Balancing Board/Investors Oversight and Operational Intervention?

The KSA's vision 2030 is building a dynamic and diverse economy, driving growth, attracting investments into new business avenues. The PIF in alignment with Vision 2030, driving the transformation at a unprecedented growth, sparking an era of new economic growth and opportunity. This supported PIF to invest in diversified industries that never existed in the Kingdom.

As there is no Precedence of skillset or experience in the Kingdom, the companies predominantly operate with the expertise of the international community/Professionals. The Companies have adopted the best in class corporate governance practices, and establishes a robust Board to provide oversight on the business and executive management to operate.

The key risk from Corporate Governance standpoint is "Frequent change in business direction and the Boards/Investors involvement in the operational executive decisions".

The purpose of this article is to look through two different lenses and understand what is the best practice:

Considering the best practices of Corporate Governance, Board/Investors involvement in executive decisions will compromise the oversight and undermines the autonomy and decision-making authority of management, it means that the board, which is responsible for overseeing the organization's operations, starts interfering excessively in the day-to-day management and decision-making processes. This interference can have several negative consequences. Some of them are:

1. Hinders the ability of executive management to make timely and effective decisions as it slow down the decision-making process, as decisions may need to go through multiple layers of approval, resulting in missed opportunities or delayed responses to market changes.
2. Erodes management autonomy, hindering their expertise and creativity. Micromanagement can divert focus from the right direction, prioritizing board or investor demands over effective operations.
3. Creates a culture of dependency within the organization. If management becomes overly reliant on the board for decision-making, it can stifle innovation and initiative at lower levels of the organization. Employees may feel discouraged from taking risks or proposing new ideas, as they perceive that ultimate decision-making authority rests with the board.

Considering there is no precedence of industry in the Kingdom, and the Board/Investors has the bird eye view from the top, and understands the local market dynamics, bureaucracy well, believes that it is important to involve in the executive decisions in the start-up phase. The advantages can potentially be as follows:

1. Brings a broader perspective and strategic insight, ensuring alignment with organizational goals in the first 3 Years.
2. Access to extensive networks and resources, provides valuable assistance to executive management in effectively executing operational strategies and leveraging available resources including industry connections, expertise, and funding opportunities.

Comment below your insights and Suggestions.

#CorporateGovernance #Governance #Boardaffairs #Executive Management #KSA #Vision2030 #PIF #RiskManagement #GRC #Oversight #StrategicRisk #Performance #IIA #IRM #COSO #ISO31000

P.S: Views are Personnel.