Asalam Alaikum and good morning: Your Excellencies, Distinguished Guests, Ladies and Gentlemen,
It is a privilege to be working with the Pearl Initiative in promoting higher corporate governance standards – something for which there is a clear regional need.
Today, I will speak about Saudi Aramco’s governance journey.
I should also note – upfront – that we recognize it is a journey and one that continues to evolve with time. We know we can always improve on our corporate governance practices and their execution.
That said, to give you a better understanding of where we are heading, let me begin by talking about where we have come from and where we are now.
Saudi Aramco has been global from our very beginning – more than eight decades ago. International standards of governance have always been an integral part of what we do and how we do things.
Our approach to corporate governance has continued to evolve – as we have gone from several shareholders before 1980 to just one, currently.
While our deep-rooted history has provided us with strong foundations for organizational structure, processes and guidelines, we have also been guided by international practices. Throughout our history we have also been consistently engaged in benchmarking our performance to maintain and strengthen our industry leadership position.
For example, even though we are not subject to the same requirements as a listed company, our accounts are prepared in accordance with IFRS standards – something we have been doing since 2005.
We also produce a publicly available Annual Review on company operations and achievements.
As for our Board, I am the only working Saudi Aramco executive on the Board – along with His Excellency, the Chairman. The robustness of our Board is further enhanced by the presence of three non-Saudi directors – all previous leaders of global energy or finance organizations.
We also maintain independent auditing practices, which provides us with robust reviews of our operations. Our Board Audit Committee oversees the reliability of our accounting and reporting as well as the integrity of our financial statements.
We also have an Ethics Committee. We firmly believe in holding ourselves to the highest ethical standards. Everything we do is anchored in our five corporate values: Excellence, Safety, Accountability, Integrity, and Citizenship.
Just on safety: we have a strong safety culture and an open safety reporting system, which is a vital part of healthy corporate governance – particularly in the energy industry.
A number of years ago, we also introduced an Enterprise Risk Management System to identify and mitigate key corporate risks.
In terms of accountability, we again have a world-class system in place. As CEO, I have at my fingertips a real-time dashboard showing corporate KPIs. This enables me to readily see the ‘health’ of our business. Think of it as the equivalent of monitoring your own wellbeing by being permanently hooked up to an E-K-G machine while also undergoing a continuous C-T scan.
Just to be clear: the creation of shareholder value has been and will continue to be important at Saudi Aramco. However, our focus does not end there. It extends to customers, suppliers, the community, and of course also to employees.
As for our employees, it is worth pointing out that at Saudi Aramco, people are recognized and rewarded for doing what is right. Individuals can freely express their views to senior management.
To help protect the environment and combat climate change, we also maintain one of the strongest programs in our industry. We are constantly seeking ways to further reduce our carbon footprint.
For example, Saudi Aramco recently signed an agreement to test a new technology that potentially converts up more than two-thirds of a barrel of crude oil directly into petrochemicals. This has the potential to lower costs and create new markets. It also has positive implications for future non-combustible uses for oil.
Water conservation is another high priority. We put a value on water a long time ago. As a result, our people strive to minimize groundwater usage and maximize the reuse of wastewater. In fact, we have one of the highest reuse rates in the region for industrial and sanitary wastewater.
Localization is also an important initiative. Through our iktva program, Saudi Aramco is working to significantly increase the amount of goods and services we procure domestically – up to 70 percent by 2021.
Beyond improving our supply-chain reliability, we expect this will help further industrialize the Kingdom, diversify the domestic economy and create jobs.
On a related note, we also have a code of conduct for our supply chain. We expect no less of our suppliers than of our own employees.
Citizenship is another key community priority for us. In line with Vision 2030, we are promoting entrepreneurship and job-rich small-to-medium enterprises.
Indeed, we firmly believe taking this multi-stakeholder approach is essential to our sustained success.
That all said, I should pause to emphasize a key point…
Even though Saudi Aramco has well-developed corporate governance practices, we have absolutely no intention of standing still.
All of which brings me to where Saudi Aramco goes from here…
Going forward, one challenge for us – for that matter, a challenge for all companies – is maintaining the right balance of control, compliance and performance.
For a company like Saudi Aramco, it is critical that corporate governance structures do not become top heavy. If the chain of command and control becomes too long for a large organization like ours, the business will become sluggish, less innovative and resistant to change.
However, it is important to note: size doesn’t matter. Micro, small and medium-sized enterprises as well as family-owned firms can also benefit from practicing good corporate governance.
Indeed, key principles such as following the law, ethical conduct, sound accounting practices, and protecting one’s investments are as important to smaller firms as they are to bigger companies.
In fact, perhaps even more important. After all, smaller companies face a unique set of challenges during down cycles. In addition, smaller companies cannot typically afford elaborate governance monitoring systems.
Ultimately, good governance provides a foundation for better, sustainable performance and also an enhanced reputation for any company, of any size.
Good governance is about values – starting with the individual – through to teams – and ultimately across the entire enterprise. Which of course means the actions of one individual can have a huge impact on a company’s reputation, performance and bottom-line.
And as many of you already know: it takes a long time to build a good reputation, but only a few minutes to lose one.
Ladies and Gentlemen, at Saudi Aramco we have seen firsthand the benefits of good governance.
Saudi Aramco is has always focused on financial and operational efficiency.
But like all companies, we also know that we are not perfect.
As I said at the beginning, we realize we can further improve on both our governance practices and their execution. We also recognize that it is our broader responsibility to help others, especially in the Kingdom.
That is why we are pleased to co-host this important Forum with the Pearl Initiative. To help show why good governance is key for every company that wants to thrive during this dynamic time.
It is also why Saudi Aramco will continue to strive to raise the bar even higher for ourselves in the years and the decades to come.