Protecting The Rights Of Stakeholders In Joint Stock Companies

Stakeholders in joint stock companies are everyone who has an interest with the company such as employees, creditors, suppliers, customers, agents, and service providers to companies.

The rules of corporate governance contained in the executive regulations of the law establishing the Capital Markets Authority and regulating the activity of securities necessitate respecting and protecting the rights of stakeholders in accordance with the relevant laws in force in the State of Kuwait, such as the Labor Law, the Companies Law and its Executive Regulations, in addition to the contracts concluded between the two parties. And any additional commitments made by the company towards stakeholders, as protecting the rights of stakeholders in accordance with the laws provides them with the opportunity to obtain actual compensation in the event of a violation of any of their rights.

The framework of corporate governance practices must include recognition of the rights of stakeholders, and encourage cooperation between both the company and stakeholders in many areas, as the contributions of stakeholders constitute a critical resource for building the company’s competitiveness and enhancing its profitability levels.

The company must develop a policy that includes rules and procedures that guarantee protection and recognition of the rights of stakeholders, and allow them to obtain compensation in the event of any violation of their rights, in accordance with what is established in the laws issued in this regard.

The policy prepared by the company in this regard must include the following, as a minimum:

  1. To confirm that dealing with members of the Board of Directors and stakeholders is carried out on the same conditions that the company applies to the various stakeholders without any discrimination or preferential conditions.
  2. The procedures to be followed in the event of any of the parties breaching their obligations, as well as the procedures for which compensation will be paid, and emphasizing that the contracts concluded between the stakeholders and the company include and explain in detail those procedures.
  3. Mechanisms for compensating stakeholders in the event of a violation of their rights, which are recognized by the regulations and protected by contracts.
  4. Mechanisms that explain how the company establishes good relations with customers and suppliers and maintains the confidentiality of information related to them.
  5. Mechanisms for settling complaints or disputes that may arise between the company and stakeholders.

In order that the stakeholders’ transactions, whether contracts or deals with the company, do not conflict with the interests of the shareholders, the following must be taken into consideration:

  1. None of the stakeholders obtains any advantage through his dealings in contracts and deals that fall into the company’s normal activities.
  2. The company should set internal policies and regulations that include a clear mechanism for awarding contracts and deals of all kinds, through tenders or various purchase orders, provided that this mechanism is fully disclosed.

The company must also put in place mechanisms and frameworks that ensure maximum benefit from the stakeholders’ contributions and urge them to participate in following up on its activities, in line with the full realization of its interests. Where the company must do the following, as a minimum:

  1. To provide stakeholders with access to information and data related to their activities, so that they can be relied upon at the appropriate time and on a regular basis.
  2. Put in place the appropriate mechanisms to facilitate the stakeholders’ reporting to the company’s board of directors of any improper practices they are exposed to by the company, while providing appropriate protection for the reporting parties.

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