By: Mohd Zamre Bin Mohd Zahir
The Malaysian Code on Corporate Governance (Code), first issued in
March 2000, marked a significant milestone in corporate governance reform in
Malaysia. It codified the principles and best practices of good governance and
described optimal corporate governance structures and internal processes.[1]
Since the release of the Code, the
Malaysian corporate scene has made significant strides in corporate governance
standards.[2] The mandatory reporting of
compliance with the Code has enabled shareholders and the public to assess and
determine the standards of corporate governance by listed companies.[3] The
Malaysian Securities Commission (SC) has released a new Code on Corporate
Governance which takes effect from 1st October 2007, following an announcement
in the 2008 Malaysian Budget Statement by Dato’ Seri Abdullah Badawi.[4]
The Malaysian Code on Corporate
Governance (Revised 2007) supersedes the existing
regulations issued in March 2000.[5] The Code aims to
strengthen Malaysia's corporate governance framework and bring it in line with
current global best practice. Its main revisions strengthen the roles and
responsibilities of Boards of Directors and Audit Committees and aim to ensure
the effective discharge of their duties.[6] The revisions also codify
the eligibility criteria for the appointment of Directors, the composition of
the Boards and the role of the Nomination Committee.[7]
The new regulations state that Independent
non-Executive Directors should continue to make up at least one-third of the
members of the Board and that there should be a more meaningful and independent
oversight function. Appointments and reappointments to the Board must be made
by a separate Nomination Committee which is expected to evaluate the
professionalism and integrity of each Director.[8] The Committee should also
make sure that Board members possess basic skills, knowledge, expertise and
experience to discharge their duties and responsibilities.
The revised Code strengthens the regulations
on the role of Audit Committees to ensure that they provide an effective check
on company mangers.[9]
The new rules cover the composition of Audit Committees, the frequency of
meetings and the need for audit committee members to attend continuous training
to keep abreast with developments in relevant financial and other related
developments. In order to ensure the independence of the Audit Committee,
Executive Directors are excluded from membership.[10]
Recent corporate accounting irregularities have
highlighted the importance of an effective and independent internal audit
function. The revised Code emphasizes this by requiring all public-listed
companies to carry out their own internal audit functions.[11] The reporting line has
also been clarified so that the Board of Directors will now be held accountable
for ensuring adherence to best practice standards for internal audit functions.[12]
The revised Code has received support from
leading stakeholder groups including the Malaysian Institute of Corporate Governance and the Minority
Shareholder Watchdog Group (MSWG).[13] The CEO of the MSWG,
Abdul Wahab Jaafar Sidek said, “I laud the initiative to revise the Code
and set new rules to deal with improper activities of certain directors.”[14] The revised Code has been
achieved through ongoing collaboration between the SC, other government
agencies and industry leaders and is widely regarded as being a significant
advance which will strengthen Malaysia's corporate governance framework.
The Malaysian Code on Corporate Governance as
revised in 2007 represents the continued collaborative efforts between
Government and the industry. The Securities Commission (SC) would like to thank
the Companies Commission of Malaysia, Bursa Malaysia Berhad, Bank Negara
Malaysia, the Bar Council, the Federation of Public Listed Companies, the
Malaysian Institute of Corporate Governance, the Minority Shareholders Watchdog
Group, the Malaysian Accounting Standards Board, the Malaysian Institute of
Accountants, the Malaysian Institute of Certified Public Accountants, The
Institute of Internal Auditors Malaysia, the Malaysian Institute of Chartered
Secretaries and Accountants and the Malaysian Investment Banking Association
for their invaluable feedback and comments.[15]
[1] Malaysian Code on
Corporate Governance (Revised 2007).
[2] Ibid.
[3] Ibid.
[4]CSR Malaysia,
“Revised Code on Corporate Governance Introduced in Malaysia” online available
at http://www.csr-malaysia.org/news/malaysia/revised-corporate-governance-code-2007101324/
accessed on 20th December 2011.
[5] Ibid.
[6] Ibid.
[7] Ibid.
[8] Ibid.
[9] Ibid.
[10] Ibid.
[11] Ibid.
[12] Ibid.
[13] Ibid.
[14] Ibid.
[15] Note 1.
No comments:
Post a Comment