An investigation into the impact of selection and appointment processes on ned performance in Saudi Arabian-listed companies

Corporate Governance became an issue in the 1980s when financial scandals affected several companies, including companies in the UK; for example, the collapse of businesses such as Robert Maxwell and Polly Peck. These events were unexpected and attracted the attention of regulators, professionals, and academics to focus on this issue, which subsequently attributed to the dominant Chief Executive and misleading financial reporting. It appears that some CEOs and chairpersons were dominating those companies and running them as their own by driving the company towards their interest rather than the interest of the shareholders. During the 1990s, attention was brought to directors' remunerations with concerns that senior executive directors were not incentivized in a way that was sufficient for them to work for the interest of the shareholders. Risk management also emerged as a governance issue during the 2000s as there were concerns that company boards were not sufficiently aware of the risk they were exposed to in actuality. Weak internal control systems were the cause of the collapse, or, near collapse, of some of the banks during the crisis in the UK between 2007 and 2009. More recently, non-executive directors received more attention concerning their role in the effective governance system, especially with the recent criticism of the pay gap between senior company executives and other company employees. Non-executive directors are expected to be independent in protecting the interest of shareholders and other various stakeholders. Researchers recently raised the concern that non-executives are constrained from playing an influential role in the governance system by several factors, one of which is the lack of independence. Independence means non-executive directors, when deciding for the company, should only consider what is in the company's best interest. However, due to some recruitment forms, particularly in companies where non-executive directors are recruited through their relationship with the CEO or existing directors, there is good reason to believe that non-executives would make decisions in favour of those executives whose interests are more aligned with, at the expense of the company. The aim of the current work was that of evaluating the influence that the current recruitment processes have on the independence and role performance of NEDs in listed firms in the KSA. In this regard, the work sought to provide insight regarding the literary gap in terms of the employment process of NEDs and their rewards, risks, and roles in listed firms in the KSA. Furthermore, the work also offers literary insight in terms of NEDs as a whole in consideration of the fact that no set definition exists regarding them. The thesis had made use of a qualitative approach to the subject matter with face-to-face interviews used to collect data from three groups of twenty-five individuals; a sample that was gathered by way of the convenience approach. The gathered data was assessed through the use of a thematic analysis and phenomenological data analysis. As such, the current work’s findings offer considerable contributions to agency theory and stakeholder theory with them highlighting that power of an NED directly impacts the degree to which the individual will contribute to the decisionmaking process. Moreover, the autonomy and independence of the individual is compromised by their position in the rganization and hinders their likelihood of being unbiased. Lastly, the findings demonstrate that the independent directors improve the relationship between KSA listed firms and other firms value. Thus this thesis found that current selection processes of NEDs in Saudi Arabia have to some extent affected their freedom to exercise their independence and influenced by power dynamics within the boards especially independent directors who are by law must have no ownership power in their positions. The research was communicated with CMA and took initiative to put this into public consultation.

Citation

Alshehri, M. (2025) An investigation into the impact of selection and appointment processes on ned performance in Saudi Arabian-listed companies. University of Wolverhampton. https://wlv.openrepository.com/handle/2436/626030

Publisher

University of Wolverhampton

URI

https://wlv.openrepository.com/handle/2436/626030

Type

Thesis or dissertation

Language

en

Description

A thesis submitted in partial fulfilment of the requirements of the University of Wolverhampton for the degree of Doctor of Philosophy.

Collections

Theses and Dissertations