2022-02-23

OIA Publishes Code of Governance for OIA Entities Al-Murshidi: The Royal Decree (57/2021) promulgating the system of OIA has permitted us to implement the Code of Governance as per best practices.

In light of Oman Investment Authority’s terms of reference as per Royal Decree No. 57/2021; Oman Investment Authority (OIA) issued “the Code of Governance for OIA Entities”. This code was published to regulate the work of the entities, standardize their managements and correlate their functions with sustainable development plans. The Code encourages the efficient utilization of human and financial resources and assets, while also having the entities serve the purpose of bringing a balance between economic and strategic goals. Further on, the Code organizes practices of accountability, as it includes basic policies and principles that guide the operations of these companies in regards to their various commercial activities.

HE Abdulsalam Al-Murshidi, the President of Oman Investment Authority (OIA), stated that OIA’s system as decreed has been given the greenlight to implement the Code of Governance of State-owned Enterprises as per best practices. With aspirations that the Code contributes in enhancing the performance of these companies financially and operationally, increasing their productivity and finding a comprehensive decision-making system within them.

As per the Code of Governance, OIA will be appointed as a shareholder and not as an entity of the government. Thus, the legal relation between it and the companies will be governed indiscriminately by the Private Companies Law. OIA is dictated to have a clear long-term strategy on the ownership of shares within its entities. The Code also ensures the application of governance practices based on the principles of transparency, accountability, responsibility and efficiency. Moreover, it outlines penalties for any breach of the Code of Governance, as well as not adhering to any established law. In agreement with other shareholders, OIA may outline the timeframe or economic standards that allow OIA to sell its shares, if reached. The Code also obligates all OIA entities to clearly outline their purpose; and in case they deviate from the purpose or fail in achieving it, OIA will set up an evaluation scheme to determine the next course of action.

To ensure equitable treatment within shareholders, the entity’s constitutional documents, policies and procedures must reflect the rights of those shareholders and how they are safeguarded. This includes enabling shareholders to access information that allows them to practice their rights; and provide frameworks to allow unconditional expression of opinions. In addition, if any entity wants to underwrite part of their shares for initial public offering (IPO) or to transfer some of them to the private sector, they shall amend their constitutional documents to reflect and protect shareholders’ rights.In an effort to promote the concept of governance, the Code dictates that all OIA Companies must prepare an annual report that showcases adherence to the Code, guiding principles and policies. This report is to be signed by the chairperson of the board and the executive president and submitted on or before the 31st of January of every year. The entity shall also adopt a clear policy on distribution of profit, clear disclosure of any agreement it partakes in and/or any financial burden regarding the fulfillment of any obligation. The Code makes it clear that the entity receives the same treatment given to all private entities in regards to conflict with creditors, suppliers or other parties.

To ensure the efficiency of boards of directors, the Code stipulates that each board encompasses a variety of skills and necessary expertise to effectively supervise the entity’s management. Secondly, the Code sets out that the board is to be formulated with a minimum of three members and a maximum of nine members. Thirdly, the membership shall not include government officials at the level of minister or undersecretary. Fourthly, a minimum of one third of the board must be constituted with independent members. Fifthly, these members serve in their roles for a maximum of two board terms. The term spans for a period of three years beginning at the date of the general meeting where the elections were held and until the third annual general meeting. If the third general meeting occurs after the three-year period; the membership is extended as per the law until it is held, aligned with the Commercial Companies Law. Lastly, a member shall not be reelected for another term if they had a poor performance review in the previous term.

The Code mandated that the board must do the following: Act in the best interest of the entity with all stakeholders in mind, ensure that the entity complies to all contractual, fiduciary and legal obligations including the requirements of concerned regulatory bodies. That along with creating policies and regulations that are updated regularly throughout the entity. The Code also outlines the main roles and responsibilities of the board, as follows: Responsibilities towards the shareholders, delegation of authority, strategic responsibilities, financial responsibilities, tendering and procurement responsibilities, risk management, compliance and internal controls responsibilities, responsibilities regarding related party transaction and dealing with interested parties and related government entities, responsibilities relating to executive management, and responsibilities of the Company towards its respective group.

The Code also outlined the roles of board chairpersons and members. When it comes to the chairperson, the responsibilities fall into two categories; internal and external. Most importantly, the chairperson leads the board, ensuring its efficiency in all areas and effectively communicating with all parties involved. As for board members, each one of them is responsible for the success of the entity. Thus, each board member bears personal responsibility on a number of roles, most predominantly in presenting clear and appropriate strategic guidance for the entity. In addition, they embody the entity’s mission, vision and values, they lead the entity, while supervising the entity’s policies and procedures and along with making timely and efficient decisions.

To promote the culture of performance, accountability and efficient governance, the Code detailed the rights of board members. These include receiving information through an identified protocol, accessing professional consultancies and having access to documents relevant to the board. As for benefits, the OIA’s mission is to identify a system in accordance to what has already been at work in the entities while also taking into consideration sensitive commitments, other commitments and participation in committees. They shall also receive fair and reasonable compensation for attendance; and receive bonuses tied to specific and clear performance objectives evaluated based on key performance indicators.

When it comes to the conduct of board members, the Code emphasized many issues that adhere to enacted laws and agreed upon ethical standards. These issues mostly highlight the need for them to put in necessary effort to perform their duties and exercise their authority. They are also required to be objective and sensible during discussions and judgments on issues, and while making decisions. Moreover, they are expected to act with integrity, goodwill and in the best interest of the entity. They are also no doubt required to protect the confidentiality of the information and data they encounter while on duty. Additionally, they shall not inappropriately utilize the information they are exposed to pertaining to their position. Furthermore, they shall refrain from accepting bribery, gifts, services, perks or hospitality that might affect or might be viewed as affecting their behavior. They shall also refrain from benefitting from or using the entity’s properties for personal gain. Finally, they shall not engage in any behavior that leads to defamation of the entity or other institutions associated to and including OIA.

In addition, members must maintain transparency and disclose information of all direct and indirect contractual interests with all commercial bodies and entities and OIA. The personnel interests of any member and/or one of their relatives, shall under no circumstances be given priority when it comes to any benefits from the entity. All members must publish personal statements on personal assets, shares and anything else that might lead to conflict of interest upon appointment of the chairperson; and continue to submit such statement on an annual basis throughout the appointment period. Board members must also disclose any conflict of interest whether existing or possible as soon as that conflict becomes apparent. In case this conflict of interest continues, the member must resign from the board.

When it comes to the executive administration of each institute, the Code regulated their responsibilities in several clauses that fall most predominantly in the development of the entity’s vision, values and short, medium and long-term strategies. Additionally, they are responsible for preparing action plans and reports. They are also expected to present quarterly reports to the board of directors on the entity’s activities. Moreover, they are responsible for identifying and evaluating business opportunities. On top of that, they are responsible for informing the board on any issues that might negatively impact the entity’s performance and/or financial stability in a prompt manner. Over and above, they shall maintain a competitive edge via increasing available resources. Furthermore, they are tasked with encouraging the commitment of their employees; and the strategic compliance of the entity’s culture with its goals. They are also responsible for the legal and systemic compliance with the entity’s policies and practices delegated by the board. They are further responsible for having a proper framework and necessary policies and practices for risk management. They shall encourage fair treatment between all employees, clients, suppliers and competitors. They are also responsible for protecting the rights of shareholders and achieving growth and increase in profits. On top of that, they must maintain environmental sustainability, interests of concerned parties, the economy, society and especially the local community. Finally they must protect the confidentiality of any accessed data or information.

The Code of Governance for OIA Entities came about to embody the utmost priority in which the OIA regards the governance of state owned enterprises since its inception. As it launched “Rawabet” Program in September 2020 to establish the framework for rules of governance for state owned enterprises, correlate between the entities’ policies and regulations with the higher regulations of OIA and unify and adapt them under Vision 2040. OIA has succeeded so far in reformulating boards and appointing national expertise and qualifications in them. Furthermore, it succeeded in restructuring a number of these entities, like the consolidation of a number of fisheries companies under one umbrella called Fisheries Development Oman (FDO). Other examples include the restructuring of ICT companies, leading the mission to restructure the water and wastewater sector in collaboration with relevant stakeholders, dissolution of Oman Aviation Group, restructuring the real-estate and tourism investments in Oman by consolidating them under Omran Group, constituting the Board of Directors of Muscat Stock Exchange, restructuring electricity companies, launching In-Country Value (ICV) program (Qimam) and a number of initiatives to support SMEs in Oman.