Friday, March 30, 2012

Malaysia's New Corporate Governance Code Puts Strong Emphasis on Board Effectiveness

The Securities Commission Malaysia (SC) released the Malaysian Code on Corporate Governance (CG) 2012 (MCCG 2012) as the first major deliverable of the Corporate Governance Blueprint 2011 (Blueprint) launched in July last year.

Aimed at enhancing board effectiveness of listed companies through strengthening board composition, reinforcing the independence of directors and fostering commitment of directors, the new code will supercede the Malaysian Code on Corporate Governance 2007.

"In essence, the Malaysian Code on Corporate Governance 2012 and the Blueprint seek to embed a culture of good corporate governance, addressing the key components of the corporate governance ecosystem to strengthen self and market discipline. Boards and shareholders must embrace the fact that good business is not just about achieving the desired financial bottom line by being competitive. It is equally about creating shareholder value, which can only be sustained by well-informed strategic direction and engaged oversight, which stretch beyond short-term financial performance," said Tan Sri Zarinah Anwar, Chairman of the SC.

The new CG code sets out eight broad principles and specifies the best practices of good corporate governance at a higher level than that expected by regulations. Each principle is followed by a series of recommendations, which include the formalisation of a board charter, capping of the tenure of independent directors to nine years and the separation of chairman and CEO roles. It also elaborates on the need for boards to recognise and manage risks and for companies to encourage shareholder participation.

To support and enhance the capacity of directors to fulfil the demands of their role, the new code puts greater emphasis on the role of the Nominating Committee, chaired by a senior independent director, in relation to the recruitment, assessment, and training needs of directors.

"Good corporate governance cannot be achieved merely on the strength of regulations. Directors have a duty not just in setting strategic direction and overseeing the conduct of business in compliance with laws, they should also be effective stewards and guardians of the company in respect of ethical values, and ensuring an effective governance structure for the appropriate management of risks and level of internal controls," added Tan Sri Zarinah.

The MCCG 2012 will be effective on 31 December 2012 although listed companies are encouraged to make an early transition to the principles and recommendations elaborated in this new code.

The new CG code, as well as a set of FAQs, is available at the SC website at www.sc.com.my

No comments:

Post a Comment