She said the global experience over the last two decades had highlighted the consequences and costs of governance failures, whether in the public or corporate sector.
In the case of larger corporations and entities, such governance failures had witnessed large-scale destruction of wealth, collapse of financial markets and the erosion in confidence that resulted in costs that were detrimental to the economy of the country, she said.
“Weak governance in both the private and public sectors have resulted in poor investment decisions, excessive risk-taking and irregular practices.
“In the public sector, the consequences of getting it wrong is even greater, given that its repercussions are far reaching...across the entire nation,” she said in her talk titled Building Sustainable Institutions: Good Governance Matters at the Chancellor Tuanku Muhriz Lecture at Universiti Kebangsaan Malaysia in Bangi on Wednesday.
Gracing the inaugural annual lecture were Yang Dipertuan Besar Negri Sembilan, Tuanku Muhriz Almarhum Tuanku Munawir and Tunku Ampuan Besar Negri Sembilan, Tuanku Aishah Rohani Almarhum Tengku Besar Mahmud.
Zeti said there had been countless incidences of such governance failures in both the corporate and financial sectors, which had resulted in large bankruptcies, often followed by massive litigation, company closures and fines imposed by the regulators.
Citing several financial scandals such as The Bank of Credit and Commerce International (BCCI) in the United Kingdom in 1991, Enron in the United States (2001), Tyco International (2002) and JP Morgan (2012), she said these highlighted how expensive governance failures could be.
“We can see this in the perspective of comparing the collapse of Lehman Brothers in 2008 which wiped out US$691bil and the Tohoku disaster in Japan which cost the country US$380bil.
“When governance failures occur, not only is there a loss in financial terms but there is the added loss of reputation and the dire task of rebuilding trust,” she said.
In terms of the Asian region, Zeti said while it had continued to be an important growth centre in the global economy, the region however was not immune to the turbulence and upheavals taking place in the different parts of the world.
Thus, she said, the capability of its institutions and organisations needed to be strengthened and the governance arrangements to be commensurated with the developments unfolding.
As an emerging economy in Asia, Malaysia needed to pursue the middle ground and that which was contextualised to its environment, she said.
“But there is no question on the need to provide the assurance of sound governance practices if we are to draw meaningful international participation in our economies,” she added. - Bernama
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