Corporate governance in Saudi Arabia: key features and emerging hot topics

It is a fascinating time to be observing corporate governance in Saudi Arabia. Having only recently arrived in the Kingdom, I’ve had the benefit of a newcomer’s perspective - one that allows me to compare how governance here is evolving in relation to other jurisdictions. 

The pace of change is striking. Saudi Arabia’s corporate governance ecosystem is undergoing rapid modernization, driven by a combination of regulatory reform, capital market development, and Vision 2030’s ambition to diversify and globalize the economy.

This article provides a high-level overview of the Saudi corporate governance landscape and explores five “hot topics” currently shaping boardrooms across the Kingdom.

The corporate landscape: ownership matters

Saudi Arabia’s corporate sector has traditionally revolved around a relatively small number of large, listed companies, often with state connections. These dominant firms, many of which are household names such as Aramco, STC, SABIC, Ma’aden, and ACWA Power, are key players in the Tadāwul, the region’s largest stock exchange.

While the SME sector has historically represented a smaller share of GDP than in many other economies, it is growing rapidly as entrepreneurship and venture financing accelerate. Yet for now, governance discussions still centre on these major listed entities, where ownership structures, and particularly ownership concentration, define the dynamics between shareholders, boards, and executives.

In Anglo-American markets, share ownership of listed companies tends to be dispersed, with institutional investors, such as asset managers and pension funds, playing a significant role. In Saudi Arabia, by contrast, ownership remains more concentrated. The state and its sovereign vehicles, especially PIF, are pivotal players, holding significant stakes in key listed companies and leading major giga-projects, such as NEOM, the Red Sea, and Diriyah Gate. Family ownership remains another defining feature, with groups such as Olayan, Al Rajhi, and Al Hokair continuing to wield influence across retail, hospitality, banking, and contracting.

Since 2015, foreign ownership has opened up significantly. Qualified Foreign Investors can now hold up to 49 percent of a listed company, and foreign joint ventures are common, particularly in petrochemicals and finance. Nevertheless, foreign institutional ownership still represents only around 5% of the Tadāwul - a sharp contrast to around 50% in France and almost 60% in the UK.  

The regulatory framework: two important pillars

Saudi corporate governance is based on two primary pillars: the Companies Law and the Corporate Governance Regulations (CGRs).

The Companies Law - most recently overhauled in 2022 - represents the most extensive reform of corporate legislation in decades. Spanning 281 articles, it has modernized the business environment, introduced new corporate forms such as simplified joint-stock companies, and aimed to align with Vision 2030’s objectives of innovation and private-sector dynamism. Oversight lies with the Ministry of Commerce, and it applies to all kinds of corporate entity (listed and unlisted).

The Corporate Governance Regulations, by contrast, sit under the Capital Market Authority (CMA) and apply specifically to listed companies. These rules cover the architecture of governance - from board composition and committee structure to disclosure, related-party transactions, and shareholder rights. The CGRs were most recently updated in 2023, reflecting an ongoing effort to align with international best practices while accommodating local ownership realities.

A further layer of governance regulation must be applied by financial institutions. These rules are defined and enforced by the Saudi Central Bank (SAMA). Additional requirements include the need for a risk and a compliance committee, and the establishment of independent control functions (e.g. risk management, internal audit, compliance). Candidates for board positions (and other key roles) must also meet SAMA’s “fit and proper” requirements.

How Saudi Governance Compares Globally

Compared with the UK and EU, Saudi Arabia’s corporate governance framework is distinctly more regulatory and compliance-driven. The CGRs set out binding obligations for listed companies rather than relying on the “comply or explain” principle that underpins many Western governance codes. Spanning 93 articles across 61 pages, the CGRs also provide a level of prescription and detail that far exceeds the UK Corporate Governance Code, which is just 15 pages long and largely principles-based.

When viewed alongside the United States, the Saudi regulatory framework has a distinct advantage – consolidation and centralization. All core governance requirements are contained within unified CGRs overseen by the Capital Market Authority. This contrasts with the fragmented landscape of US corporate governance, where responsibilities are divided among the SEC, stock exchanges, and individual state laws.

Saudi Arabia, like the UK and US, operates a single-tier board structure in which executives and non-executives may sit together on the board - although in practice, few executives do. In fact, the Center for Governance’s research finds that only around 42% of listed company CEOs also serve on their boards. Independence requirements contained in the CGRs stipulate that listed company boards must consist of at least two independent directors or one-third of the board (whichever is greater). A majority of the board must be non-executive.

Other features of Saudi listed companies align with global best practices. The separation of the chair and CEO roles is mandatory (although executive chairs can be found at limited liability companies). Audit, nomination, and remuneration committees are required, with the latter two often combined into a single nomination and remuneration committee. Saudi listed companies must publish detailed corporate governance reports - a level of transparency that rivals international norms. 

Interestingly, Saudi Arabia also requires cumulative voting by shareholders for elections to the board of directors. Such a requirement is rarely observed in other jurisdictions. However, it potentially offers minority shareholders a stronger voice in governance, mitigating the impact of a concentrated ownership structure.

Hot topic 1: board remuneration after the cap

One of the most significant recent developments has been the removal of the SAR 500,000 statutory cap on director remuneration. This cap, embedded in the 2015 Companies Law, may have previously deterred international directors from joining Saudi boards. The 2022 law replaced it with a principle-based requirement that pay be “fair, incentivizing, and commensurate with the performance of the [board] member and the company.”

The newfound flexibility has sparked debate. Some investors welcome it as a necessary modernization. Others worry it could blur the independence of non-executives or become a vehicle for excessive rewards in companies with dominant shareholders. 2024 annual general meetings have already seen shareholders question boards directly on pay levels and performance linkage. Without formal “say-on-pay” votes, Saudi boards will need to demonstrate that remuneration policies are evidence-based, benchmarked, and clearly tied to outcomes.

Hot topic 2: foreign ownership liberalization

A potential loosening or removal of the 49 percent foreign-ownership cap is another issue attracting major attention. In September 2025, a CMA board member was quoted by Bloomberg as stating that majority foreign ownership might soon be permitted in listed companies - a statement that immediately buoyed the stockmarket.

Proponents argue that further opening up the market would boost liquidity, strengthen valuations, and attract global institutional investors, who tend to demand higher governance standards. Sensitive sectors, such as banking, telecoms, and energy, may retain specific limits, but the direction of travel seems to be toward liberalization, mirroring the UAE’s 2021 decision to allow up to 100 percent foreign ownership, except where restricted by sector law.

Hot topic 3: ESG integration and disclosure

ESG has rapidly moved from aspiration to expectation in Saudi boardrooms. Driven by investor demand, new regulatory initiatives, and changing social attitudes, ESG is increasingly viewed as a core governance issue rather than a peripheral concern.

The Saudi Exchange’s ESG Disclosure Guidelines (2021) encourage companies to align their reporting with global standards such as GRI and TCFD. While ESG disclosure remains voluntary, regulatory signals are increasingly pointing toward ISSB-aligned reporting in the near future. The CMA has already begun linking sustainability disclosure to capital-raising through new sustainable finance regulations that take effect in May 2025 - a clear indication of the direction of travel.

Leading firms, including Aramco, SABIC, STC, and Saudi Electricity Company, now publish sustainability reports, although reporting and external assurance remain inconsistent. Family-owned listed firms lag further behind. Some investors, meanwhile, are growing impatient with what they perceive as “green gloss” rather than rigorous sustainability transparency.

Hot topic 4: cybersecurity and digital risk

Cybersecurity has emerged as a board-level governance issue. Saudi Arabia has suffered major attacks in the past - most notably the Shamoon malware incidents that crippled Aramco and other institutions. The threat landscape has since evolved to include ransomware, supply-chain infiltration, and cloud vulnerabilities.

The National Cybersecurity Authority has established frameworks that all sectors must follow. At the same time, the CMA now expects boards to oversee digital and cyber risk as part of their risk-management duties. Yet few boards include directors with deep cyber expertise, leaving a critical blind spot.

As artificial intelligence transforms both operational processes and board decision-making, directors will need to integrate digital literacy - and ethical awareness of AI - into their core competencies.

Hot topic 5: board effectiveness and soft governance

Finally, attention is shifting from governance compliance to governance effectiveness. Saudi boards have become adept at meeting the letter of regulations - independence ratios, committee charters, disclosures - but genuine effectiveness lies in culture, behavior, and decision quality.

This “soft governance” agenda examines whether boards truly challenge management, deliberate strategically, and balance diverse perspectives. Questions such as “Who should sit on a board?”, “How many mandates are too many?” and “What does fiduciary duty mean in practice?” are gaining traction.

Board evaluations are now required annually, with involvement of an external assessor every third year. Over time, the feedback from these reviews is likely to play a significant role in enhancing board professionalism. 

However, a persistent challenge in Saudi Arabia and elsewhere is a variation on the so-called Dunning–Kruger effect (“The less someone understands something, the more they tend to overestimate their mastery of it.”). Many directors, successful as executives, assume board membership is simply an extension of management, underestimating the distinct skills it demands. Building that awareness -through training, reflection, and peer dialogue - is central to the next phase of Saudi board maturity.

Looking ahead

Saudi Arabia’s governance framework has undergone significant advancements in a relatively short period. The foundations - a robust legal base, active regulator, and growing professional community - are firmly in place. The next frontier will be qualitative: developing boardrooms that are not only compliant but capable - where independent judgement, strategic foresight, and ethical leadership shape the country’s economic transformation.

Dr. Roger Barker 

Chief Research and Thought Leadership Officer, Center for Governance

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the opinion or position of the Center for Governance.