Corporate Governance in Asia Pacific : Malaysia (Key characteristics…
Corporate Governance in Asia Pacific : Malaysia
Key characteristics influencing Malaysian corporate governance
Main business form - Public Limited Company
Predominant Ownership Structure - Controlling Shareholder(Familiy, corporation or trust nominee)
Legal System - Common Law
Board Structure - Unitary
Important Aspect - Influence of Bumiputera Shareholders
Independent non-executive directors should comprise at least onethird of the board.
Chairman and CEO’s roles to be
separate to ensure that power is not centred in one individual.
The board should have appropriate relevant information supplied in a timely fashion.
The board should meet regularly and disclose the attendance record of individual directors
at board meetings.
The board should have access to a company secretary who should ensure that the board
provides all appropriate information for corporate and statutory requirements.
should also have access to independent professional advice as and when needed at the company’s expense.
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Should be a remuneration committee, comprised wholly or mainly of non-executive
directors, to recommend the remuneration levels for the executive directors.
The remuneration of each director should be disclosed in the company’s annual report.
of non-executive directors should be decided by the board as a whole and should reflect each
non-executive’s experience and responsibilities in the company.
Remuneration packages should reflect levels of both corporate and individual performance.
Accountability and audit
An audit committee should be established, comprised of at least three directors with the
majority being independent.
It should be chaired by an independent non-executive director.
The audit committee’s role includes:
reviewing the year-end and quarterly financial statements of the company.
● considering the appointment of the external auditor, his/her fee, and the nature and scope of the audit
● reviewing the scope, programme, and results of the internal audit.
The activities of the audit committee, the number of meetings held each year, and the
attendance by individual directors should be disclosed
Internal audit should be independent
of the activities they audit.
The board should ensure that there is an effective communications strategy between the
board, management, shareholders, and stakeholders.
There should be ‘a dialogue based on
the mutual understanding of objectives’ between the company and its institutional investors.
The annual general meeting (AGM) is a way to communicate with private investors and
encourage their participation.
The third part of the Code is aimed at investors and auditors and their role in corporate
-The Corporate Law Reform Committee was established in 2004 to lead a programme of
corporate law reform in Malaysia.
Corporate governance reforms are the focus of one of the
working groups, which is looking at issues of corporate governance and shareholders’ rights.
In June 2009 the stock exchange in Malaysia, Bursa Malaysia, announced that it would be launching a new corporate governance index with the aim of encouraging greater transparency, more independence at board level and helping to deter related party transactions.
In 2011 the Securities Commission Malaysia published a Corporate Governance Blueprint setting out a broad-based approach to the corporate governance landscape going
Boards and shareholders should conduct business in a way that enhances the
company’s reputation for good governance and promote more internalization of the culture of good governance.
The Blueprint ‘seeks to enrich the governance process through
promoting more extensive and proactive participation by a broader range of stakeholders’.
The Corporate Governance Blueprint has six chapters:
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The Blueprint details recent changes in Malaysia impacting on the corporate governance environment, these include that in 2010, the Capital Markets and Services Act 2007 was
amended to include sections 317A and 320A which gave the Securities Commission Malaysia the power to act against directors of listed companies who cause wrongful loss to their company and against any person who misleads the public through falsely preparing or auditing the financial statements of companies; and also that Malaysia has committed to achieving full convergence with the International Financial Reporting Standards (IFRS) by
In the following year the Malaysian Code on Corporate Governance (2012) was issued. This
focuses on strengthening board structure and composition, recognizing the role of directors as active and responsible fiduciaries. It also encourages companies to have appropriate corporate disclosure policies and to make public their commitment to respecting shareholder
rights. The eight principles
are as follows:
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Liew (2007) finds that Malaysia’s corporate governance reforms have been modelled on the Anglo-American system to a large extent, but the majority of the interviewees in her research placed greater emphasis on the social aspect of corporate governance in contrast to the traditional notion of shareholder accountability.