Enhancing Corporate Governance in Jordan

Impact

	Accountability and transparency encourage investments.

In mid 2005, USAID in cooperation with Jordan Securities Commission (JSC), the Amman Stock Exchange (ASE) and the Securities Depository Center (SDC) as well as Jordan’s listed companies, brokers and institutional investors finalized and delivered a corporate governance code. The code was finalized in accordance with the principles of the Organization for Economic Co-operation and Development (OECD) and best business practices in the United States. The code explicitly outlines corporate governance requirements of Jordan’s listed companies, market participants and financial institutions.

Challenge

The lack of one monitoring entity allowed for various companies and brokers to not be held accountable in terms of good governance. Another challenge was applying the same law or code to all companies despite the fact that many of Jordan’s company’s vary in their state of maturity.

Initiative

The corporate governance code takes a different approach to suggest the most effective method of enforcement; a “comply or explain” framework. The approach creates real obligations for companies, but also allows them to opt out of one or more provisions. Companies can now explain the reasons for non-compliance in a public statement. The information conveyed through these means allow investors to make important investment decisions.

"The Rule of Law and accountability on all parties have paved the way for investors’ confidence,” stated Dr. Saket, Executive Chairman of the Jordan Securities Commission. “The enforcement of such culture resonates deep within the countries core, and ultimately solidifies Jordan’s capital market and financial sustainability standing in the region, where almost close to 45% of Jordan’s market capitalization goes to non-Jordanian’s."

Results

By demonstrating solid regulations for anti-corruption and accountability, Jordan will soon be able to reap the benefits of future investments in its many forms. Accountability for actions encourages confidence from investors in the markets leading to a self-sustaining and enabling financial environment.