An Analysis of Perceptions of Western Corporate Governance Principles in Saudi Arabia

Abstract

Managers working for multinational firms must evaluate the extent to which they should adapt corporate governance mechanisms to local markets or to pursue a one-size-fits-all approach. In 1999, the OECD Principles of Corporate Governance were endorsed by OECD ministers in an attempt to influence policymakers worldwide by setting global governance standards. Yet the level of approval and understanding of these principles in non-OECD nations is still unclear. In this study we develop and test a survey instrument in the Kingdom of Saudi Arabia to assess perceptions of OECD principles by 168 Saudi Arabian managers. Results suggest that Saudi Arabian perceptions of shareholder rights are positively related to a) maintaining an effective corporate governance framework and b) the effective monitoring of management by the board of directors. Managerial implications and future research directions are also discussed.