Muscat: Recent move of the Capital Market Authority (CMA) to amend the definition of the independent director and related parties in the Code of Corporate Governance aims to upgrade the standards of corporate governance principles to enhance investor confidence on the Muscat Securities Market (MSM) and to protect the rights and interests of shareholders, a statement issued by the Director of Compliance and Disclosure of CMA said.
Ahmed Sulaiman Al Qasabi, Director of the Department of Compliance and Disclosure, said that constitution of boards of directors of public joint stock companies and methods of election of directors, distribution of tasks and transaction with related parties are the main issues corporate governance principles addresses, as they are the focus of good governance to ensure efficient boards of directors able to direct the company in the sound track to reduce conflict of interests in the transactions of the company with related parties. He added public joint stock companies are required to apply the definition of the independent director in the first election of the new directors.
With regard to the definition of the related parties the definition applies on the new transactions of the company after the issuance of the circular.
Al Qasabi said CMA attaches importance to the corporate governance principles in line with the best international practices for guiding the company toward more productivity and growth as corporate governance is a set of rules and incentives the company uses to maximise profits and value on the long-term and such rules regulate the relationship between the stakeholders in the company whereby every party consider the interests of the other parties as well as ensuring regulation and accountability to protect the interests of all the parties.
CMA has to cope with the developments in the economic arena to work continuously to assess the regulatory framework of corporate governance to achieve the objects the prime of which is the protection of the rights and interests of shareholders. CMA adopted gradual policy and methodology in applying the principles of corporate governance since the issuance of the Code of Corporate Governance in 2002, then an independent department was established in 2006, then the establishment of the Corporate Governance Committee in 2008 and then the establishment of the Oman Centre for Corporate Governance.
Al Qasabi added that the new definition of the independent director ensures selection of independent directors with adequate degree of independence. The new definition specifies the cases where the director in no longer independent in line with the new corporate governance principles which add more professional standards to prevent conflicts of interests in the resolutions of the directors of public companies.
On the other hand, he said that constitution of third of board of directors of adequately independent directors and the expansion in the definition of related parties would lead to many gains the foremost of which is the avoidance of conflicts of interest resulting from common interests that impact the resolutions of the company and enhancing the level of confidence in the performance of the public joint stock company which would boost the confidence of the investors in the MSM.
Furthermore, independent directors would add external dimension to the general strategy through their skills and knowledge which may not be available within the company. On the expression of senior executives in the definition of independent director Al Qasabi said this expression includes the managing director, chief executive officer, financial manager and any person directly reporting to them or directly reporting to the board of directors of the issuer.