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Corporate Governance

Introduction

 

The Board, Senior Management and all employees of Noor Capital Markets “NOORCM” are committed to effective Corporate Governance and observing the highest standard of professional behavior and conduct. NOORCM is committed in promoting integrity and maintaining the highest standard of ethical conduct in all of its activities in compliance with CMA rules and regulation and Kuwait

 

Our Vision

 

The executive management was keen on developing a strategy that clearly reflects NOORCM’s vision, future trends, the tasks assigned to management and staff at all times. We are committed to maintain our customers and shareholder’s trust as well as NOORCM’s market credibility. This can only be achieved through our excellence in serving our customers and responding to their expectations.

 

Principles of Good Corporate Governance

 

Corporate Governance is a set of systems, organizational structures and operations that attain institutional control as per global standards and principles through determining the responsibilities and duties of the board of Directors and Senior Management of a company taking into account protection of shareholders and relevant stakeholders rights (financiers, customers, management, employees, government, and the community).

 

Corporate Governance at NOORCM

 

The CMA in 2015 has issued a set of instructions on corporate governance for local companies. CMA takes into account the structure of the Kuwaiti financial sector, the basic characteristics of the Kuwaiti economy and its integration with global economy as well as other factors that underline the critical importance of corporate governance at Kuwaiti companies. The instructions include the following:

 

1: Board of Directors

2: Corporate Values, Conflict of Interest and Group Structure

3: Senior Management

4: Risk Management & Internal Controls

5: Remuneration Policies and Procedures

6: Disclosure and Transparency

7: Complex Corporate Structure Pillar

8: Protection of Shareholders’ Rights Pillar

9: Protection of Stakeholders’ Rights

 

The following pages include a brief on each Pillar and the steps taken by NOORCM to implement the requirements under each Pillar in order to comply with the CMA instructions and promote good governance within NOORCM.

 

1. Board of Directors

 

The Board’s Overall Responsibility

 

The Board has overall responsibility for the company, including approving and overseeing the implementation of NOORCM’s strategic objectives, risk strategy, corporate governance and corporate values. The Board is also responsible for providing oversight of NOORCM’s senior management including the CEO.

The Board assumes ultimate responsibility for NOORCM business and its financial soundness, fulfilment of CMA requirements, protecting the legitimate interests of shareholders, staff and stakeholders and ensuring that NOORCM is managed in a prudent manner and within the applicable laws and regulations and the internal policies and procedures.

 

Board Composition

 

NOORCM has an adequate number and appropriate composition of Board members to enable NOORCM form the necessary number of Board standing Committees in conformity with the governance requirements of the CMA.

 

Board Chairman

 

The Chairman ensures the proper functioning of the Board and maintains a relationship of trust with the Board members. She/he ensures that Board decisions are taken on a sound and well-informed basis through proper discussion and dialogue. The Chairman establishes a constructive relationship between the Board and the senior management of NOORCM and ensures that NOORCM has sound corporate governance standards in place.

 

Organization and Functioning of the Board

 

The Board meets as often as it deems fit but at least 6 times a year with at least 1 meeting in every quarter. The minutes of the meetings shall be mandatory and constitute part of NOORCM’s records. The Chairman, in consultation with the senior management, proposes the important and comprehensive topics to be included in the agenda of each Board meeting and ensures that the Board members are provided with sufficient information enough time before each Board meeting so as to be able to make informed decisions. The Board Secretary takes record of all Board discussions, suggestions by the Board members and results of voting conducted in the Board sessions.

 

Board Secretary

 

The overall role of the Board Secretary is to assist the Board and its Chairman in running Board affairs including but not limited to:

Ensuring timely development of Board agendas in conjunction with the Chairman and CEO.
Co-coordinating, organizing and attending Board and shareholder meetings.
Drafting and maintaining minutes of Board meetings.
Carrying out any instructions of the Board.
Ensuring compliance with all statutory requirements in relation to Board affairs.

 

Rights of the Board Members

 

To receive all available information to be discussed at a meeting, prior to that meeting.
To be given adequate time to consider and debate issues.
Have access to relevant and reliable information and be entitled to obtain such resources and information from NOORCM, including direct access to employees, as they may require.
Any Director or Committee of the Board may, with the prior approval of the Chairman of the Board, seek their own independent legal or other professional advice at NOORCM’s expense to assist them in the proper performance of their duties to NOORCM and the shareholders.

 

Delegation of Authority

 

The Board has delegated the task of running the day to day operations of NOORCM to the senior management headed by the CEO through written / approved delegated financial and operational authorities. NOORCM has clearly set out all transactions that cannot be delegated to NOORCM’s management or the CEO and require the Board’s approval.

 

Qualifications of Board Members

 

It is the aim of NOORCM to have qualified and experienced members on the Board as well as the various Board Committees in order to serve the interests of NOORCM and its various shareholders and stakeholders. The Board Nomination & Remuneration Committee (NRC) assists the Board in the selection / appointment of Directors for the Board and its Committees by setting the basic criteria for such memberships. These are aimed at creating a Board capable of challenging, stretching and motivating management to achieve sustained, outstanding performance in all respects. Board members should be and remain qualified, including through training, for their positions. They should have a clear understanding of their role in corporate governance and be able to exercise sound and objective judgment about the affairs of NOORCM.

 

2. Corporate Values, Conflict of Interest and Group Structure Corporate Ethics & Values
 

Corporate, Social Representative:

 

The Board through the Code of Conduct and Ethics defines appropriate governance practices for its own work and has in place the means to ensure that such practices are followed and periodically reviewed for ongoing improvement.

The Code of Conduct and Ethics has been circulated to all NOORCM staff and Board members, whose signatures are obtained as an acknowledgment to abide by contents therein.

 

Conflicts of Interest

 

The Board has a formal written Conflicts of Interest Policy covering all conflicts of interest related matters and possibilities thereof including, but not limited to:

A member’s duty to avoid to the extent possible activities that could create conflicts of interest;
Board approval on any activity a Board member is engaged in to ensure that such activity will not create a conflict of interest;
A member’s duty to disclose any matter that may result, or has already resulted, in a conflict of interest;
A member’s responsibility to abstain from voting on any matter where the member may have a conflict of interest or where the member’s objectivity or ability to properly fulfil duties to NOORCM may be otherwise compromised; and • adequate procedures for transactions with related parties to be made on an arms-length basis, and the way in which the Board will deal with any non-compliance with the policy.

 

Related Parties

 

NOORCM has a written policy for Related Party Transactions which includes the rules and procedures regulating operations with related parties. NOORCM keeps records of all related party transactions and keeps them under appropriate audit. NOORCM determines its related parties based on the definition of such parties under the International Accounting Standards (IAS), and keeps updated records of these parties in order to control any transaction with them. All related party transactions are disclosed in accordance with IAS and applicable IFRS in this regard and as required by the local regulatory authorities including the CMA.

 

Group Structures

 

The Board of NOORCM has the overall responsibility for adequate corporate governance across the group and ensures that there are governance policies and mechanisms appropriate to the structure, business and risks of the group and its entities.

 

Board Committees

 

The Board, without abdicating its own responsibility, has formed the following standing Committees to increase the efficiency of their control over NOORCM’s key operations:

 

1.      Audit Committee

2.      Risk Management Committee

3.      Nomination & Remuneration Committee

 

The Chairman of the Board may not be a member of the Audit, Risk Management and Nomination & Remuneration Committees. The NRC assists the Board in nominating members to each of the Committee based on its criteria for membership on each committee and to ensure that there is sufficient number of non-executive directors present on each committee to ensure independency of their decisions.

 

3. Senior Management

 

Senior management consists of a core group of experienced and qualified individuals including the CEO and Executive Managers who are responsible and held accountable for overseeing the day-to-day management of NOORCM. Under the direction of the Board, the senior management ensures that the activities are consistent with the business strategy, risk appetite and policies approved by the Board. The Board depends on the senior management’s competency in implementing the Board’s resolutions / decisions without any direct interference by the Board. Senior management contributes substantially to a sound corporate governance through personal conduct and by providing adequate oversight of those they manage. They are responsible for delegating duties to the staff and its monitoring thereof and establishing a management structure that promotes accountability and transparency.

Senior management is responsible for supervision and control over the business, particularly with respect to ensuring compliance, risk control, independence of functions and segregation of duties. They provide the Board with periodic transparent and objective financial and administrative reports.

 

Chief Executive Officer

 

The Chief Executive Officer (CEO) is responsible to the Board for the overall management and performance of NOORCM.

The CEO manages NOORCM in accordance with the strategy, plans and policies as approved by the Board. The CEO is responsible for:

 

•          Delivering on NOORCM’s strategic and operational plans as approved by the Board

•          Referring transactions outside of his/her delegated authority to the Board

•          Ensuring that all actions comply with NOORCM’s policies and with the laws

•          All actions delegated to him/her by the Board

•          The CEO act within the authority matrix approved by NOORCM Board if directors.

 

The performance of the CEO is to be reviewed by the Board on an annual basis. The remuneration of the CEO is to be considered by the Nominations and Remuneration Committee and a recommendation made to the Board following the annual review of performance.

 

Internal Audit

 

NOORCM has in place an independent Internal Audit function headed by the General Internal Auditor, through which the Board, senior management, and stakeholders are provided with reasonable assurance that its key organization and procedural controls are effective, appropriate, and complied with. Internal Audit has access to any information or any staff at NOORCM as well as the full authority to perform the tasks assigned to Internal Audit.

The General Internal Auditor is appointed by the Board and reports to the Audit Committee.

The scope and particulars of a system of effective organizational and procedural controls shall be based on the following factors: the nature and complexity of business and the business culture; the volume, size and complexity of transactions; the degree of risk; the degree of centralization and delegation of authority; the extent and effectiveness of information technology; and the extent of regulatory compliance.

The key responsibilities of the Internal Audit function include the following:

Verifying the sufficiency and effectiveness of internal control systems and ensure that the internal control systems pertinent to financial and administrative issues are comprehensive and are being reviewed on timely manner.
Verifying that NOORCM’s internal policies are in full conformity with the relevant laws, policies, regulations and instructions.
Examining particular business activities relating to NOORCM’s financial position, internal control systems, risk management and others.

NOORCM shall not outsource any of the basic audit roles. In the event where NOORCM needs to outsource certain audit tasks to external parties for a specific period of time, the CBK’s approval will be sought.

 

External Audit

 

An external auditor shall enable an environment of good corporate governance as reflected in the financial records and reports, an external auditor shall be selected and appointed by the shareholders upon recommendation of the Audit Committee and the Board.

The Audit Committee has set appropriate standards to ensure that the external audit process is carried out by applying the Dual Audit methodology.

The external auditor shall provide the Audit Committee with a copy of the audit reports and will meet with the Audit Committee to discuss these reports and any other significant observations on NOORCM’s issues. The Audit Committee shall meet with the external auditor in the absence of the senior management at least once a year.

The external auditor of NOORCM shall not at the same time provide all services of an internal auditor to NOORCM. NOORCM shall ensure that other non-audit work shall not be in conflict with the functions of the external auditor.

The audit firm’s partner in charge of NOORCM’s audit shall be rotated every four (4) years or earlier.

 

Audit Committee

 

The Audit Committee is formed of the Board members, including at least three non-executive members, one of whom shall be the Chairperson of the Committee. At least two members of the Audit Committee shall be qualified and experts in financial business.

The Audit Committee is responsible for reviewing the following:

NOORCM’s internal and external audit scope, results and adequacy
Accounting issues of a substantial impact on NOORCM’s financials
NOORCM’s internal control systems, ensuring that the resources available are sufficient for the monitoring functions
NOORCM’s financials before presenting them to the Board to ensure that necessary provisions are sufficient
Ensuring that NOORCM complies with the relevant policies, rules and regulations and instructions

 

The Audit Committee is authorized to obtain any information from the CEO as well as the right to invite any senior or Board member to its meetings.

 

4. Remuneration Policies and Systems Remuneration Policy

 

The Board actively oversee NOORCM’s remuneration system’s design and operation, and monitors and reviews the remuneration system to ensure that it is operating as intended. The Nominations and Remuneration Committee provides guidance to the Board in respect of all remuneration related matters.

NOORCM’s Salary Administration Policy within its HR Policies serves as the remuneration policy and incorporates all the requirements within its corporate governance instructions. The policy includes all aspects and components of financial remuneration taking into account reinforcing effective risk management in NOORCM. The policy is designed to attract and retain highly qualified, skilled, and knowledgeable professionals.

 

5. Protection of Shareholders’ Rights

 

The Kuwait Companies Law,  and the corporate governance instructions of CMA as well as NOORCM’s Articles and Memorandum of Association and internal policies, include the controls and basis for protecting shareholder rights.

The Board ensures that it protects the rights of its shareholders including minority shareholders as well as NOORCM’s various stakeholders.

 

Rights of Shareholders

 

Rights to review and participate in the decisions related to amending NOORCM’s Article and Memorandum of Association, as well as the decisions related to non-ordinary transactions which might affect NOORCM’s future or activity, like mergers, sale of a substantial portion of its assets, or winding up of subsidiaries.
Rights of meeting participation, comments and recommendations (if any) on any improvements required.
Rights of contributing in the decision-making of any significant changes being made in NOORCM.
Rights of expressing an opinion on the appointment of members of the Board of Directors
Rights to have accurate, comprehensive, detailed, sufficient, and timely essential information in order to evaluate investments and make informed decisions.
Rights for receiving dividends and for participating and voting at the General Assembly meetings.
Rights for minority / foreign shareholders to be treated on equal basis and be given the opportunity to rectify any mistreatment in their rights.

 

6. Protection of Stakeholders’ Rights

 

Stakeholders (other than shareholders) are relevant to the success of an entity. The Board understands that NOORCM’s final success is the outcome of the joint efforts of many parties including its depositors, borrowers, staff, investors and other parties having business relationships with NOORCM. NOORCM’s various procedures, policies and practices accentuate the importance of respecting stakeholder rights as per relevant laws, bylaws and regulations.

The Board supports, as part of its Corporate Governance system that:

The interests of all stakeholders’ legal rights are respected
Performance enhancing mechanisms should exist for stakeholders to participate in the Corporate Governance process, and in the consultative process to ensure an effective and responsible approach to managing NOORCM

 

Corporate Social Responsibility (CSR)

 

NOORCM is committed to achieve sustainable development for society in general and its employees in particular. NOORCM implements corporate social responsibilities (CSR) implemented and approved by Board of Directors to ensure taking part in achieving sustainable economic and social developments.

The CSR is well drafted in our marketing policy approved by the Board of Director.