ZAIN 2022 All Rights Reserved
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Corporate Governance
The Board believes that good corporate governance complements and significantly promotes business success. The Board, our management and all employees at Zain are committed to principles of good corporate governance consistent with wise management and maximization of shareholder value. These principles lay emphasis on transparency, accountability, and independence. As the meaning of good corporate governance continues to evolve, the Board of Directors and the Executive Management assess changes to ensure that our commitments match expectations. As the highest governing body at Zain, the Board reviews its governance practices on an ongoing basis to reflect its commitment to continuous improvement.
Corporate governance completes Zain’s corporate strategy (4Sight) under ethical principles including transparency and integrity embedded in sustainable business practices. The principles of corporate governance and best practices are formed through the laws and regulations and international standards. Zain meets its legal duties under the laws and regulations issued by the Ministry of Commerce and Industry (MOCI), Boursa Kuwait, the Capital Markets Authority (CMA), the Communication & Information Technology Regulatory Authority (CITRA), the Ministry of Finance (MOF), the Anti-Corruption Authority (KANCOR), the Competition Protection Authority (CPA), and other regulatory entities. Additionally, (ESG) indicators are integrated in our business operations across all stages to ensure that the company addresses the long-term interests of its key stakeholders. Zain has maintained its alignment with the international standards of ESG provided by FTSE, S&P and MSCI aligning to the following reporting frameworks: Global Reporting Initiative (GRI) Standards, Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-Related Financial Disclosure (TCFD). This report describes the principles of corporate governance for Zain Group and provides background information as of December 31, 2021.
The Company has created the “Corporate Governance Framework” to ensure that corporate governance principles are implemented across all markets according to laws and regulations and international best practices. Our Corporate Governance Framework, which includes internal policies, charters, and guidelines, caters for evolving and aligning with the requirements and expectations through effective engagement with our stakeholders. These internal rules and guidelines ensure that the Board will have the necessary authority and processes in place to make decisions that are independent of the Management. The Board may change these guidelines regularly to achieve different objectives. Our Board, comprised of proactive, seasoned, and competent members is the cornerstone to maintaining strong and effective corporate governance. The Board of Directors oversees the performance of the Management to serve and protect the long-term interests of our stakeholders. It is responsible for establishing the company’s values, mission and vision, corporate strategies that are intended to build sustainable long-term value and accordingly delegates tasks to the Executive Management. The board reviews and approves the Company’s business plans, significant company policies and the inherent level of risk in these plans in coordination with Board Risk Committee. Hence, the board approves authorities delegated to the Executive Management and develops policies that regulate the relationship with stakeholders.
The Board and the Executive Management are dedicated to fulfilling a defined purpose and work towards a collective goal which encompass economic, environmental, and social (ESG) Indicators. The creation of long-term value is the definitive measurement of successful corporate governance. Therefore, it is important that shareholders and other stakeholders understand why the company has chosen to use particular governance structures, systems, and processes to achieve its objectives and strategies.
The Board of Directors has formed three committees. The purpose and responsibilities of each of these committees are outlined in the committee charters, based on the laws and regulations and best practices, and adopted by the Board. According to the regulatory requirements of the CMA, Board committees (BCs) have been revised and reformed to comply with regulatory requirements. All BCs maintain communication with the Vice Chairman & Group CEO, the CFO, and executives from related functions within the Group. The current Board committees at Zain are:
Board Audit Committee (BAC)
The Audit Committee is responsible for assisting the Board in fulfilling its responsibilities relating to the oversight of the quality and integrity of the accounting, auditing, internal control, and financial reporting practices at Zain Group. The committee also manages the performance and qualifications of the independent registered public accounting firm (external auditors), and the company’s relationship with its external auditors. The role of this committee also involves supervising the performance of the company’s Internal Audit Function. BAC also oversees the company’s compliance with legal and regulatory requirements.
Board Risk Committee (BRC)
The BRC advises the Board on the Company’s risk strategy and risk appetite and monitor the Executive Management in the implementation of this strategy. It also reviews the Company’s risk profile, risk strategy, risk appetite and risk control framework on an annual basis. The committee’s role extends to assist the Board to set and evaluate accepted risk limits in the Company and ensure that the Company’s risk tolerance levels are not exceeded. Any breaches are escalated to the Board of Directors.
The committee reviews and approves the Company’s overall risk governance framework annually, and reviews the Company’s risk management structure, roles, responsibilities, and methodologies prior to the Board’s approval.
The Company’s Risk Appetite is reviewed by the BRC and approved by the Board. Risk limits are then cascaded from the approved Risk Appetite to the material risk takers through the BNRC. The Board, in coordination with BRC, is responsible for reviewing the level of risk, maintaining a clear mapping of the risks faced by Zain, ensuring that appropriate systems of risk-management and control have been put in place including climate-related risks, evaluating options, and taking decisions on possible options for mitigating risks. The board ensures that the strategic plans are consistent with the company’s risk profile.
Board Nominations and Remunerations Committee (BNRC)
This committee is responsible for nominating and re-nominating members of the Board of Directors and the Executive Management. It also conducts an annual review of the required skills and competencies in the Board and Executive Management, considering the Company’s approved strategic objectives and corporate governance rules issued by the Capital Markets Authority. In coordination with the Executive Management, the Committee shall prepare the succession plan for the Executive Management, including emergency cases or unexpected vacancies to ensure the sustainability of the company’s business. The Committee maintains a training system to develop the skills of employees. The committee also evaluates the performance of the Executive Management and facilitates the evaluation of the Board of Directors. BNRC also plays a key role in the remuneration of the Board and the Executive Management in accordance with applicable rules and regulations. The BNRC works with the board to obtain the approval of the mechanism for calculating and distributing annual remuneration for Executive Management, proposal of the Board remuneration to be approved by the AGM. It is also involved in the evaluation mechanism and subsequently the training programs for Board members.
The Board appoints a well-qualified chief executive officer (CEO) to lead the company where they oversee the performance of the CEO and Executive Management in implementing the company’s long-term growth plans and strategies and managing risks under the company’s code of conduct.
The Board holds periodic meetings with the Executive Management to discuss the operations, challenges and opportunities. Accordingly, performance standards are set for Executive Management consistent with the company’s objectives and strategy. The Executive Management leads the company’s business and operations by managing activities and operations to ensure profit optimization and cost reduction in accordance with the company’s strategy and objectives. The Board, in approving the charters for the various committees, recognizes the important role management must play and has given the various committees sufficient authority to involve management in their meetings and discussions to the extent the committee members feel this will prove beneficial to the decision-making process. To facilitate the Board’s oversight role, the Executive Management shall provide the Board and concerned committees with periodic performance reports during a given period against Key Performance Indicators set by the Board. The Board approves the principles and codes, and the Executive Management is responsible for implementing them. Each executive ensures that their respective policies and procedures are in compliance with the company’s ethics and principles and has the ownership of the department’s policies and procedures.
Management develops and implements the corporate strategy and operates the company’s business under the Board’s oversight, with the goal of producing sustainable long-term value creation. The Executive Management shall carry their responsibilities as delegated by the Board of Directors and in accordance with laws and regulations issued by the CMA and related regulatory authorities. The role of the management extends to ensure the proper implementation of the Company’s approved Corporate Governance Framework. Executive management ensures that internal control and risk management systems are in place, monitors the adequacy and effectiveness of such systems and ensures compliance with the Company’s risk appetite approved by the Board of Directors.
The Board and management should engage with long-term shareholders on issues and concerns that are of interest to them and that affect the company’s long-term vision. In making decisions, the board considers the interests of all of the company’s stakeholders, including shareholders, regulators, employees, customers, suppliers, and the community in which the company does business, as doing so contributes in a direct and meaningful way to building long-term and inclusive value creation.
The Board has direct responsibility for a number of important matters, including the relationship with external auditors and setting the “tone at the top” highlighting the company’s commitment to integrity and putting the basis for a corporate culture that is well communicated to employees at all levels within the organization.
Zain has a system to ensure the proper operation of business in the Group by specifying the guiding principles and procedures to management through its internal policies and charters. The company works to improve structures for business operations, through complying with the Zain group Code of Conduct and the Articles of Association. Zain provides guidance and management of its subsidiaries in accordance with relevant laws and regulations and best standards.
It is important to ensure the availability of adequate and effective management information systems for risk reporting and decision making that is in accordance with the scope, complexity, and nature of the Company’s activities. The BRC reviews the compliance risk processes that are in place to anticipate and effectively manage the impact of regulatory change on the Company’s operations. In addition, it ensures the existence of clear lines of authority and accountability for managing, monitoring, and reporting risks as performed internally and as required by applicable laws and regulations.
Sustainability issues, including the socio-economic and environmental impacts of Zain, fall under the responsibility of the Chief Sustainability Officer (CSO). The CSO ensures that Zain’s business practices are impactful on all economic, environmental, and social levels. She develops, manages, and monitors the company’s sustainability strategy, in a manner that improves the organization’s environmental, social, and economic impact. The CSO works with the Board, management, employees, customers, stakeholders, suppliers, and corporate shareholders to minimize the company’s the company’s environmental footprint in alignment with the Paris Agreement and the GSMA and ITU Mobile Industry Pathways. Impacts and other issues pertaining to these themes are reported to both Executive Management and the BOD by the Chief Sustainability Officer through a variety of tools that include periodic reports such as quarterly performance reviews and the annually published Sustainability Report. The Sustainability Report is prepared and reviewed by the Chief Sustainability Officer (CSO) and the final approval is provided by the board. The CSO’s role at Zain is to develop the Corporate Sustainability Strategy and ensure that the Zain operations are aligned to the CS strategy and are working towards achieving the targets. Her role also entails developing methodologies to assess the feasibility or success of sustainability initiatives and monitoring the effectiveness of sustainability programs.
The Chief Diversity and Inclusion Officer (CDIO) at Zain is responsible for leading Diversity and Inclusion across Zain with specific focus on Gender Diversity, Disability Inclusion, Internal Innovation and Youth Development. The CDIO connects the dots between diversity and inclusion efforts across the organization. The CDIO develops a broad company-wide strategic diversity and inclusion plan, including training programs for employees. The CDIO works with the Board and the management to promote a more vibrant, inclusive, and supportive environment. The CDIO facilitates opportunities for employee training, and collaborates with management to enhance recruitment, hiring, promotion and retention of diverse communities at Zain, and to provide support to employees with diverse experiences and backgrounds. The CDIO builds relationships with stakeholders to drive diversity-related messages throughout the organization.
Governance and compliance topics are handled by the Chief Communication Officer (CCO). The corporate governance and compliance function reports to the CCO. The corporate governance and compliance function is how Zain fulfills its regulatory obligations by adopting laws and regulations and adapting to the environment in which it operates. The governance department allows Zain to have appropriate decision-making processes and controls in a way that balances the interests of different stakeholders while maintaining effective management, clear lines of communication and a good relationship with the different involved parties. The CG department stays up to date on the responsibilities of the company and its Board and management. The department provides recommendations on corporate governance matters including board affairs, board committees, disclosure and transparency, and the effectiveness of internal control systems within the company . The main objective is to protect the shareholders and other stakeholders’ rights through sound systems and integrity. The Annual Corporate Governance Report is prepared and reviewed by the Chief Communications Officer and the final approval is provided by the Board. The frequency of revision for social, economic, and environmental issues depends on the relevant laws and regulations, international standards, and urgency of the matter. It ranges from annual, semiannual, to ad-hoc as follows:
Annual review:
- Internal Control Review done by an independent auditor through the governance team.
- Annual review of all policies and charters including risk and remuneration
- Annual assessment of the board
- Annual sustainability report
- Annual risk framework review including Company’s risk profile, risk strategy, risk appetite and risk control framework.
- Annual assessment by MSCI – this review is continuous throughout the year
- Annual Assessment by FTSE
- Annual Assessment by S&P
Semiannual review:
- Governance checks semiannually as required by the CMA
Ad-hoc:
as raised by the Board, Executive Management, shareholders, regulators, and other stakeholders.
The Board seeks to identify new business opportunities and to identify gaps in expertise to improve the company’s business strategy and capacity for innovation. The board follows a third-party evaluation process which provides an unbiased independent recommendation to assist the board in taking their roles and responsibilities to the next level. The Company appointed Price Waterhouse Coopers (PWC) to conduct this impartial review of the Board assessment. The BOD consists of nine Members, with two Members of the Board appointed by the Kuwait Investment Authority (the investment arm of the Kuwait Government and Zain’s largest shareholder). The remaining Board Members represent other shareholder groups (companies and individuals) and one independent board member. Members of the BOD maintain independence and hold no major equity in the company. The Vice Chairman is an executive member since he has been appointed as the Group CEO by the Board. The Board was elected during the Annual General Meeting for shareholders which was held in March 2020. The Board of Directors are elected every three years for a renewable period by a secret ballot. Each shareholder, regardless of the number of shares held thereby, shall have the right to attend General Assembly meetings, and shall have a number of votes equal to the number of the votes allocated for that class of shares. There are nine members, all of whom are male with a three-year membership and age ranging from 37-63.
The company is committed to ensuring that all shareholders exercise their rights fairly. In addition, the company is committed to protecting shareholders’ assets from any misuse by the company’s Executive Management, Board of Directors, or key shareholders. The company treats all shareholders of the same class equally and without any discrimination, in line with the company’s interests, and in accordance with the laws and regulations.
Zain continually strives to ensure open and constructive communication with all key stakeholders, as well as transparency in relation to the company’s performance. At Zain, communications with shareholders and investors are handled by the investor relations department (IR), which reports to the CCO. Through the Investor Relations Department, the company maintains ongoing dialogue with the financial community, including analysts, current and prospective investors, and other market communities such as Boursa Kuwait. In addition, our Investors Relations team supports management in their decision making by taking into account feedback received from the community. In addition to the periodic calls, road shows, reports, and events which the IR holds, the stakeholders can access all information through a user-friendly IR app on their mobile devices. The IR’s main objective is to increase the visibility of the company to the financial communities and to guarantee a smooth user experience in doing so. The IR department enables the company to reflect the fundamental value of the company by representing the company to investors and vice versa. The IR team provides financial information to investors in a timely and accurate way and provides nonfinancial data to support company valuations.
Name | Classification | Committee Membership | Professional Experience |
|---|---|---|---|
Mr. Ahmed Tahous Al Tahous
Chairman | Non-executive | BNRC | 34 years in the banking and investment sectors in the global and Kuwaiti markets |
Mr. Bader Nasser Al-Kharafi
Vice Chairman & Group CEO | Executive | BRC
BNRC | Industrial and banking sector, investment and business sectors, non-profit institutions, telecommunications, and mechanical engineering sector |
Mr. Talal Said Al Mamari
| Non-executive | BRC
(Chairman) BNRC | Finance experience in the telecommunications sector |
Mr. Zaki Hilal Saud Al Busaidi
| Non-executive | BNRC
(Chairman) | 20 years of experience in various fields and sectors including port services, insurance, telecommunications, and government. |
Mr. Atif Said Rashid Al Siyabi
| Non-executive | BRC | Over 17 years of experience in information technology, business transformation, innovative technology solutions, system operations, and investment |
Mr. Alaa El-Din bin Abdullah Bait Fadel
| Non-executive | BAC | 18 years of expertise in multi domain business operations, including network operations, sales, quality control, contact center, customer service and customer experience, and composite operational environments |
Mr. Nasser bin Suleiman Al-Harthy
| Non-executive | BAC
(Chairman) | Over 21 years of experience in investment, economic, financial affairs, management, international investment operations, Information Management, legal affairs and compliance. |
Mr. Abdulrahman Mohammad Ibrahim Al Asfour
Independent | Independent | BAC
BNRC | Technical expertise in the application of IT solutions, audit and finance |
Mr. Yousef Khaled Al-Abdulrazzaq | Non-executive | BAC
BRC | Audit and investment expertise within the general reserve sector and investment funds |
As indicated in the table above, the Chairman of the Board is a non-executive officer. This is in accordance with CMA regulations and the commercial law.
New members of the Board are provided with the key information including financial reporting, risk management, internal audit, HR, marketing, legal, , sustainability and governance related affairs of the company. In addition, all members go through training sessions during the year to address any concerns related to expertise and performance as per the annual board assessment results.
The company’s Stakeholders as per internal policies include: the shareholders, regulators, customers, employees, vendors, community, and counterparties (partners, competitors, etc.).
A total of 6 Board Meetings were held in 2021. Meetings between Zain’s Executive Management and the BOD take place on both a periodic basis and as required. Authority regarding economic, social, and environmental issues related to Zain are delegated by the BOD to members of the organization’s Executive Management based on the pre-defined responsibilities of each Senior Executive. The Company is keen to align its business values and strategy with the corporate sustainability strategy which includes social and economic needs while embedding responsible and ethical business practices into every activity carried out by the company.
Zain has in place specific policies and procedures for handling unethical or unlawful behavior. These are articulated in the company’s whistleblowing, insider trading, Code of Conduct, conflict of interest, sanctions, anti-corruption, human rights policy statement, corporate sustainability, and stakeholders and shareholders’ rights protection policies. New board members are provided with all policies and charters as part of their initiation process after the AGM. The Corporate Governance Framework at Zain ensures the implementation of control systems to prevent conflicts of interest and improper conduct. The company developed its Conflict of Interest Policy which sets out the guidelines for the identification, reporting, disclosure, prevention, or strict limitation of potential conflicts of interest. Each member of the Board of Directors and Executive Management shall be responsible for disclosing to the Board any cases that may result in a conflict between their interests and the interests of the company. The Board shall monitor and deal with cases of conflict of interest reported by the members of the Board, the Executive Management or the company’s employees and ensure that such cases have been dealt with in an appropriate and timely manner with the necessary approvals in accordance with the relevant regulatory requirements. The Board also reviews all proposed transactions with related parties to ensure that no conflict may arise as a result of such transaction. Any Board member shall not attend or participate in any discussion or decision-making or voting that involves a subject, transaction, or proposed transaction where there is a potential conflict of interest.
Zain’s whistleblowing policy covers the mechanism of reporting any misconduct internally and investigation of suspicious activities. This policy is intended to encourage and enable employees to raise any concern by offering a reporting and investigation mechanism that is objective, confidential, and independent so that appropriate corrective action can be taken.
The remuneration policy of the company sets out the basis for the remuneration of Board of Directors and the Executive Management and its alignment to the local laws and regulations in addition to the company’s long-term performance and risk tolerance. The policy reflects the company’s objectives and takes into consideration soundness of the company’s operations and financial position. Zain considers that the remuneration system is a key element in value creation. Thus, it has an advanced remuneration scheme in line with the interests of shareholders.
The entire BOD shall be fully accountable for promoting effective governance and sound practices of the remuneration system of the company. The BOD, through the Nomination and Remuneration Committee, is responsible for drafting and updating the remuneration policy consistent with the company’s risk strategy. The BNRC is responsible for monitoring the implementation of the remuneration system and ensuring that there are no significant deviations from the policy and the system of rewards. The BNRC is also responsible for reviewing the policy on an annual basis and when necessary, taking into consideration the extent of compliance with the laws and guidelines issued by the relevant regulatory bodies such as the Capital Markets Authority and others. The Committee submits proposed policy amendments to the Board for approval.
The overall strategy of the Company is set and approved by the BOD and is translated into Key Performance Indicators (KPIs). KPIs are documented and communicated to ensure alignment of the management activities to the strategy applied. The KPIs are based on the Company’s overall strategy and are approved by the Board of Directors. The Executive Management implements this strategy and reports thereon to the Board of Directors on a regular basis.
The total annual remuneration of each board member shall be determined and approved annually during the Annual General Meeting of shareholders as per the recommendations of the BNRC, and by the Board of Directors. It shall comprise of Board Membership, Committees membership, and Performance Bonus. The total Board remuneration shall not exceed 10% of the net profits of the Company (after depreciation, reserves and payment of dividends to shareholders not less than 5% of the Company’s capital or any higher percentage, as provided in the Articles of Association of the Company). The Executive Management remuneration considers the environment in which it operates and the results it achieves. It includes the following key components:
Fixed remuneration: it is reviewed by the BNRC, in coordination with concerned departments if required on an annual basis. Fixed Remuneration includes salaries, allowances and benefits and is granted according to the Company’s salary and grading structure approved by the BOD.
Variable remuneration: The Variable annual remuneration is linked to the achievement of previously established targets. Variable remuneration awards are allocated to individuals depending upon individual and companywide performance.
Zain complies with all local laws and regulations with regards to disclosure and transparency as stipulated by the CMA, Company’s Law issued by the MOCI and Boursa Kuwait guidelines. The disclosure policy at Zain ensures that timely and accurate disclosures are made on all material information, including the financial situation, performance, ownership, and governance of the company. The timely disclosure and simultaneous reporting of all material information that arise between regular reports are necessary to ensure equitable treatment of all stakeholders. Zain takes pride in its strong disclosure system that promotes real transparency which is central to shareholders’ ability to exercise their rights on an informed basis. Through zain’s website stakeholders have access to regular, reliable, and consistent information to assess the performance of the board and management and make informed decisions accordingly.
Additionally, internal policies and procedures are created on the basis of the said laws and regulations and as per best practices. The company outlines its measures and guidelines in its Disclosure and transparency Policy. The internal disclosure and transparency policy clearly defines It includes the types of information that qualify as material, basic principles, responsible persons and teams, timeliness, process, and other matters. In 2021, no violations were reported against Zain regarding its disclosure and transparency practices. Under the sponsorships of the Chairman, and through the board nomination and remuneration committee (BNRC) the Board shall conduct, at least annually, an assessment of its performance as well as the performance of each committee and each individual director which will address its composition, responsibility, structure, processes, and effectiveness in accomplishing its remits and responsibilities. Board evaluations reassure stakeholders, and particularly shareholders, that the Board is committed to the company’s improvement. An external party has been appointed by the Board to facilitate the assessment process which is of a great help in discussing the results and resolving issues. A balance of qualitative and quantitative KPIs are included. In addition, the assessment tool is focused and user friendly. The annual assessment enables the Board of Directors to assess the efficiency and effectiveness of the Board in discharging its responsibilities. Since the Board of Directors determines the general climate of professional and ethical conduct within the organization, it is necessary to regularly assess the governance and performance of the Board. This provides the Board with a comprehensive overview of performance and allows the Board to fill the gaps through the training plan and work to improve the performance of the Board and its supervisory capacity. This process will help in solving the company’s problems and challenges related to governance and compliance which is in the best interest of shareholders and stakeholders. The assessment of the Board of Directors is also a means of improving performance and reducing constraints that may prevent the full implementation of their responsibilities. In 2021, the Board of Directors continued with the method of assessing the performance of the Board as approved previously. Members and Committees were evaluated by an independent third party. The third-party evaluation is conducted by a neutral, seasoned third party. The objective of this assessment is to provide an unbiased assessment of the operations of the Board of Directors. This assessment helps the company to raise the efficiency and improve the performance of the Board and its members and committees, which is reflected on the performance of the company. Such assessment helps the company to identify potential problem areas, improve its ability to manage risks related to Board performance, and measure Board performance indicators against governance standards and applicable legal and regulatory requirements.
The Board Chairman shall review the training and development needs based on the assessment results and in coordination with BNRC. The Board members are always keen to develop their skills and competencies through attending training, awareness, and development sessions on key technical subjects. All members of the Board are committed to allocating sufficient time to perform the tasks assigned to them. Accordingly, all members allocate time to review any material / reports related to the meetings of the Board or any of the committees of which they are members. They also review the performance reports received from the Board Committees and the Executive Management and make recommendations on any problems to the Board; the members commit to the proposed development plan as by the Nomination and Remuneration Committee as it provides an added value in relation to the interests of the Board of Directors and the company. As a result of the Board’s assessment process, a training plan is prepared for all members covering all development needs identified during the evaluation process. Training is given to new board members as part of the induction program which was created by the corporate governance department and is handled through the board secretary. In addition, all employees are provided with the company’s principles and values upon joining the company through internal policies and procedures.
