of Board meetings to all concerned parties no later than 10 working days from the meeting date. The Secretary is the authorised channel of communication and coordination with related departments to notify the Executive Management of all Board decisions and should follow up on those decisions and ensure their implementation by the Executive Management. The Secretary is responsible for ensuring the regulatory compliance of Board affairs.

In compliance with Saudi regulators and Basel guidelines, the Board has established six Board Committees to assist it, as detailed in the following table:

Executive Committee

Responsibilities

• Oversee SAIB’s business strategy and its execution
• Reviewing, monitoring, and approving key financial and non-financial business
• Investment and operational decisions for the Bank within the authority defined by the Board

* Former Board Member

Risk Committee

Responsibilities

• Advise the Board regarding current and future plans and strategies for the Bank’s risk management
• Provide oversight on execution of plans and strategies
• Assist the Board in all activities and resolutions related to risk management

Audit Committee

Responsibilities

• Assist the Board of Directors in fulfilling their oversight responsibilities for the financial reporting process, the system of internal control including IT system control, the internal and external audit process
• Assist the Board of Directors through the Management Compliance Committee to monitor compliance with laws, regulations, and the code of conduct

* Former Board Member
** Former Member

Nomination and Remuneration Committee

Responsibilities

• Provide recommendations to the Board for new Board members and members of Senior Management
• Co-lead assessment of Board effectiveness together with Corporate Governance Committee
• Oversee Bank’s personnel or human resource policies
• Oversee compensation system’s design and operation
• Ensure compensation is appropriate and consistent with Bank’s culture, long-term business and risk strategy, performance and control environment, and legal and regulatory requirements

* Former Board Member

Corporate Governance Committee

Responsibilities

• Enhance and maintain best-in-class corporate governance practices by ensuring their implementations across all activities undertaken by the Bank
• Ensuring compliance of the Bank with Saudi and relevant international corporate governance regulations

Shariah Committee

Responsibilities

• Providing Shariah opinions on submitted applications and related contracts and forms
• Ensuring compliance of the Bank with Shariah principles
• Handling Shariah-related enquiries from the Bank and customers

The details of Board Committee meetings and attendance are provided in the following tables:

The Executive Committee held 12 meetings in 2019.

The Audit Committee held five meetings in 2019.

The Nominations and Remuneration Committee held five meetings in 2019.

The Corporate Governance Committee held three meetings in 2019.

The Risk Committee held four meetings in 2019.

The Shariah Committee held five meetings in 2019.

Two Extraordinary General Meetings were held in 2019.

The Board and the Management complement the responsibilities of each other but remain separate to ensure that sound governance practices are adhered to. The Board is responsible for setting the strategic direction of the Bank and monitoring the performance of the Bank across all functions. The Management is responsible for developing policies, procedures, and frameworks that enable the execution of the strategy set by the Board and reporting on the Bank’s performance across all functions to the Board, as well as highlighting key risks and making recommendations to address issues.

The Board has the organizational responsibility of appointing and removing the Chief Executive Officer (CEO) and the Deputy Chief Executive Officer (Deputy CEO). There is a clear division of responsibilities between the roles of the Chairman of the Board and the CEO – this ensures effective separation of the roles of the Board and the Management.

• The Board of Directors is responsible for the oversight of SAIB and its activities.
• The CEO and the Senior Management team who report to the CEO, are responsible for the day-to-day management of the Bank and its activities.

The Chairman of the Board is responsible for leading the Board, overseeing the Bank’s strategy and management, overseeing the implementation of corporate governance standards, and overseeing that effective external relations are in place with stakeholders such as shareholders, creditors, etc.

The Chairman, together with the CEO, is co-responsible for the Bank to its local regulator, SAMA, CMA, and to the Government.

The CEO controls and supervises business affairs and the management of the Bank as per the general authority delegated to them by the Board and the Executive Committee. They are responsible to the Board for the implementation of the regulations, policies, and decisions of the Board and the Executive Committee. They must also work together with the Nomination and Remuneration Committee for succession planning.

Board members have no individual power over the Bank’s staff, including the CEO. Their power is purely collective and direct communication between Board members and management outside of the Board or committee meetings must be facilitated through the Corporate Secretary.

SAIB has established nine management committees for the purpose of recommending, deciding, approving and/or monitoring key topics in their respective areas:

SAIB has established seven management subcommittees to make recommendations on specific topics to a particular Management or Board Committee:

GRI 102-16

Communication between Board members and members of the staff is facilitated either through the Board committee or subcommittee meetings or through the Corporate Secretary. In the case of a meeting with the Corporate Secretary, they must seek the consent of the CEO for the meeting and the CEO may opt to participate in the discussion.

The effectiveness of the Board is monitored through an annual performance evaluation, which is conducted by the Board Nomination and Remuneration Committee. The Nomination and Remuneration Committee reports its findings to the Chairman of the Board and recommends a course of action to address areas identified for improvement. The Board will also ensure that each Board committee conducts a regular self-evaluation of its performance and the performance of its members.

SAIB follows the International Financial Reporting Standards (IFRS) as modified by SAMA for the accounting of Zakat and Income Tax [relating to the application of International Accounting Standard (IAS) 12 – “Income Taxes” and IFRIC 21 – “Levies” insofar as these relate to accounting for Saudi Arabian Zakat and Income Tax] and complies with the provisions of the Banking Control Law, the regulations for companies in the Kingdom of Saudi Arabia and the Bank’s Articles of Association.

The Financial Statements for the year ended December 31, 2019 have been approved by the Directors to ensure that they present a true and fair view of the state of affairs of the Bank for the year under review.

Information technology is an integral part of the management and operations of the Bank and contributes to its competitive edge. The Bank’s IT development and operations are conducted in accordance with international standards and best practices. The Bank’s IT strategy is aligned with its business strategy.

The Information Security Management System (ISMS) is the system that safeguards the Bank’s IT hardware and digital assets, and by extension, the interests of customers, investors, employees, and other stakeholders. The ISMS is built upon the framework defined by the Bank’s IT Information Security Policy. The framework specifies for restricted access to digital assets and nominates an owner and rules for access, with access being issued on a “least privileged” and “need to know” basis. Physical locations that store critical sensitive facilities are protected with the appropriate security barriers and limitations to access. In the event of an information security threat, protocols are in place to be followed to ensure a fast and effective response to neutralise the threat.

The Bank’s Code of Conduct, enforced by the Bank’s corporate governance, stipulates the highest ethical and professional standards to be maintained across all commercial operations and practices. The Code, which applies to all Directors, employees, affiliates, and any representative of the Bank, inculcates a culture of professionalism wherein the highest standards of ethics, integrity, and respect for confidentiality are upheld.

The Bank has a Whistle-blowing Policy that facilitates the direct reporting to the CEO or General Manager of Human Resources of breaches of the Code of Conduct, ethics, laws, regulations, or procedures by employees without the fear of reprisal. A portal on the Bank’s website is also available to external parties who may wish to report any suspected irregularities.