Disclosure of Committee Activities

Annual Report Sections, Transparency Levels, and Regulatory Requirements

First: Introduction

Committees may operate behind closed doors during the year, but their activities must be transparent to shareholders, regulators, and the broader market. Disclosure of committee activities serves multiple purposes: regulatory compliance, accountability to stakeholders, building investor confidence, and benchmarking against best practices. In an era of increasing transparency expectations, committees that disclose effectively gain credibility; those that hide behind minimal regulatory compliance lose stakeholder trust.

In the Saudi system, the Corporate Governance Regulations precisely specify mandatory disclosures regarding committee activities in the annual governance report. These requirements form a minimum, beyond which leading companies expand to build a culture of transparency. This article reviews regulatory requirements, content of annual disclosures, transparency levels, examples of best practices, and how to transform disclosure from a regulatory burden to a stakeholder communication opportunity.

Second: Regulatory Disclosure Requirements

1. CMA Corporate Governance Regulations

The regulations require listed companies to disclose in the annual governance report:

1.1 Committee Composition

• Names of each committee’s members.
• Classification (executive, non-executive, independent).
• Member experience and qualifications.
• Membership in other committees.

1.2 Committee Activities

• Number of meetings during the year.
• Member attendance rate.
• Main tasks performed.
• Material decisions or recommendations.

1.3 Committee Charter

• Mention of charter existence.
• Reference to its publication.
• Any material amendments during the year.

1.4 Performance Evaluation

• Whether evaluation was conducted.
• Methodology used.
• Overall results.
• Improvement plan.

2. Sectoral Disclosures

2.1 Banking Sector

SAMA requires additional disclosures:

• Detailed risk committee activities.
• Compliance committee activities.
• Sharia activities (for Islamic banks).
• Stress test results (summary).

2.2 Insurance Sector

Insurance Authority requires:

• Investment committee activities.
• Underwriting committee.
• Claims committee.

3. Specific Disclosures

3.1 Audit Committee Report

Specifically required in annual report:

• Composition and qualifications.
• Number of meetings.
• Tasks performed during the year.
• Financial statements review.
• External auditor communication.
• Internal audit oversight.
• Significant findings.
• Performance evaluation.

3.2 Compensation Disclosure

Detailed disclosure of board and senior executive compensation:

• Total compensation by category.
• Compensation by component (fixed, variable, allowances).
• Top 5 executive compensation.
• Performance-compensation linkage.

3.3 Related Party Transactions

• Material transactions during the year.
• Approval procedure.
• Audit committee role.
• Justifications and prices.

Third: Annual Governance Report Structure

1. Typical Report Sections

A typical comprehensive annual governance report includes:

1.1 Introduction and General Approach

• Chair’s message on governance.
• General governance philosophy.
• Key governance developments during the year.
• Future priorities.

1.2 Governance Structure

• Board composition.
• Committee structure.
• Senior management.
• Authority distribution.

1.3 Board

• Members and their qualifications.
• Meetings during the year.
• Material activities.
• Performance evaluation.

1.4 Committees (Each Separately)

• Committee composition.
• Charter and authorities.
• Annual activities.
• Material achievements.
• Performance evaluation.

1.5 Compliance and Ethics

• Compliance status.
• Code of ethics.
• Whistleblower mechanisms.
• Identified violations and treatment.

1.6 Compensation

• Compensation policy.
• Detailed disclosures.
• Performance-compensation linkage.

1.7 Related Party Transactions

• Material transactions.
• Approval procedures.

1.8 ESG and Sustainability

• ESG strategy.
• Performance against goals.
• Future commitments.

1.9 Communication with Shareholders

• Communication strategy.
• General assemblies.
• Investor communications.

2. Disclosure Format

2.1 Numerical Tables

For quantitative information:

• Member attendance.
• Performance indicators.
• Year-over-year comparisons.

2.2 Descriptive Text

For qualitative information:

• Strategy and approach.
• Material activities.
• Challenges and treatment.

2.3 Visual Aids

For complex information:

• Organizational charts.
• Performance charts.
• Comparative timelines.

Fourth: Transparency Levels

1. Minimum Compliance Level

Companies adhering to required minimum:

• Mandatory information only.
• Generic descriptive text.
• Limited tables.
• No additional context.
• Minimal benchmarking.

This level meets regulatory requirements but doesn’t build deeper stakeholder trust.

2. Best Practice Level

Companies going beyond minimum:

• All required information.
• Additional context and clarifications.
• Comparison with previous years.
• Detailed material activities.
• Future plans and priorities.
• Challenges faced.

3. Distinguished Level

Companies considering disclosure a strategic communication opportunity:

• Comprehensive narrative on governance.
• Year-over-year evolution.
• Peer benchmarking.
• Specific KPIs and performance.
• Lessons learned and continuous improvement.
• Forward-looking statements.
• Multi-stakeholder perspective.

Fifth: Specific Committee Disclosures

1. Audit Committee Disclosure

1.1 Required Components

• Composition with member qualifications.
• Number of meetings and attendance.
• Tasks performed.
• Financial statements review.
• External auditor relationship.
• Internal audit oversight.
• Internal control.
• Performance evaluation.

1.2 Best Practice Additions

• Specific significant issues handled.
• Discussions with auditor.
• Major accounting estimates.
• Whistleblower reports received.
• Independence assessment.

2. Nominations and Remuneration Committee Disclosure

2.1 Required Components

• Activities during the year.
• Compensation policy.
• Detailed compensation.
• Performance-compensation linkage.

2.2 Best Practice Additions

• Succession planning approach (high level).
• Board diversity progress.
• Nomination process used.
• Benchmarking on compensation.
• Pay ratio (where applicable).

3. Risk Committee Disclosure

3.1 Required Components

• Risk management framework.
• Risk appetite.
• Material risks.
• Activities during the year.

3.2 Best Practice Additions

• Emerging risks tracking.
• Stress test summary results.
• Risk metric trends.
• Major risk events and responses.
• Cybersecurity approach.

4. Governance Committee Disclosure

4.1 Required Components

• Governance framework.
• Compliance status.
• Board evaluation.

4.2 Best Practice Additions

• ESG strategy and progress.
• Stakeholder engagement.
• Governance improvements during year.
• Code of ethics application.
• Diversity initiatives.

Sixth: Compensation Disclosure

1. Regulatory Requirements

Detailed disclosure of:

• Board member compensation by member or category.
• Top 5 executive compensation.
• Compensation breakdown.
• Performance-related elements.
• Termination arrangements.

2. Disclosure Format

2.1 Aggregated Tables

2.2 Individual Disclosure

In some cases, individual disclosure for senior positions:

• Top 5 executives.

3. Performance-Compensation Linkage

• Performance metrics used.
• Targets vs. achievements.
• How compensation was determined.
• Discretionary adjustments and rationale.

Seventh: Communication with Shareholders

1. Annual Report

Main communication channel:

• Sufficient detail.
• Easy to read.
• Year-over-year comparable.
• Linked to broader company narrative.

2. General Assembly

Direct interaction opportunity:

• Chair’s report to assembly.
• Committee chair Q&A.
• Detailed compensation presentation.
• Shareholder questions.

3. Investor Communications

Ongoing communications:

• Investor presentations.
• Analyst meetings.
• Investor relations website.

4. Material Disclosures

Specific events:

• Major decisions.
• Senior management changes.
• Material related party transactions.
• Charter amendments.

Eighth: International Reporting Standards

1. ESG Reporting Standards

Increasingly important globally:

• GRI (Global Reporting Initiative).
• SASB (Sustainability Accounting Standards Board).
• TCFD (Task Force on Climate-related Financial Disclosures).
• ISSB (International Sustainability Standards Board).

2. Saudi Standards

• Saudi Vision 2030.
• CMA Sustainability Reporting Guidelines.
• Saudi Stock Exchange (Tadawul) ESG Disclosure Guidelines.

3. Linkage with Committee Disclosure

Comprehensive ESG disclosure typically includes:

• Governance Committee role in ESG.
• Risk Committee role in ESG risks.
• Audit Committee role in ESG metrics validation.
• Integration with broader governance disclosure.

Ninth: Common Challenges

1. Sensitive Information

Some information may not be appropriate for disclosure:

• Investigation details.
• Future strategic plans.
• Personal employee information.
• Information that would harm competitive position.

Treatment:

• Disclosing general information with sensitive specifics protected.
• Anonymized disclosure where possible.
• Clear rationale for non-disclosure.
• Legal review.

2. Balance Between Detail and Readability

Too much detail can overwhelm:

• Annual reports becoming too long.
• Critical information lost in detail.
• Reader fatigue.

Treatment:

• Executive summaries.
• Clear structure.
• Visual aids.
• Cross-references.
• Online supplements.

3. Year-over-Year Consistency

Maintaining consistent disclosure approach:

• Comparable information.
• Same metrics used.
• Format consistency.
• Explanation of changes.

4. Forward-Looking Statements

Balance between transparency and prudence:

• Not making commitments difficult to meet.
• Appropriate disclaimers.
• Periodic updates.
• Realistic projections.

5. Linguistic Quality

Reports in Arabic and English with quality:

• Specialized translation.
• Specialized terminology consistency.
• Cultural appropriateness.
• Linguistic editing.

Tenth: Quality Indicators of Disclosure

1. Comprehensiveness

• Coverage of all required topics.
• Coverage of material topics beyond required.
• No critical information gaps.
• Multi-stakeholder addressed.

2. Clarity

• Clear, jargon-free language.
• Logical structure.
• Effective navigation.
• Visual aids.

3. Accuracy

• Verified information.
• Consistent across sections.
• Reconciled with financial statements.
• Reviewed by relevant parties.

4. Timeliness

• Published in timely manner.
• Reflecting recent events.
• Updated for material developments.

5. Comparability

• Comparable year-over-year.
• Comparable across peer companies.
• Comparable across international standards.

Eleventh: Best Practices

1. Content Best Practices

• Going beyond regulatory minimum.
• Telling the governance story, not just compliance.
• Including challenges and lessons learned.
• Quantitative data with context.
• Forward-looking with appropriate caveats.

2. Process Best Practices

• Year-round preparation, not last-minute.
• Committee input on their sections.
• Board review and approval.
• Multiple-eye review.
• Quality assurance.

3. Presentation Best Practices

• Professional design.
• Effective use of visuals.
• Both Arabic and English with quality.
• Digital accessibility.
• Easy-to-find online.

4. Engagement Best Practices

• Anticipating stakeholder questions.
• Proactive communication.
• Feedback channels.
• Continuous improvement based on feedback.

Conclusion

Disclosure of committee activities is the bridge between internal committee work and external stakeholder accountability. Done minimally, it meets regulatory requirements without building trust. Done well, it transforms regulatory compliance into competitive advantage — demonstrating governance quality, building investor confidence, and supporting the company’s broader narrative.

Saudi companies have a strong regulatory framework to build upon. The opportunity lies in going beyond compliance to embrace transparency as a strategic asset. Companies that invest in disclosure quality — comprehensive content, clear presentation, year-over-year consistency, and stakeholder engagement — build credibility that compounds over time. As investor expectations rise globally and regulatory frameworks evolve, the companies that lead in disclosure will be the companies that lead in capital access, stakeholder trust, and long-term success. Disclosure is not the end of governance — it’s the proof of it.

References and Sources

• Corporate Governance Regulations issued by the Capital Market Authority.
• Saudi Companies Law (Royal Decree M/132).
• Implementing Regulations of the Companies Law for Listed Joint-Stock Companies.
• CMA Sustainability Reporting Guidelines.
• Saudi Stock Exchange (Tadawul) ESG Disclosure Guidelines.
• OECD Principles of Corporate Governance — Disclosure.
• ICGN Global Governance Principles — Transparency.
• GRI Standards.
• TCFD Recommendations.
• ISSB Standards.