What Role does Corporate Governance Play in Combating Financial Corruption in the UK and Saudi Arabia?

Abstract

This work evaluates the importance of corporate governance in mitigating corruption, in the UK and Saudi Arabia. Highlighting the interplay between the environment in which companies exist and the extent to which they are susceptible to corruption, it argues that although corporate governance can be shown to have a role in improving transparency and accountability and thus rendering corruption more difficult to engage in, this argument is one which is more effective in theory than reality. Corporate decision making is undertaken by individuals existing within the social, cultural and legal environments unique to their jurisdictions and companies, and thus the creation of corporate governance frameworks, regardless of how they encourage accountability in their formulation, will only be effective if the environment supports their implementation. In this regard, the work argues that the difference between the UK and Saudi Arabian approaches, and the success of their implementation, should not be considered as being the fact that the former takes a comply or explain approach whilst the latter imposes mandatory rules, issues with transplanting one legal approach into another jurisdiction aside. Rather, although the UK has not experienced full compliance with its provisions, there is evidence that the Corporate Governance Code operates to improve trust in businesses, and it achieves this due to the fact that there is nothing fundamental at cultural level which prevents corporations from administering the principles. The flexibility inherent in the comply or explain approach may therefore be adapted to different companies and a variety of corporate structures. Conversely, the Saudi regime which is relatively less developed by comparing the UK regime, which is long-standing and has been developed over years. The Saudi regime is plagued by weaknesses in the environment, even aside from universal perceptions of corruption, in which nepotism exists and where wealthy families dominate business activities, which could negatively impact Saudi Arabia’s aims of promoting investor confidence that is as part of Saudi Arabia 2030 Vision. And thus the need to provide for a sufficiently effective regime for combatting corruption is of primary significance as part of these aims.