Transcript Click to add title

Corporate Governance
Abdulaziz Al-Hashimi
General Auditor
Saudi Aramco
Agenda
 Introduction to Corporate Governance
 Definition
 Benefits
 System
 Cornerstones of Good Governance
 The Saudi Aramco Experience
 Audit Committee
 Internal Audit
2
‫‪Corporate Governance‬‬
‫‪ ‬حاكميه الشركات‬
‫‪ ‬اإلدارة الرشيدة‬
‫‪ ‬االنضباط اإلداري‬
‫‪ ‬حوكمة الشركات‬
‫‪3‬‬
Corporate Governance
Corporate Governance Defined
“Corporate governance involves a set of relationships
between a company’s management, its board, its
shareholders, and other stakeholders. Corporate
governance also provides the structure through which
the objectives of the company are set, and the means of
attaining those objectives and monitoring performance
are determined”.
… Institute of Internal Auditors
4
Why Corporate Governance?
Company
Creditors
Suppliers
Insurance
Majority
Government
Employees
Community
Owners
Management
Minority
5
Why Corporate Governance?
 How can you guarantee that
management is increasing owner’s
wealth?
 Does management use the business for
their personal benefit?
 Is the Company controlled by a
majority?
 How can creditors be given assurance
of financial strength?
 Are employee rights and benefits
protected?
 Is the Company fulfilling its community
obligations?
 Is Company information transparent?
6
Benefits of Corporate Governance
Discipline
Social
Responsibility
Transparency
Corporate
Governance
Fairness
Independence
Responsibility
Accountability
7
System of Corporate Governance
BOARD
REGULATORS
EMPLOYEES
COMMUNITY
SHAREHOLDERS
OFFICERS
SUPPLIERS
INSURERS
AUDITORS
POTENTIAL
INVESTORS
LENDERS
GOVERNMENT
8
Board of Directors
General Board responsibilities should include:
 Corporate Philosophy and Mission
 Director Nomination
 CEO and Senior Executive Selection
 Management’s Strategic Plans and Business Objectives
 Evaluation of Corporate Performance
 Enterprise Risk Management (ERM)
 Ethical Compass of the Organization
 Board Self-Assessment
9
The Cornerstones of Corporate Governance
 Audit Committee
 Executive
Management
 Internal Audit
 External Audit
10
BAC Responsibility
Financial Reporting
Risk Mgmt & Controls






Financial Statements
Accounting Policies
FR Controls
Effectiveness of Controls
Irregular Activities
Follow-up on Audit Issues
BAC Areas
Of Focus
Internal Audit



Authority & Resources
Scope of Work
Risk & Control
Recommendations
External Audit



Scope, Fees & Services
FS Opinion & Controls
Independence & Performance
11
Relationship with the General Auditor
Independent & Objective
Provider of Assurance
Risk Focused
Value Added Improvements
Professionalism and Integrity
Effective Operations
Establishes the “Tone at the
Top”
Independent
Risk Knowledgeable
Actively Engaged
Corporate Governance
Ensures Resources
Candid Communication
Candid Communication
Board Audit Committee
General Auditor
12
Internal Auditing
“Internal Auditing is an
independent, objective
assurance and consulting activity
designed to add value and
improve an organization’s
QA
operation. It helps an
organization accomplish its
objectives by bringing a
systematic, disciplined approach
to evaluate and improve the
effectiveness of risk
management, control and
governance processes.”
Independence
Objectivity
Internal
Auditing
Audit
Types
Skilled
Staff
13
Internal Auditing
Board Audit
Committee
Sr. Vice President
Finance
General Auditor
Operational Audits
Department
Engg. & Projects Mgt.
Exploration & Producing
Functional Audits
Department
Special Audits
Division
Planning Support &
Consulting Division
Admin & General
Int”l Businesses
Refining & Marketing
Information Systems
Operations Services
Industrial Relations
ASC Audits Division
14
Model Audit Professionals
Auditors
78 Auditors
Education
4 Year
Training
 E-learning
Degrees:
 In-house
• Saudi Arabia
• Accounting
 Company
• USA
• Finance
 In-Kingdom
• Canada
• Engineering
 Out-of-
• UK
• Economics
• Philippines
• Info System
From:
• South Africa
• Australia
40% are:
• India
• MBAs/MS
• Engineering
• Accounting
Certification
Kingdom
60%
•
•
•
•
•
•
•
•
•
•
•
•
CIA
CPA
CA
CISA
CISSP
CFA
CFE
CMA
CFM
CGA
PFSO
CCSA
Experience
Company
Fieldwork in
Engineering
Other
Companies
 Internally
Developed
(via OJT)
15
Internal Auditing Services
Assurance Services
Internal
Controls &
Risk
Management
Regular Audits
Special Audits
Control
Self-Assessment
Risk Assessments
Fraud Awareness
Internal
Controls &
Risk
Management
Consulting Services
16
17
‫‪Governance is a Social Responsibility‬‬
‫”إن المسؤولية المشتركة بين الجميع تفرض على كل مسؤول‬
‫تقلد أمرا من شؤون هذا الشعب الكريم مسؤولية القيام بأمانته‬
‫واضعاً نصب عينيه انه خادم ألهله وشعبه وما أعظمها من‬
‫التفاني والعطاء‬
‫اإلخالص والتفاني‬
‫باألمانة واإلخالص‬
‫العطاء‬
‫خدمة إذا توشحت باألمانة‬
‫والتواضع‪.‬‬
‫التواضع‬
‫وليعلم كل مسؤول انه مساءل‬
‫مساءل أمام هللا سبحانه وتعالى ثم‬
‫أمامي وأمام الشعب السعودي عن أي خطأ مقصود أو‬
‫تهاون“‬
‫خادم الحرمين الشريفين الملك عبدهللا بن عبدالعزيز حفظه هللا‬
‫‪18‬‬
Hierarchy of Ethics
COMPETENCY
HONESTY
TRUSTWORTHINESS
LOYALTY
INTEGRITY
19
What is Fraud?
Opportunity
Rationalization
Pressure
20
Examples of Poor Governance
“I want to assure you that I have never felt better
about the prospects for the Company”.
Kenneth Lay, Former ENRON Chairman, August 14, 2001
“My Personal belief is that ENRON stock is an
incredible bargain at current prices.. and that
we will look back a couple of years from now
and see the great opportunity that we currently
have.”
Kenneth Lay, September 26, 2001
21
Examples of Poor Governance
“We found a systematic and pervasive attempt by
Enron’s management to misrepresent the
Company financial condition”
“The true causes of Enron’s rapid slide into
bankruptcy were its own improprieties”
William Powers, Chairman, Special Enron Investigations Committee
February 1, 2002
22
Examples of Poor Governance
“A Quality Control Agency located in the USA
withdrew the Quality Certificate it awarded to a
Saudi Company because the percentage of lead
in its products exceeded the allowable limit, and
therefore, the Saudi Company is not authorized to
use the quality certificate.”
Al-HAYAT Newspaper, January 20, 2008
23
24
Conclusion
Corporate Governance is a Process…
It can Create a Positive Impact
Throughout any Organization…
You Need to Believe in it for it to be
Successful…
Corporate Governance is for Everyone…
25
THANK YOU
26