Corporate governance in M’sia

MAICSA PERSPECTIVE: A monthly series by The Malaysian Association of the Institute of Chartered Secretaries and Administrators.


CORPORATE governance is the current flavour among business writers, conference organisers and policymakers. Many seminars and conferences have been organised locally and globally on this topic. Policymakers and investor groups flaunt the word in their speeches, but some business editors and directors view it critically. 

In Malaysia, corporate governance principles and practices were implemented by the High Level Finance Committee which was established by the Finance Ministry, regulators, industry players and professional bodies who deliberated on issues for over a year before formalising their Report on Corporate Governance in 1999. 

The recommendations of this report have subsequently been implemented in stages by the KLSE and apply to all listed issuers. In anticipation of the implementation of the Malaysian Code on Corporate Governance (the Malaysian Code), the Malaysian Institute of Corporate Governance (MICG) was formed in March 1998. The objective for setting up this body was to represent, express and give effect to opinions of members of MICG on issues relating to corporate governance in Malaysia, promote awareness of corporate governance principles among corporate participants, the investing public and corporations on the importance of good governance to enhance shareholders value and bring about corporate prosperity. 

The KLSE has adopted most of the recommendations of the Malaysian Code that require all listed corporations to put into practice. All listed corporations’ annual reports must include, inter alia, the Statement of Corporate Governance and a statement of the state of internal control in their annual report, plus disclosures of remuneration to the executive directors and details of directors seeking re-election at AGMs. 

The Malaysian Code is an attempt to enhance corporate governance in listed corporations and to ensure that these corporations adhere to the recommended principles and practices, which are enforced by the Listing Requirements. As corporate governance suggests credibility through transparency and accountability in running corporations, the principles and practices must continue to evolve to adapt to the Malaysian way and culture. The numerous recommendations of the Malaysian Code were implemented to enhance transparency and disclosure of relevant information among listed issuers. 

Capital market regulators like the Securities Commission (SC) and the KLSE view defaults by errant directors and listed issuers seriously, and many directors of listed issuers have now been taken to task. 

The SC has, since 1996, embarked on a shift in the capital market regulation from a merit-based regulation (MBR) to a disclosure based regime (DBR), especially for corporate proposals which include the issue/offer/listing of securities over a three-phase shift from a flexible MBR to a hybrid of MBR and DBR, with greater emphasis on disclosure, due diligence and corporate governance as well as promoting accountability and self-regulation. 

SC still studies corporate proposals for its pricing of securities, valuations of assets and the utilisation of proceeds to be raised from various types of securities, and onward to full DBR with a high standard of disclosure, due diligence and corporate governance, as well as exercising self-regulation. 

SC will evaluate proposals wholly from the perspective of quality and integrity of information disclosed by the listed issuer. Directors and promoters will be held responsible to provide full, accurate and timely information and be liable for breaching securities laws and regulations. 

Malaysia ranks 5.5 points out of 10 points in its application of corporate governance among other Asian countries - an improvement from 3.7 points two years ago as seen from a recent Hong Kong study. The study looked into the standard of enforcement of rules and regulation, political and regulatory environment, adoption of international accounting standards, institutional mechanisms and corporate governance culture. Malaysia recorded 9 out of 10 points in term of strict rules and regulations, but scored only 3.5 points for enforcement. 

The Employees Provident Find established the Minority Shareholders Watchdog Group in 2001 as a voice for minority shareholders and to provide an avenue for minority shareholders to institute proceedings against listed issuers who flout the principles and practices of good corporate governance. Active shareholder involvement in listed issuers at general meetings ensured that certain resolutions not benefiting the minority shareholders were not carried. There is a heightened level of shareholder participation in listed issuers at general meetings, which indicates the presence of a vibrant corporate governance system in Malaysia. 

As Malaysia marches into the new millennium that is uncertain and punctuated with war, threat of war, terrorism and more recently, the outbreak of an unknown disease, business expansions and establishment of new entities seem to be a little slow. Not only have these factors contributed to a gradual development of new businesses, other factors have also played a part in stagnation of some businesses. 

Poor corporate governance policies in mega corporation elsewhere have had an indirect effect on corporations in Malaysia, resulting in slow growth and loss of overseas business, which in turn have resulted in a general slowdown in the business. Fortunately, however, Malaysia has had the fortitude of inheriting sufficiently good corporation laws and regulations from its British peers. With the abundance of corporate governance policies already in place in Malaysia, the relevant authorities now have to ensure that corporate governance principles and practices are effectively carried out in the boardroom, and not be treated mere as a checklist with which they need to comply. 

It is envisaged that other recommendations of the Malaysian Code to restate and strengthen provisions relating to the following will be studied and implemented via company law: 

·Providing more protective rights to minority shareholders by removing unnecessary obstacles to facilitate the private enforcement of minority shareholders rights and streamlining and/or simplifying laws relating to derivative actions; 

·Stricter provisions to regulate self-dealing and the control of related party transactions or fiduciary duties of directors with the view to curb abuses by major shareholders and directors in related party transactions; 

·Differentiating between the level of protection required by listed and unlisted companies, bearing in mind cost considerations to the company in implementing the onerous requirements. 

In conclusion, the writing is on the wall for Malaysian corporations to enhance good corporate governance policies in their set-up and as the laws and regulations are being restated. However, all these legislations will not bear fruit, until and unless these principles and practices are internalised and become part of the life in a corporation, and the practices are looked upon as proprietary values that have to be strictly followed.  


F. S. Cheah is a Council Member of MAICSA and ICSM. He is a part-time lecturer in corporate law and practices at Multimedia University, Cyberjaya. 

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Next In Business News

MUI Group's PMC to buy 51% stake in A&W Malaysia
Yinson reports third straight quarterly earnings growth
KPower posts RM37.4mil net profit in FY21, despite Covid-19 setbacks
FBM KLCI broadly higher on bargain-hunting activities
BNM's international reserves at US$116.2bil as at Sept 15
China stocks end higher, Evergrande's assurances lift real estate firms
Maybank, UOB to jointly underwrite RM2bil Islamic facility for Malayan cement
DFIs provide micro-SMEs with financing totalling RM8.1bil
Oil prices rise on tight supply, renewed risk appetite
Citi Malaysia bags multiple banking awards

Stories You'll Enjoy