In light of the rapid changes witnessed by the global economy, adherence to the principles of governance has become essential to ensure the success of institutions and enhance the confidence of investors and stakeholders. The concept of governance is no longer limited to mere compliance with regulations and laws, but has turned into an integrated system that helps improve institutional performance and reduce financial and administrative risks.

In this article, we will discuss the basic principles of governance, and review the most important information about governance in the world today.

What are the principles of governance?

Governance is one of the most important administrative concepts that aims to regulate the relationship between stakeholders within institutions, whether governmental, private, or non-profit. Governance is based on a set of principles that ensure transparency, integrity, accountability, and justice in resource management and decision-making.

The need for governance emerged as a natural response to the requirements of institutional development and the reduction of corruption and mismanagement, as it plays a vital role in improving institutional performance and ensuring the rights of shareholders and beneficiaries.

Governance is not just laws and procedures, but rather an integrated framework that enhances efficiency, reduces conflicts of interest, and improves the level of trust in institutions. Interest in governance principles is growing globally due to the financial and economic crises that highlighted the importance of having transparent administrative systems, which prompted governments and companies to adopt advanced strategies to ensure compliance with international standards.

Important statistics about governance principles

Studies indicate that applying governance principles contributes to improving the financial performance of institutions. Research has shown that companies that rely on strong governance systems achieve growth of 10% to 15% more than companies that do not apply them. In addition, companies that adopt governance reduce the chances of exposure to corruption by up to 50%, according to reports from Transparency International.

Globally, countries such as Sweden and Canada apply the highest standards of governance principles, which has made them top indicators of integrity and transparency. In contrast, some developing countries suffer from weak governance systems, which leads to the spread of corruption and poor administrative performance. These statistics confirm the importance of governance in building strong institutions capable of achieving sustainable development.

Reliable systems to enhance governance principles

Organizations can benefit from advanced digital systems to enhance governance principles. The most prominent of these systems are:

Doc Suite System: An integrated platform for managing administrative documents and communications, allowing accurate tracking of administrative processes and improving the level of transparency within institutions.

systemSAP GRC: Helps businesses comply with laws and regulations through risk management, governance and compliance.

systemOracle Governance, Risk, and Compliance (GRC): Provides integrated solutions for risk management and ensuring compliance with governance principles.

systemMicrosoft Compliance Manager: Provides tools to monitor compliance and reduce operational and financial risks.

These systems help to implement governance principles more efficiently, which contributes to enhancing institutional performance and achieving integrity.

Challenges Facing the Implementation of Governance Principles

Despite the great benefits provided by governance, its implementation faces many challenges, including:

internal resistance to changeOrganizations face challenges in convincing employees and managers of the importance of shifting towards governance, especially in environments that are accustomed to working in traditional ways.

Weak legislation and oversightIn some countries, governance laws are still unclear or insufficiently enforced, making their implementation limited.

high costGovernance requires investments in IT systems, training, and compliance consulting, which can be a financial burden for some organizations.

Cybersecurity ChallengesWith the reliance on digital systems, organizations become more vulnerable to cyber attacks, which requires strengthening protection measures and compliance with security standards.

Governance principles are a fundamental pillar for any organization seeking to achieve integrity, transparency and ensure the sustainability of its operations. With technological and legislative developments, it has become necessary to adopt advanced systems to ensure the effective application of governance principles. While organizations face challenges in implementation, digital solutions such as DocSuite and others contribute to facilitating compliance and improving administrative performance, making governance an imperative necessity in today’s business world.

Laws and legislations related to governance principles

Governance is a fundamental pillar for ensuring transparency and integrity in institutions. Therefore, many countries and international organizations have developed laws and legislation that oblige companies and institutions to apply governance principles. These laws differ from one country to another, but they agree on the basic goal, which is to enhance accountability, reduce corruption, and protect the rights of shareholders and stakeholders. The following are some of the most prominent international laws and legislation related to governance principles:

1. Sarbanes-Oxley ActSarbanes-Oxley Act (SOX) – United States

This law was passed in 2002 in the United States as a response to major accounting scandals, such as the Enron scandal.Enron and WorldCom, which caused huge losses to investors due to financial manipulation and mismanagement, the law aims to:

• Imposing strict standards on the financial reporting of public companies.
• Strengthening the role of boards of directors in oversight and accountability.
• Imposing severe penalties on executives in the event of providing misleading financial statements.
• Requiring companies to have strong control measures to ensure the accuracy of financial statements.

It isSOX is one of the most stringent laws on financial governance principles, requiring companies to improve their internal audit and financial disclosure systems to prevent manipulation and corruption.

2. OECD Principles (OECD) Corporate Governance

The Organization for Economic Co-operation and Development (OECD) issuedOECD) A set of corporate governance principles, used as an international framework to ensure compliance with standards of transparency and fairness in corporate governance. The basic principles include:

• Shareholders' Rights: Emphasizing the rights of shareholders to obtain information and make decisions related to the company.
• equal treatment: Prevent discrimination between shareholders, whether large or small investors.
• Disclosure and TransparencyThe necessity of disclosing important financial and administrative information in a clear and organized manner.
• Board of Directors Responsibilities: Emphasizing the role of boards of directors in oversight and responsible decision-making.

Many countries rely on these principles as a reference when developing their national legislation on governance principles.

3. Corporate Governance Regulations - Saudi Arabia

In the Kingdom of Saudi Arabia, the Saudi Capital Market Authority issued the Corporate Governance Regulations, which are a set of laws that aim to enhance accountability and transparency within companies listed on the financial market. The most prominent features of the regulation are:

• Strengthening the independence of the Board of Directors by specifying a certain percentage of independent members.
• Improving financial disclosure to ensure transparency in financial transactions.
• Protecting shareholders’ rights and providing mechanisms to hold executive management accountable.
• Strengthening the oversight role of internal audit committees to ensure compliance with laws.

This regulation comes as part of Saudi Arabia’s efforts to enhance the business environment and achieve Vision 2030, which calls for improving the investment climate and enhancing governance in the public and private sectors.

4. UK Corporate Governance Code (UK Corporate Governance Code

The UK is one of the leading countries in implementing strong governance principles, with the Corporate Governance Code based on the principle of “comply or explain”.Comply or Explain), meaning that companies are required to either implement governance principles or provide a clear explanation for non-compliance. Key principles in the Code include:

• The role of boards of directors in supervising administrative and strategic performance.
• Emphasis on financial disclosure and transparency.
• Ensuring the independence of oversight committees within companies.

This model gives companies some flexibility, but at the same time imposes on them the responsibility of clarifying their administrative and financial policies.

5. EU Governance Code (EU Corporate Governance Framework)

The European Union is working to harmonize governance laws across its member states to ensure that large companies adhere to standards of transparency and accountability. European corporate governance laws include:

• Obligating companies to disclose their environmental, social and administrative policies (ESG).
• Strengthening the role of shareholders in monitoring administrative decisions.
• Tighten controls on executive remuneration to prevent conflicts of interest.

These laws focus on sustainability and social responsibility, reflecting a new global trend in governance that goes beyond mere financial oversight.

These laws and legislations reflect the continuous development in the concept of governance, as they are no longer limited to financial rules, but have extended to include environmental, social, and technological aspects. The implementation of these laws ensures that institutions not only comply with the law, but also improve their reputation, attract investments, and increase the confidence of customers and shareholders. With the development of technology and the digital economy, it is expected that governance laws will witness further amendments to ensure that they keep pace with new challenges.