IN PARTNERSHIP WITH Jordan Institute of Directors 97115 Jordan Corporate Governance Regulations Comparative Study 1 Companies Law 2 SME’s 3 Publicly Listed 4 Banks Contact Information: Maali@JIoD.org 5 Insurance Tel: 06 5534131 Fax: 06 5511195 Acknowledgement We would like to express our appreciation to all those who provided us with the support to make this unique publication a possibility. A special gratitude goes to the International Finance Corporation (IFC) for continuously encouraging us to do this publication and moving forward and in particular Yehia El Husseiny, the Corporate Governance Officer of IFC Advisory Services, Middle East & North Africa for all his efforts and guidance throughout Acknowledgement the process to make sure this happens. Furthermore we would like to acknowledge with much appreciation the vital role of all the organizations involved that helped us by proofreading the content and ensuring the accuracy of its information, in particular the following: Central Bank of Jordan Companies Controller Department Amman Stock Exchange Jordan Securities Commission A special thanks goes to Ms. Luma Qteishat, who assisted us in the legal content. Introduction: 2 Overview: 3 Implementation: 6 Focus Areas 7 I. Commitment to Corporate Governance: 8 II. Board Functioning: 9 1. Board Roles and Responsibilities: 10 2. Board Structure, Composition and Independence: 11 2.1 Size of Boards 12 2.2 Qualifications and Diversity of Composition 13 2.3 No. of Non-Executive Directors and Independent Directors 14 2.4 Definition of Independence 15 2.5 Separation of Chairman & CEO roles 16 2.6 No. of Directorship a Director can hold 16 2.7 Terms and Renewal of Terms 17 Table of Contents 2.8 2.9 3. Evaluation of Directors and Training Board Secretary Board Committees 17 18 19 3.1 Audit Committee 19 3.2 Remuneration Committee 19 III. Management and Control Environment 21 IV. Disclosure and Transparency 23 1. Companies Law 23 2. CCD CG Code 23 3. CG Code for Listed Companies 24 4. CG Code for Banks 24 5. CG Code for Insurance 25 V. Role of Stakeholders and Shareholders 26 Annex 1 27 Annex 2 28 Introduction: Overview: As the importance of Corporate Governance increases, an awareness and understanding of the different There are over 25 codes and guidelines issued in the Middle East and North Africa region since 2002. The codes relevant regulations becomes of paramount value. are listed in Annex 2 for reference. All codes are built around the OECD principles of Corporate Governance but focus on different dimensions. The importance and value of Corporate Governance is not the core of this publication. The publication is built around the premise that Corporate Governance is important and increasingly becoming of significant With respect to Jordan, there are four regulations and codes that directly address Corporate Governance as importance for growth, continued success and sustainability.1 follows: Accordingly, this publication aims to identify, highlight and summarize the different codes of Corporate 1. Corporate Governance Code for Banks by the Central Bank (the "CG Code for Banks") Governance along with other relevant regulations that impact Corporate Governance that are available in 2. Corporate Governance Code for Shareholding Companies by the Amman Stock Exchange (the "CG Code Jordan. for Listed Companies") 3. Corporate Governance Instructions from the Insurance Commission (the "CG Instructions for Insurance") We intend to address the different codes with respect to the principles of Corporate Governance as defined by 4. Jordan Corporate Governance Code for Privately Held Companies by the Companies Controller the Organization of Economic Cooperation and Development (OECD);2 namely: Department (the "CCD CG Code") I. Ensuring the Basis for an Effective Corporate Governance Framework In addition to the actual Corporate Governance codes that exist, there are other rules, regulations and II. The Rights of Shareholders and Key Ownership Functions legislation that affect the implementation of Corporate Governance in Jordan such as for shareholding III. The Equitable Treatment of Shareholders companies: Securities Law, Listing and Disclosure Rules and for banks: Banking Law etc. In addition, the IV. The Role of Stakeholders in Corporate Governance Companies Law No. 22 for 1997 (as amended) creates a baseline for companies with respect to Corporate V. Disclosure and Transparency Governance. VI. The Responsibilities of the Board In this comparative review, we will discuss the four Corporate Governance codes along with the Companies Law. Insurance This comparative study will provide an overview of how each code (or relevant regulation) addresses the Commission 2006 different principles and to what extent. Regulations, laws and codes in brief: Jordan Central Since certain Corporate Governance practices tend to overlap across different principles and cover broad Bank 2007 practices, we have found that it would be best in this study to provide a detailed assessment of different practices and requirements based on different dimensions. The dimensions we use are those defined based on 1. Companies Law Companies Law best practices as identified by the International Finance Corporation (IFC) as follows: 1997 The Companies Law No. 22 for 1997 as amended, (the "Companies Law") is a broad regulation that aims to 1. Commitment to Corporate Governance address the types of entities in Jordan, their registration and basic requirements of the operation of an entity. To Jordan Securities 2. Board Functioning a certain extent, it touches on the broad strokes of Corporate Governance. Commission 2008 3. Management Control Environment Companies Control 4. Disclosure and Transparency The Companies Law addresses a lot of issues. With respect to Corporate Governance, it addresses: Department 2012 5. Shareholder and Stakeholder Relations • Appointment of the Board • Roles of the Board of Directors3 äÉcô°ûdG áªcƒëH ΩGõàdE’G • General assembly rules and regulations CG Codes Commitment to Corporate Governance • Rights of shareholders • Role of the external auditor in Jordan Board Functioning IQGOE’G ¢ù∏› äÉ°SQɇ • Rights of stakeholders Management Control Environment ájQGOE’G áHÉbôdG áÄ«H 2. Central Bank Disclosure and Transparency á«aÉØ°ûdGh ìÉ°üaE’G The Central Bank of Jordan, through circulars in 2000, 2002 and 2003 referred all banks to guidelines issued by The Bank for International Settlements (BIS) in 1999 promoting the adoption of sound Corporate Governance practices by banking entities. Shareholder and Stakeholder Relations ídÉ°üŸG ÜÉë°UCGh ÚªgÉ°ùŸG äÉbÓY In 2004, the Central Bank of Jordan issued Bank Directors Handbook of Corporate Governance.4 The Handbook has five main sections, each of which addresses a broad area of Corporate Governance and bank Director responsibilities or duties. These can be summarized as follows: In some instances, different regulations 1. Introduction and Background: defines Corporate Governance, discusses why it is important for a bank’s safe across the region and and sound operation and outlines best practices. globe will also be 2. Director Standards, Values and Efficiency: outline qualities of bank Directors and how Boards can effectively referred to, to and efficiently fulfill their responsibilities to shareholders, depositors and other stakeholders. demonstrate different 3. Management Selection and Oversight: describes one of the Board’s most important functions and how it trends and practices. interacts with operating management. 4. Planning and Policies: describes the Board’s responsibilities to approve and monitor implementation of plans and policies. 5. Internal Control and Audit: discusses how the internal control system, internal audit and independent external audit interact and complement bank supervision. 3 The Companies Law also accounts for the appointment of a management committee in limited liability companies, which for the 1 For more information on why corporate governance is important, please refer to references listed in Annex 1. purpose of this comparative review is considered as Board of Directors unless specified otherwise. 05 2 The English and/or Arabic version can be downloaded online from: http://www.oecd.org/daf/ca/oecdprinciplesofcorporategovernance.htm 4 A copy can be found online at: www.cbj.gov.jo/uploads/corp_e.pdf Jordan Corporate Governance Regulations Comparative Study 06 3 In 2007, the Central Bank of Jordan issued a Corporate Governance Code (the "CG Code for Banks")5 that is Applicability: intended to promote international best practice with respect to Corporate Governance of Jordanian banks. Each code or regulation applies to a different group of companies. The codes discussed in this comparative review apply to the following group of companies respectively: The guiding principles of the Bank’s Code are fourfold: Regulation or Code Applicability • Fairness in the treatment of all stakeholders (such as shareholders, depositors, creditors, the bank’s employees and regulators). Companies Law All companies registered under the companies • Transparency and disclosure to enable stakeholders to assess the Bank’s financial performance and condition. law • Accountability in the relationships between the Bank’s executive management and the Board, and between the Board and the shareholders and other stakeholders. CG Code for Banks Banks registered with the central banks including • Responsibility – the clear division and delegation of authority. foreign banks9 CG Code for Listed Companies Companies listed in the Amman Stock 3. Insurance Commission: Exchange10 The Insurance Commission issued Corporate Governance Instructions in 2006 (the "CG Instructions for CG Instructions for Insurance Insurance companies registered with the Insurance")6 that came into effect in 2007. The instructions covered: insurance commission including foreign insurance companies or branches operating in • Composition of an effective and knowledgeable Board (experience, independency etc.) Jordan • Role and responsibility of the Board of Directors and executive management and experience necessary to fill such a post CCD CG Code All companies that are not listed in the Amman • Composition and role of an audit committee Stock Exchange fall under this code including: • Details of a Risk Management and Internal Control and Supervision System - Public Shareholding Companies that are not • Role, responsibility and accountability of an internal auditor listed in the stock exchange • Disclosures necessary for compliance - Private Shareholding Companies - Limited Liability Companies As applicable, the provisions of these instructions shall be applied on the authorized manager and the branch - Private Shareholding Companies that are not for of the foreign insurance Company and according to the decision to be issued by the Director General for this profit purpose. - Limited Liability Companies that are not for profit 4. Jordan Securities Commission: In 2008, the Rules of Corporate Governance for Shareholding Companies listed at Amman Stock Exchange Implementation: (ASE) were issued (the "CG Code for Listed Companies")7 that cover a broad range of issues as follows: Regulations and codes can take several different formats in terms of their implementation. From two ends of the • The Board of Directors of the Shareholding Company spectrum, codes can be mandatory which means that all their provisions must be complied with whilst other • Board of Directors Tasks and Responsibilities codes are voluntary which means that implementation of their provisions are voluntary. In between the two • Committees Formed by the Board of Directors ends there is also "Comply or Explain" mode of implementation which requires entities to either comply with • Meetings of the Board of Directors the provision and in the event that they don't, they need to explain why not i.e. that the provision is not • General Assembly Meetings applicable, or they are still not ready to comply, etc. • Shareholders Rights • General Rights This third approach is intended to give companies flexibility in implementing the Corporate Governance rules • Rights within the Jurisdiction of the General Assembly and sufficient time to adapt to them, in order to enhance awareness of these rules and to achieve full • Disclosure and Transparency compliance gradually. • The Audit Committee • Duties of the Audit Committee Often to ensure buy-in and increase awareness, codes also transform from one end to the other i.e. start with • Powers of the Audit Committee being voluntary, then become "Comply or Explain" and then become mandatory. This ensures that entities • The External Auditor gradually buy into the codes or regulations and have the time and opportunity to build their capacity to comply. In Jordan, the codes are mandatory and/or "Comply or Explain". The CG Code for Listed Companies is a 5. Jordan Corporate Governance Code for Privately Held Companies combination of both whereby some provisions are mandatory and others require compliance or an explanation. There are no voluntary governance codes or regulations. This can be reflected as follows: The code of Corporate Governance issued by the companies controller department issued in June 2012 (the "CCD CG Code")8 is intended to be applicable to all companies registered in the Ministry of Industry and Trade. Regulation or Code Form of Implementation The code covers 5 key areas as follows: Companies Law Mandatory • The Board of Directors/Management Committee – roles and responsibilities • Control Environment CG Code for Banks Mandatory • Transparency and Disclosure • Rights of Shareholders/Partners CG Code for Listed Companies Mandatory and Comply or Explain • Stakeholders CG Instructions for Insurance Mandatory CCD CG Code Comply or Explain 5 A copy can be found online at: www.cbj.gov.jo/uploads/code_book__e.pdf 6 A copy of the instructions can be found online at: http://www.irc.gov.jo/legislation3.asp 7 A copy can be found online at: http://bit.ly/17yQiKk 9 At the date of this publications there are 18 local banks and 13 foreign branches registered. 07 8 A copy can be found online at: http://bit.ly/103zkMG 10 At the date of this publications there are 139 listed companies. Jordan Corporate Governance Regulations Comparative Study 08 3 Focus Areas I. Commitment to Corporate Governance: As discussed earlier, each code focuses on different Corporate Governance issues. This could be a result of Commitment to Corporate Governance is reviewed with respect to the following: different interests based on the applicability and scope of the regulation i.e. a focus on internal management issues would be more applicable for SME's whilst a focus on shareholders rights would be more applicable for • The extent to which the Board discusses Corporate Governance issues and how that demonstrates strong listed companies. commitment to CG • Whether the Company has developed Corporate Governance codes and/or guidelines Accordingly, with respect to Jordanian regulations, the focus areas and depth of such focus areas can be • Whether the Company is aware of national/regulatory CG principles/codes and ensures compliance summarized as follows: therewith • Company disclosures to shareholders and stakeholders of information demonstrating its commitment to Companies CCD CG CG Code for Listed CG Code CG Instructions Corporate Governance Law Code Companies for Banks for Insurance • If the Company has in place other pertinent codes and policies, such as Code of Conduct, Conflict of Interest and are well understood and adhered to with a ‘Whistleblower’ process defined COMPLIANCE MODEL V-M-C Mandatory Comply or Explain Comply or Explain Mandatory Mandatory From a comparative perspective, there are only three elements that could be captured to compare this dimension which are the need for companies to disclose their commitment to Corporate Governance, the CODE FOCUS ON CG PRINCIPLES establishment of code of ethics or conduct and whistleblowing processes available or required. Commitment to Based on that, this dimension is addressed by the different Corporate Governance regulations in Jordan as CG follows: Board functioning Companies CCD CG CG Code for Listed CG Code CG Instructions Law Code Companies for Banks for Insurance Management & Control Disclosure on To publicly report Environment commitment to its compliance corporate with the CG code Disclosure and governance Transparency Code of The Code of Formal policies, Role of Ethics/Conduct Conduct may including a Code Shareholders and establish the social of Conduct, and stakeholders and environmental definitions and duties of the controls on organization. conflicts of interest Blue: and insider dealing, have been Green: established and Orange: are required to be Red: assented to by all employees and Directors, and Based on the above, it is clear that the CG Code for Banks seems to have a very strong focus on the functioning Disclaimer: these have been of the Board while the CG Code for Listed Companies has a very strong focus on disclosure and transparency. published. It is critical to state Whistle- Each of these sections will be discussed comparatively in more depth. here that this is the blowing The Board should The Bank has set opinion of the authors develop a whistle- up arrangements and whether any area blowing whereby staff can is identified as a very mechanism within confidentially raise strong focus area, its Code of concerns about weak focus area or Conduct possible otherwise is not a irregularities, and judgement on the that allow for such code itself but rather concerns to be shedding light on the independently focus areas investigated and comparatively. followed up. Such arrangements are overseen and monitored by the Audit Committee. 09 Jordan Corporate Governance Regulations Comparative Study 10 3 II. Board Functioning: 1. Board Roles and Responsibilities: According to the OECD principles, the Board's roles and 5. Ensuring a formal and transparent Board nomination and The codes address this scope of responsibility in different depth and detail. responsibility are addressed as follows: election process. Since the Companies Law handles all types of companies, it addresses the roles and responsibility of the Board OECD Guidelines: 6. Monitoring and managing potential conflicts of interest of of Directors per Company were applicable i.e. in Article 62 it defines the roles and responsibility of the management, Board members and shareholders, including management committee of an LLC, in Article 72 (Repeated) it defines the roles and responsibility of Board of The Corporate Governance framework should ensure the misuse of corporate assets and abuse in related party Directors of private shareholding companies and in Articles 132, 140 and 142 the roles and responsibility of strategic guidance of the Company, the effective monitoring of transactions. the Board of Directors of publicly held companies. The most extensive is covered with respect to publicly held management by the Board, and the Board’s accountability to companies and accordingly, for all types of companies where their specific provisions do not address a matter, the Company and the shareholders. 7. Ensuring the integrity of the corporation’s accounting and the provisions related to publicly held companies apply i.e. Article 89 (repeated) of the Companies Law. financial reporting systems, including the independent A. Board members should act on a fully informed basis, in good audit, and that appropriate systems of control are in place, It is important to note here that for the purpose of this comparative review, where no distinction is made faith, with due diligence and care, and in the best interest of in particular, systems for risk management, financial and between the companies i.e. management committee for LLC or Board of Directors for privately held companies the Company and the shareholders. operational control, and compliance with the law and or publicly held companies, the term "Board of Directors" applies to both. relevant standards. B. Where Board decisions may affect different shareholder The CCD CG Code addresses the roles and responsibility of Board members and/or management committees groups differently, the Board should treat all shareholders 8. Overseeing the process of disclosure and communications. in article 1.2 through the following principle: fairly. E. The Board should be able to exercise objective independent The Board of Directors should: C. The Board should apply high ethical standards. It should take judgment on corporate affairs. into account the interests of stakeholders. • Provide continuity for the entity 1. Boards should consider assigning a sufficient number of • Approve strategy and structure D. The Board should fulfill certain key functions, including: non-executive Board members capable of exercising • Approve annual financial statements and External Auditor's report 1. Reviewing and guiding corporate strategy, major plans of independent judgment to tasks where there is a potential • Select, appoint, support and review the performance of the CEO action, risk policy, annual budgets and business plans; for conflict of interest. Examples of such key • Delegate to management setting performance objectives; monitoring responsibilities are ensuring the integrity of financial and • Exercise accountability to shareholders and be responsible to relevant stakeholders implementation and corporate performance; and non-financial reporting, the review of related party • Take decisions on issues that require Board approval as required by law or the entity's by-laws overseeing major capital expenditures, acquisitions and transactions, nomination of Board members and key divestitures. executives, and Board remuneration. The code goes on to provide further guidance with respect to each responsibility in a bit more depth. 2. Monitoring the effectiveness of the Company’s governance 2. When committees of the Board are established, their The CG Code for Listed Companies, CG Code for Banks and CG Instructions for Insurance go into depth in practices and making changes as needed. mandate, composition and working procedures should be terms of the Boards roles and responsibilities in Chapter Two Section One, Article 2 and Article 3 respectively. well defined and disclosed by the Board. 3. Selecting, compensating, monitoring and, when necessary, The respective provisions are quite broad to compare however, certain responsibilities are more comparative replacing key executives and overseeing succession 3. Board members should be able to commit themselves than others such as the express responsibility of the board (i) to represent all shareholders not just their planning. effectively to their responsibilities. representative shares; and (ii) for succession planning and the role of the board in this respect. This can be comparatively represented as follows: 4. Aligning key executive and Board remuneration with the F. In order to fulfill their responsibilities, Board members should longer term interests of the Company and its shareholders. have access to accurate, relevant and timely information. Companies CCD CG CG Code for Listed CG Code CG Instructions Law Code Companies for Banks for Insurance As can be seen from the above list, this is probably one of the broadest focus areas of responsibility. Accordingly to be able to address this component, it will be further divided into three sections as follows: Board represents Directors represent Directors owe a all shareholders all shareholders responsibility to 1. Board roles and responsibilities the bank as a 2. Board structure, composition and independence whole and not to 3. Board committees any particular shareholder Companies CCD CG CG Code for Listed CG Code CG Instructions Succession The Board of The Nomination The Board has Law Code Companies for Banks for Insurance planning Directors should and Remuneration approved Board roles and function in a way committee is executive responsibilities to ensure the responsible to set management sustainability of an a human resources succession plans Board structure, organization by plan in terms of for senior composition and creating the needs of the executives of the independence succession plans organization and Bank, which set and structures that the required out the required Board Committees enable such caliber qualifications and continuity. requirements of the positions. 11 Jordan Corporate Governance Regulations Comparative Study 12 3 2. Board Structure, Composition and Independence: No. of At least 2 One third of the At least 3 At least one third Independent independent board be independent In this component, we compare the following criteria: Directors independent Directors No. Criteria Description Separation of Chairman may be Chairman and Chairman should Chairman must be Roles must be Chairman and a full-time CEO should be not have any separate from the separated. 1 Size of the Board Comparing the size of Boards as permitted by the CEO employee separated executive position CEO with no Chairman must codes and regulations in the Company family relationship not be a member of the executive 2 Qualifications and diversity of Comparing the different qualifications necessary management composition to become Board members and what diversity of Board members is required Number of Max. 5 whether in 2-4 years Max. 5 whether in directorships their personal renewable for up their personal 3 No. of Non-executive Directors and This is two fold, comparing which codes address capacity or as to three terms capacity or as Independent Directors non-executive Directors and how many representative of representative of non-executive Directors should be on the Board corporate body. corporate body. in addition to the number of independent Directors required Terms and Four years Not less than three Renewal and not more than 4 Definition of independence Comparing the different definitions of four independence Appointment of Yes Yes Yes Yes 5 Separation of Chairman & CEO roles Comparing how the relationship between the Corporate Chairman and CEO should be handled Secretary 6 No. of Directorship a Director can hold Comparing the number of Directorship a Director Benchmark Comparison: Board Size Boards of public can hold companies have seven There is no exact benchmark for optimal to twelve members.2 7 Terms and Renewal of Terms Comparing how long a Director can serve Board size in a Company. It will depend Companies in the properly and effectively on each Company finding the right size MENA region have an to ensure its Board includes a good mix average of six to ten 8 Evaluation of Directors Comparing how if at all should Board members of skills and perspectives and can hold members (Banks tend be evaluated productive, constructive discussions on to be a bit larger issues facing the business. Too few Boards with ten or 9 Corporate Secretary Comparing which codes address corporate members will compromise more).3 secretaries and to what extent decision-making and too many will be burdensome to manage. 1Research Recommendations In brief, some of the key criteria above can be summarized as follows: Internationally, the benchmark varies by Electronic Voting, 2004 country/market. In the UK, a majority of 2PwC The Board Agenda, Companies CCD CG CG Code for Listed CG Code CG Instructions Boards on the FTSE 250 have six to Good Practices, 2001 Law Code Companies for Banks for Insurance eleven members.1 In the US, Latin 3IFC/Hawkamah MENA CG America, and Asia Pacific the majority of Survey, 2008 Size of the board <13 & >3 (for a <13 & >3 <13 & >5 <13 & >7 limited liability company a Below is an in depth review of each criteria. manager or a management 2.1 Size of Boards committee <7 & >2) Companies CCD CG CG Code for Listed CG Code CG Instructions Law Code Companies for Banks for Insurance Qualifications and - Candidate must The Board of Members of the Some specific skill Members of the Diversity of be above 21 years Directors should Board should be sets are required Board should have Size of the board <13 & >3 (for a <13 & >3 <13 & >5 <13 & >7 Composition together represent qualified with for some the necessary limited liability a balanced mix of adequate committees but knowledge, company a competences to knowledge and not for experience and manager or a achieve their roles experience in and membership to the skills to supervise management and more specific board. There and follow up on committee <7 & responsibilities requirements are should be an the affairs of the >2) and have the listed for element of organization. necessary committees diversity With respect to Jordan regulations, the size of the Board varies from 3 to 13 for public shareholding background and companies11 or for limited liability companies no less than two and no more than seven members12 as per the professional Companies Law. However, there is a requirement for a minimum of 5 or 7 for listed companies as per the CG experience Code for Listed Companies and insurance companies as per the CG Instructions for Insurance respectively. required No. of Half the board At least 3 Majority Non-Executive members Directors 13 14 11 Companies Law, Article 131 (1) 12 Companies Law, Article 60 (a) Jordan Corporate Governance Regulations Comparative Study 3 2.2 Qualifications and Diversity of Composition 2.3 No. of Non-Executive Directors and Independent Directors Companies CCD CG CG Code for Listed CG Code CG Instructions Companies CCD CG CG Code for Listed CG Code CG Instructions Law Code Companies for Banks for Insurance Law Code Companies for Banks for Insurance Qualifications and - Candidate must The Board of Members of the Some specific skill Members of the No. of Half the board At least 3 Majority Diversity of be above 21 years Directors should Board should be sets are required Board should have Non-Executive members Composition together represent qualified with for some the necessary Directors a balanced mix of adequate committees but knowledge, competences to knowledge and not for experience and No. of At least 2 One third of the At least 3 At least one third achieve their roles experience in and membership to the skills to supervise Independent independent board be independent and more specific board. There and follow up on Directors independent Directors responsibilities requirements are should be an the affairs of the and have the listed for element of organization. necessary committees diversity In composing an effective Board, some codes have taken into consideration the need for non-executive background and Directors. professional experience The Companies law does not expressly address the issue of non-executive or independent Directors. It does required however, mention that Board members of publicly listed companies shall hold a number of shares as required by the Company's memorandum or association18 whilst members of the management committee may or may The different Corporate Governance codes go into varying depth of the qualifications required of Board not be shareholders.19 members. The Companies Law handles this requirement on two levels. First, basic requirement, to be a Board member the candidate must not be less than twenty-one years old or be a civil servant in the Government or an However, the Corporate Governance codes require a different composition of non-executive Directors on the official public corporation.13 Second, it negates membership whereby certain individuals cannot apply i.e. Board varying from half the Board being non-executives to at least three. persons convicted of any felony or misdemeanor involving honor such as bribery, embezzlement, theft, forgery, abuse of confidence, false testimony, or any crime against public manners and morals, or if they are The CCD CG Code suggests that half the Board members need to be non-executive with at least two incapacitated or declared bankrupt unless rehabilitated.14 independent Directors.20 The CG Code for Banks requires that specific Board qualifications exist for their committees but not for The CG Code for Listed Companies requires that at least one third of their Board members be independent21 membership to the board itself. However, they require an element of diversity through an optimal mix of skills, but does not specify non-executive Directors per se in their composition. However, they refer to the need of at ages and experiences.15 least three non-executive Directors for the composition of their committees.22 Accordingly, implicitly, this is a requirement to have at least three non-executive Directors on the Board. The CG Code for Listed Companies requires that members of the Board should be qualified with adequate knowledge and experience in administrative affairs.16 More specific requirements are listed for committees. The CG Code for Banks requires that the majority of the Board be non-executive, at least 3 independent Directors23 and potentially more if the roles of the Chairman and CEO are combined. The CG Instructions for Insurance requires that members of the Board should have the necessary knowledge, The CG Instructions for Insurance requires that at least one third of the Board be independent24 but does not experience and skills to supervise and follow up on the affairs of the Company.17 address non-executive Directors. The CCD CG Code addresses this as follows: 1.1.a Diverse competences The Board of Directors should together: - Represent a balanced mix of competences to achieve their roles and responsibilities and that can be representative of the entity’s service/product and target audience taking into consideration age and gender. By means of an example to include Directors with the following: • Experience serving on other Boards of Directors • Experience in managing executives/management • Experience in identifying and controlling risks • Financial knowledge • Knowledge of the entity's nature of business • Knowledge of national and international markets • Knowledge in applicable laws and regulations - Have the background and professional experience required to achieve their main objective of protecting and adding value to the entity. By means of an example Directors should: • Be able to read and understand management and financial reports • Be able to provide business judgment independently to avoid conflicts of interest and in the event of any conflict of interest; has to act in accordance with this Code and its provisions related to conflict of interest, related party transactions and disclosure • Align their values with those of the entity • Have knowledge of Corporate Governance best practices • Have a good reputation and personal integrity • Have enough time available to exercise their fiduciary duties • Be committed to Corporate Governance implementation • Have a strategic vision 18 Companies Law, Article 133 19 Companies Law, Article 60 (a) 13 Companies Law, Article 147 20 Code for Privately Held Companies, Article 1.1b 13 Companies Law, Article 134 21 Corporate Governance Code for Shareholding Companies, Chapter Two Article 1 15 Corporate Governance Code for Banks, Article 2 (d) (i) 22 Corporate Governance Code for Shareholding Companies, Chapter Two, Section 2, Article 2 16 Corporate Governance Code for Shareholding Companies, Chapter Two Article 6 23 Corporate Governance Code for Banks, Article 2 (d) (i) and (ii) 15 17 Corporate Governance Instructions from Insurance Commission, Article 4 a 24 Corporate Governance Instructions from Insurance Commission, Article 4 a Jordan Corporate Governance Regulations Comparative Study 16 3 2.4 Definition of Independence Family connection A director is A director loses A director is A director is not The component of independence on the Board is very important to ensure that the Board of Directors can compromising independent if: their independent if: considered undertake independent decisions for the benefit of the entity. However, each code defines independence independence • They are not a independence if: • They are not a independent if: close family •Any of their relative (up to the •They are related differently. Below is a comparison of the difference in definitions: member of any relatives are or have second degree) of to a senior other Director or been employed in an administrator of employee in the Companies CCD CG CG Code for Listed CG Code CG Instructions any senior the executive the bank; organization or in Law Code Companies for Banks for Insurance personnel of the management of the an affiliated Employment A director is A director loses A director is A director is not organization or organization during organization by independent if: their independent if: considered any associated the last three years marriage or family • They are not and independence if: • They have not independent if: organization. preceding relationship which have not been •They are or have been employed by • They are or have nomination for exists for the last employed in any been employed by the Bank for the been an employee membership of the three financial capacity by the the organization or preceding three of the organization board. years. organization or any of its affiliates years. or in any affiliated • They or any of any associated during the last • They are not organization during their relatives are a organization in the three years receiving payment the period as a partner of the past three years. preceding or compensation board member or external auditor or • They are not nomination for from the Bank during the two if they or are or receiving membership of the (other than as a previous financial have been a partner significant board. Director). years. or employee of the additional • They are not, nor They have a organization’s remuneration from in the past three consultancy external auditor the organization or years have been, relationship with during the last three any associated affiliated with or the board of the years preceding organization apart employed by a organization. their nomination for from a fee present or former •They accept any membership of the received as auditor of the remuneration or board. Non-Executive Bank. compensation from Director. the organization or Significant A director is A director loses A director is A director is not any affiliated shareholder independent if: their independent if: considered organization for compromising • They do not independence if: • They are neither independent if: services provided to independence own, directly or • They control a significant • They acquire 5% the board for the indirectly, a more than 10% of shareholder with or more of the current year or quantity of shares the organization’s effective interest in stocks of the during the last three which could share capital. the capital of the organization. financial years. reasonably be Bank nor affiliated •They have has perceived to with one. control over the Business A director is A director loses A director is A director is not materially interfere organization. relationship independent if: their independent if: considered with the Director’s • They do not independence if: • They are not a independent if: ability to act in the directly or • They or any of director or owner • If the member best interests of indirectly have any their relatives have of an organization has a direct or the organization. business any direct or with which the indirect relationships with indirect interest Bank does commercial 2.5 Separation of Chairman & CEO roles the organization, with the business (other interest with the or associated organization or than business organization or Companies CCD CG CG Code for Listed CG Code CG Instructions organization, any of its affiliates relationships made any other affiliated Law Code Companies for Banks for Insurance senior personnel for the value equal in the ordinary organization or shareholders. to or more than course of business Separation of Chairman may be Chairman and Chairman should Chairman must be Roles must be • They are free 50,000 JD of the Bank and on Chairman and a full-time CEO should be not have any separate from the separated. from any interest substantially the CEO employee separated executive position CEO with no Chairman must and any business same terms as in the Company family relationship not be a member or other those prevailing at of the executive relationship which the time for management could reasonably comparable be perceived to transactions with The Chairman and the Chief Executive Officer (CEO) have different responsibilities, and accordingly to avoid materially interfere non-affiliated conflicting interests and maintain effective supervision of management, how these roles are separated, if at all with the Director’s parties); is important. ability to act in the best interests of The codes handle the separation of the Chairman and CEO roles differently. the organization or The CCD CG Code expresses a preference for the Chairman to be an independent member.25 is in conflict therewith. 17 25 Code for Privately Held Companies, Article 1.1c Jordan Corporate Governance Regulations Comparative Study 18 3 The CG Instructions for Insurance requires the Chairman not to be a member of the executive management - The CCD CG Code requires that Directors should serve for a specific term between 2-4 years and such term which is quite broad since this could mean a non-executive Director can be the Chairman but since the code may be renewed for three additional terms.34 does not address non-executive Directors this would infer that the intention is an independent Director.26 None of the other codes address the term or renewal of terms for Board of Directors. The CG Code for Banks requires that the Chairman of the Board be separated from that of the CEO (General Manager). Furthermore, it requires that there be no relationship up to the third degree between the Chairman 2.8 Evaluation of Directors and Training and the CEO. However, if the Chairman is an executive member then there should be consideration to appoint additional independent members to the Board.27 To ensure that the identified composition and the selected Board members continue to perform their roles and responsibilities adequately, it is worth taking a comparative look at the requirement to provide induction The CG Code for Listed Companies requires that the Chairman of the Board should not have any executive opportunities for new Board members, continuous learning for existing Board members and evaluation of position in the Company.28 Directors to regularly improve performance. In the Companies Law, the Chairman of the Board of Directors may be a full time employee with the approval These can be summarized as follows: of two-thirds of the Board members. The Board of Directors shall in this case determine the powers and duties that the Chairman may expressly exercise and shall fix his due fees and bonuses, provided he is not a full-time Companies CCD CG CG Code for Listed CG Code CG Instructions Chairman of the Board of Directors or the general manager of any other Public Shareholding Company.29 Law Code Companies for Banks for Insurance 2.6 No. of Directorship a Director can hold Induction Each Director The Company The Nominations upon appointment shall provide all and Remuneration Companies CCD CG CG Code for Listed CG Code CG Instructions should receive relevant Committee is Law Code Companies for Banks for Insurance some sort of information about responsible for induction to help the company to providing No. Of Max. 3 public Max. 3 public the Director better ensure that the background Directorship shareholding shareholding understand the directors can briefing material companies either companies either organization's perform their for Directors as in personal in personal business, its duties requested, capacity or as a capacity or as a strategy, policies, representative. In representative. In challenges to total no more than total no more than ensure their 5 public 5 public effective shareholding shareholding contribution to the companies in any companies in any Board. capacity. capacity. On-going Advise the The Bank The Companies Law places a limitation to membership to Boards of publicly listed companies.30 Individuals development management and encourages relevant staff Directors to attend can in their personal capacity be Board members of a maximum of three public shareholding companies or regarding any seminars and represent a corporate body in the Board of Directors of three public shareholding companies. However, in total amendments to events that allow no person shall be a member of more than five public shareholding companies in their personal capacity or as the laws and them to meet local representatives of a corporate entity. The CG Code for Listed Companies also states the same requirement.31 provide adequate and international training on organizations, The other codes do not address this. relevant regulatory entities and issues. companies. 2.7 Terms and Renewal of Terms Board evaluation The Board of The Board, Companies CCD CG CG Code for Listed CG Code CG Instructions Directors should through the Law Code Companies for Banks for Insurance regularly (at least Nominations and once every two Remuneration Terms Four years 2-4 years Cannot be less years) review its Committee, at than 3 or more composition and least annually than 4 years performance. assesses its own The Nomination performance as a Renewal For up to three and Remuneration Board. terms Committee would propose to the The CG Code for Listed Companies states that the term of Directors shall be specified in the articles of Board a association of the Company but cannot be less than three or more than four.32 methodology for such evaluation. The Companies Law stipulates that the Board of Directors shall undertake the management of the Company for four years as from the date of its election.33 26 Corporate Governance Instructions from Insurance Commission, Article 4 e 27 Corporate Governance Code for Banks, Article 2 (b) 28 Corporate Governance Code for Shareholding Companies, Chapter Two Article 5 29 Companies Law, Article 52(a) 30 Companies Law, Article 146 (a) 31 Corporate Governance Code for Shareholding Companies, Section Two, Chapter Two Article 7 32 Corporate Governance Code for Shareholding Companies, Section Two, Chapter Two Article 2 19 33 Companies Law, Article 132 34 Code for Privately Held Companies, Article 1.1.e Jordan Corporate Governance Regulations Comparative Study 20 3 2.6 No. of Directorship a Director can hold The CG Code for Listed Companies also mentions the responsibility of the Board to appoint a Board secretary whose responsibility would be to record minutes of Board meetings and their decisions as well as the list of Companies CCD CG CG Code for Listed CG Code CG Instructions members present and any reservations that they express.37 Law Code Companies for Banks for Insurance The CCD CG Code also requires the appointment of a corporate secretary with clear roles and responsibility.38 Appointment Yes Yes Yes Yes Role • Arrange for • Coordinate board • Record minutes • Arrange for 3. Board Committees Board meetings of directors of the Board Board meetings • Preparation of meetings meetings • Taking of The different codes regulate different committees in different depth. agenda • Preparing and • Prepare a list of minutes • Record minutes disseminating members present • Ensure Board The Companies Law does not address the issue of governance committees. However, in all the other codes, of the Board’s relevant material for • Record any procedures are certain committees are required. This can be summarized as follows: meeting and meetings in advance reservations followed decisions • Taking and expressed • Information is Companies CCD CG CG Code for Listed CG Code CG Instructions documenting conveyed between Law Code Companies for Banks for Insurance minutes of the Board members, meetings members of Board Audit Yes Yes Yes Yes • Ensure that board committees, and procedures are the executive Nomination Yes Yes Yes No followed management • Ensure the board Remuneration As part of the As part of the As part of the No members sign the nomination nomination nomination resolutions. committee committee committee • Follow up an implementation of Risk Management Yes decisions taken. Committee • Keep records and documentation of Board of Directors However, each code addresses each committee in different depths and covering different issues. meetings. • Ensure 3.1 Audit Committee governance practices and With respect to the audit committee we compared the following: policies are complied with. Companies CCD CG CG Code for Listed CG Code CG Instructions • Ensure Law Code Companies for Banks for Insurance compliance towards relevant laws and Composition At least 3 Three NED At least 3 regulations related members At least 2 members to the Board’s decisions. Independence Majority At least 2 At least one third • Carry out and independent coordinate the security of data and Committee Chair Independent Independent documents within the control of the Financial All members At least two All members of the board. expert should have members of the Audit Committee financial Audit Committee must have know-how but at should have knowledge and It is becoming an increasing practice for companies to appoint a corporate secretary to help manage the Board least one person relevant financial experience in of Directors. should have management finance and previous work qualifications and/ accounting, and at Meeting experience as an or expertise least one of them Accordingly, some codes address the importance and/or the appointment of such a corporate secretary (also frequency auditor or must have worked referred to as a Board secretary). accountant or with previously in the relevant accounting or The Companies Law requires that the Board of Directors appoint a secretary of the Board. The secretary's role degree finance fields, and is specified to include: arrangement of Board meetings, preparation of the agenda for Board meetings, and that person must recording the minutes of the Board’s meetings and decisions.35 have an academic or professional CG Code for Banks identifies that the role of the Board secretary is an important one. The role of the Board certificate in secretary is mentioned to include in addition to arrangement of meetings and taking of minutes to also ensure accounting, the board procedures are followed and that information is conveyed between the members of the Board, the finance or related members of the Board committees and the executive management. The whole Board is responsible for the fields. appointment, and removal of the Board secretary.36 At least four times At least four times a year a year 35 Companies Law, Article 154 37 Corporate Governance Code for Shareholding Companies, Section 3 (5) 21 36 Corporate Governance Code for Banks, Article 2(e) (xi) 38 Code for Privately Held Companies, Article 1.5 Jordan Corporate Governance Regulations Comparative Study 22 3 3.2 Remuneration Committee III. Management and Control Environment With respect to the Nomination and Remuneration committee we compared the following: The management and control environment dimensions addresses several issues as follows: Companies CCD CG CG Code for Listed CG Code CG Instructions • Risk management framework and whether the structure is working effectively Law Code Companies for Banks for Insurance • The presence and effectiveness of internal controls and internal audit frameworks • The degree of independence of the external auditor and the relationship therewith Remuneration The Remuneration The Remuneration The Nominations • The checks and balances to ensure compliance with existing rules and regulations Committee Committee Committee and Remuneration formulates formulates Committee Like all other dimensions, the various codes and regulations address this dimension in different ways and in remuneration remuneration comprises a different depths. To create an effective baseline for comparison, the issues that will be compared are: policies policies and minimum of three insures non-executive 1. Internal audit independence of Directors, the 2. Internal controls and risk management the Directors majority of which 3. Degree of independence of external auditor (including the 4. Rotation of external auditors Committee 5. Non-Audit work handled by external auditors Chairman) are independent. Companies CCD CG CG Code for Listed CG Code CG Instructions Remuneration Set the Set the The Nominations Adopting Law Code Companies for Banks for Insurance guidelines remuneration remuneration and Remuneration measures to structure and structure and Committee specify the amount Internal audit Organizations The Audit The Internal Audit Appoint an policy for key policy for key nominates all of compensation should consider Committee is function of the internal auditor or executives executives Board determined for the establishing an responsible to Bank should be establish an appointments, members of the internal audit ensure the provided full internal audit unit duly considering Board of Directors function or compliance of the access to Bank to audit the candidates’ and the executive appoint an internal Company with records and staff effectiveness and abilities and management auditor. The regulations and members, and sufficiency of the qualifications and, including salaries, internal auditor effectiveness of the given sufficient internal control for allowances, should have a internal audit . standing and and supervision re-nominations, remunerations and broad scope of authority within system, and the their attendance other privileges in work to review all the Bank to business of the and the quality a manner that matters within the adequately carry company and extent of their preserve the organization. out its task. including the participation in interest, goals and management of Board meetings. objectives of the the company risks Company and in accordance with Internal Controls Management The Board is The Board as a The company shall the relevant and risk should establish responsible to set whole ensures and establish an legislation. management and implement, a risk management certifies that internal authenticated and the Board policy and control systems are internal control should be assured establish the effective and that and supervision that there is, an internal controls. the Bank’s activities system, accredited effective internal The Audit comply with by the board of control system that Committee shall strategy, policies directors of the includes risk undertake the task and procedures company assessment. of overseeing and approved by the including ensuring The Board should monitoring Board or as required the Availability of review risk accounting and by law or supervision management internal control regulation. controls and policies at least and auditing As a critical part of segregation of once a year activities in the these internal responsibilities, company. controls, the Board and ascertainment ensures that all of segregation dimensions of the between the Bank’s risk are authorities managed properly responsible for risk The Audit management and Committee is the controllers on accountable to these risks., review and monitor the internal controls and the Risk Management Committee is accountable to ensure proper risk management policies are in place. 23 Jordan Corporate Governance Regulations Comparative Study 24 3 External Auditor The external To maintain The company’s The Audit IV. Disclosure and Transparency Independence auditor should not: independence the external auditor is Committee participate in the external auditor(s): not a founder, a assesses the Disclosure and transparency is a key principle of governance. It mainly addresses: founding of a • Should not be shareholder, a objectivity of the Public retained after four member external auditors, - The timely and adequate disclosure of financial and non-financial information Shareholding consecutive years. of its board of including the - Standards against which the financials are reported Company whose • Should not be directors, or a consideration of - Annual reports and other forms of disclosure accounts they allowed to provide partner or an any other - At minimum compliance with information disclosure of applicable laws, listing rules and regulations. audit, non-audit services employee of any non-audit work be a member of that might affect member of the performed by the its Board of their board of directors. external auditors Below is a comparative review of the disclosure requirements of annual reports within each code. Directors, independence B. The external upon work permanently auditor does not appointment. 1. Companies Law in any technical, perform any administrative or additional services Under the Companies Law companies are required to disclose the following in their annual report:39 consultancy work to the therein, company such as - Annual balance sheet and final accounts including the profit and loss account, necessary clarifications and be a partner to any administrative or cash flow statement, fully audited by a licensed auditor in accordance with recognized and accredited member of its technical international auditing principles Board of Directors consultations. - Annual report on the Company activities. or to be an C. The external employee of any auditor is For public shareholder companies also to include in their annual reports:40 Board member. independent in accordance with - All amounts received from the Company during the fiscal year by the Chairman and each of the members international of the Board of Directors, in the form of wages, fees, salaries, bonuses, remuneration and others. auditing standards. - Benefits that the Chairman and the members of the Board of Directors enjoy such as free accommodation, D. The external cars and others. auditor performs - Amounts that have been paid to the Chairman and members of the Board of Directors during the fiscal year his duties such as travel and transport allowances inside and outside the Kingdom. impartially without - A detailed account of the donations paid by the Company during the fiscal year, and the entities that interference received the said donations. from the board of - A list of the names of the Board of Directors, number of shares owned by each of them and the duration of directors or the the membership of each member. executive management. In addition to the annual report, publicly listed companies, should provide to the controller: Auditor Every 4 Every 4 The Bank requires - A report of the entity's financial position every six months;41 and rotation consecutive years consecutive years the regular - A written statement from the Chairman and Board members regarding the ownership of shares in the with a 2-year with a 2-year rotation of the Company or other companies by them and their families.42 cooling off period cooling off period external audit between auditing 2. CCD CG Code firms. Should this no longer be CCD CG Code addresses disclosure in terms of a general principle as follows: practical, then the "The entity should voluntarily disclose a balanced assessment of the entity’s position and prospects, and in a Bank will at a timely manner, all information that may have a material impact on the decisions of its shareholders and minimum require stakeholders." the regular rotation of the principal partner At minimum, the entity should disclose in addition to the legal requirements the following: in charge of the external audit - A Corporate Governance statement, which explains compliance and/or non-compliance with this Code. - Materially significant related party transactions. Non-audit Non-audit work is The Board should Not permissible. Mentioned in - Details of Directors’ remuneration. work carried not permissible by identify the types reference to the - Policy for evaluating the Board’s performance. out by the auditor the appointed of non-audit identification of auditor services the the independence auditor may of the external provide and auditor for disclose appointment 39 Companies Law, Article (62) and Article (140) 40 Companies Law, Article (143) 41 Companies Law, Article (142) 25 42 Companies Law, Article (138) (a) Jordan Corporate Governance Regulations Comparative Study 26 3 Also, non- financial disclosures are discussed whereby Directors should review all of their disclosure standards V. Role of Stakeholders and Shareholders relating to non-financial information. Non-financial information covers several domains. The following is a sample list of such information: The role of shareholders and stakeholders is covered across the OECD governance principles. However, they can be summarised as follows: - Ownership structure including disclosure of shareholders owning more than 10% of shares. - Directors’ shareholdings and any changes therein as well as benefits and remuneration they obtained. - The importance to protect and treat all shareholders equally - Directors’ attendance of Board meetings. - The organization of the general assembly - Details of loans to Directors and related parties. - Ensuring that policies on related party transactions, conflicts of interest and insider trading are in place - Details of the entity's penalties imposed by any statutory authority. - Clear recognition of the legal rights of various stakeholders - Material risk factors and uncertainties. - The Company’s values, mission and objectives. Due to the maturity of the national market, these provisions are often granted little or no attention and this is - Commitment to social responsibility. reflected in all laws, rules, regulations and codes. - Insider trading policy. - External Auditor. However, for the sake of completeness, below is a comparative chart of the various codes and how they address - Material issues regarding employees and stakeholders. the role of stakeholders and shareholders. - Discussion of recent performance. - Policy and procedure pertaining to related party transactions including the nature and amount of the Companies CCD CG CG Code for Listed CG Code CG Instructions transactions. Law Code Companies for Banks for Insurance 3. CG Code for Listed Companies Protect and treat No express A responsibility is An express An express shareholders responsibility but expressed whereby responsibility on responsibility on Under the CG Code for Listed Companies requirements, companies are required to disclosure in their annual equally implicit in several the board of directors the organization to the Bank to take reports the following:43 articles i.e. 144 are accountable to take appropriate active steps to and 178. shareholders and measures to encourage - To Include financial statements certified by an auditor, within 90 days of the end of its fiscal year. where the Directors ensure that shareholders, in - A preliminary report about activities submitted after a preliminary audit thereof. are responsible to shareholders enjoy particular minority ensure that each and their rights in a shareholders, to - A report pertaining to the election of the Board of Directors or the executive Board or any change in the every shareholder manner that would participate in the composition or identity of any members thereof. shall be provided with achieve justice Annual General - The Board must specify the persons required to sign the report. full and accurate and equality Assembly, and also - Every Issuer must make public, and file with the Commission, any material facts upon recognizing such. information about the without to vote either in organization, unless discrimination. person or in their Furthermore, the Jordan Securities Commission has issued guidelines on preparing annual reports.44 there is a justifiable absence by proxy. reason not to do so. 4. CG Code for Banks The organization There are extensive The organization Under the CG Code for Banks, and as part of every banks commitment to transparency and full disclosure, the of the General provisions in the Law should ensure that Bank in its annual report should include the following information: Assembly about organization shareholder meetings of the General proceed effectively Assembly Meeting – and encourage - Its Corporate Governance Code, and annual details of its compliance. the majority of which effective participation - Information on each individual Director: qualifications and experience; shareholding in the Bank; whether can be found in an independent, non-executive, or executive Director; the membership of Board Committees; dates of Article 144. appointment to the Board; other Directorships; attendance at Board and Board Committee meetings; remuneration; loans from the Bank and other transactions between the Bank and the Director or his Policies on related There is a clear The Board should set The Audit The Board should companies or other related parties. party transactions, liability on the clear policies and Committee is ensure that the Bank - Summary entity chart. conflicts of interest organization's procedures that responsible to maintains a high - Summaries of the terms of reference of Board Committees, and any authorities delegated by the Board to and insider trading Chairman, Board identify conflicts of review and degree of integrity Board Committees. of Directors, interest and the approve related in its operations - The frequency of Board and Board Committee meetings. Management or respective measures party transactions through formal - Summary of the remuneration policy; remuneration of highest-paid executive management. employees if taken to avoid or and ensure that no policies, including a - Statement by the Board of the adequacy of internal controls. insider information prevent actual, conflict of interest Code of Conduct, - A description of the structure and activities of the risk management department. is shared. potential, or perceived may arise from the and definitions and conflict of interest that organization’s controls on conflicts - The significant shareholders of the Bank (for example, individual or related parties holding or controlling could affect the transactions, of interest and more than 10%), with identification of the ultimate beneficial owners of such interests if this is needed for integrity, fairness, and contracts or insider dealing, and explanation. accountability of the projects with are assented to by organization. related parties. all employees and 5. CG Code for Insurance The organization Directors, and these should have a Code have been Under the CG Instructions for Insurance, a Company should include the following in its annual report:45 of Conduct. published. - The relationship between the Chairman of the Board of Directors of the Company and its general manager, if any. Recognition of The management Board is The Board of - The organizational structure of the Company including the structure of the Board of Directors and the rights of should run and responsible to set Directors has executive management as well as their qualifications and experiences. stakeholders develop the a policy to overall - The remuneration policy for every member of the Board of Directors of the Company and the executive organization with organize relations responsibility to management. consideration to its with stakeholders. ensure that the stakeholders and interests of - The main risks in the Company and the risk management policy. ensure successful stakeholders are interaction between met. the organization and its stakeholders through an open and transparent process. 43 Securities Law, Article (43) 43 The guidelines can be found online at jsc.gov.jo/library/633911808112732500.pdf 27 45 Corporate Governance Instructions from Insurance Commission, Article (15) Jordan Corporate Governance Regulations Comparative Study 28 3 Annex 1 The role of shareholders and stakeholders is covered across the OECD governance principles. However, they can be summarised as follows: - The importance to protect and treat all shareholders equally - The organization of the general assembly - Ensuring that policies on related party transactions, conflicts of interest and insider trading are in place - Clear recognition of the legal rights of various stakeholders Due to the maturity of the national market, these provisions are often granted little or no attention and this is reflected in all laws, rules, regulations and codes. However, for the sake of completeness, below is a comparative chart of the various codes and how they address the role of stakeholders and shareholders. Annex 2 MENA CORPORATE GOVERNANCE CODES/GUIDELINES # COUNTRY CODE TYPE Year 1 Algeria Code for FOEs & SMEs 2009 2 Bahrain Code for Joint Stock Companies 2010 3 Egypt Code for Listed Companies 2005/2011 4 Egypt Code for SOEs 2006 5 Egypt Guidelines for FOEs 2008 6 Jordan CG Code for Banks 2008 7 Jordan CG Code for Listed Companies 2007 8 Jordan CG Instructions for Insurance 2006 9 Jordan CCD CG Code 2012 10 Lebanon Code for Joint Stock Companies 2006 11 Lebanon Guidelines for Listed Companies 2010 12 Lebanon Guidelines for FOEs 2010 13 Morocco Code of Corporate Governance 2008 14 Morocco Code for FOEs & SMEs 2008 15 Morocco Code for Listed Companies 2011 16 Oman Code for Listed Companies 2002 17 Pakistan Code for Listed Companies 2002 18 Pakistan Code for SOEs 2002 19 Palestine Code for Listed Companies 2009 20 Qatar Code for Listed Companies 2009 21 Qatar Guidelines for Banks 2008 22 Saudi Arabia Regulations for Listed Companies 2006 23 Syria Code for Banks 200? 24 Syria Code for Listed Companies 2006 25 Tunisia Code of Corporate Governance 2008 26 UAE Code for Banks 2008 27 UAE Code for Joint Stock Companies 2007 28 Yemen Code of Corporate Governance 2010 29