THE Securities Commission (SC) proposes to introduce a set of best practices and standards for institutional investors to help them vet investee companies for corporate governance.
The institutional investors must disclose to their clientele that the companies they have invested in practise the best corporate governance, SC chairman Datuk Ali Abdul Kadir said.
Otherwise, people who put their money in unit trusts, for example, would not know what the companies are doing or how their interests are protected, he said.
Ali told a press conference this after the first session of the 5th Asian roundtable on corporate governance in Kuala Lumpur yesterday.
We will have discussions with the industry representatives on how we can ensure this sort of institutional shareholder activism. At the same time, we don't want too many regulations, unless they are necessary. We look forward to further participation from institutional investors, we can't rely on retail investors to have sufficient voice, he said.
In his speech at the opening address, Ali said the SC proposal on best practises and standards for institutional investors is recognition of the fact that the portfolio voting power of institutional investors represented an important and yet-to-be-fully-tapped munition in the corporate governance reform arsenal.
Looking ahead, it is not inconceivable that we will see shareholder champions. Perhaps the Minority Shareholder Watchdog Group can begin playing a role in facilitating the building of shareholder coalitions to enhance the effectiveness of the minority shareholder voice, he said.
In the last decade, the emergence of institutional investors as major shareholders in corporate equity in Asia carried strategic implications for their role as a mechanism for market-led monitoring and discipline, Ali said.
He added that in Malaysia, domestic institutional investors control more than one third of the market capitalisation of the KLSE, and this figure did not include securities held through nominees.
The three-day Asian roundtable, organised by the Organisation for Economic Cooperation and Deve- lopment (OECD) and the World Bank, will establish regional reform priorities and develop a White Paper on corporate governance in Asia.