Download - Developments in Malaysian Corporate Governance The Regulatory Perspective Nik Ramlah Mahmood
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Agenda
Overview of Reform Agenda
The Rights and Equitable Treatment of Shareholders The Role of Stakeholders in Corporate Governance
Disclosure and Transparency
The Responsibilities of the Board
Other Initiatives
Way Forward
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Malaysia has a strong legal and Malaysia has a strong legal and institutional framework for corporate institutional framework for corporate
governancegovernance
Overview of Reform Agenda
Legal framework based on traditions of common law legal system
Comprehensive array of statutes
Supported by traditional common law remedies
Established institutions like courts and regulatory agencies
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Even prior to the crisis the basic regulatory framework was being continuously reviewed and
updated
Overview of Reform Agenda
Move to Disclosure Based Regulation (DBR)
Strengthening Accounting Standards Financial Reporting Foundation (FRF)
Malaysian Accounting Standards Board (MASB)
Review of Takeovers and Mergers Code
Strengthening insider trading laws
Requirement for independent directors & audit committee
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A three-pronged approach was adopted after the crisis
Pursuit and review
of on-going programmes
Swift implementation of measures
to address specific
weaknesses
A holistic approach to
address medium to longer term
issues
Finance Committee Report on Corporate Governance
1999
Capital Market Masterplan 2001Overview of Reform Agenda
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Rights And Equitable Treatment Of Shareholders
• Related party & substantial property transactions – enhanced disclosure & approval requirements
• Revamped Takeovers & Mergers Code
• Proposed codification of directors fiduciary duties
Shareholder Activism – formation of Minority Shareholder Watchdog Group
(MSWG)
Existing common law & statutory protection
Directors fiduciary duties
• One share one vote rule
• Shareholder rights at AGM• Related and substantial party
transactions
• Oppression remedy
• Common law Derivative Action
Common law and statutory remedies are continuously enhanced
• Proposed best practices for institutional investors
• Statutory derivative actions• Cumulative voting – being studied
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Role of stakeholders and other ‘enforcers’
Regulatory and other efforts
• Civil action - Market manipulation & Insider trading - Enhanced prospectus disclosure
obligations on directors, officers and advisers
- Right to compensation
• Enhancement of audit quality and independence
• Facilitation of efforts of MSWG
Range of laws pertaining to
various stakeholder rights &
obligations, consumer rights, labour rights and
environmental issues
Watchdogs & Gatekeepers
Regulators Professionals Investors Corporates Boards AuditorsCreditors All market participants
Stakeholders and other ‘enforcers’ must play their role…..
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Disclosure And Transparency
Substantial shareholding disclosure
MASB established –Mandatory compliance
to accounting standards- 1997
Directors and CEOs to disclose interests in PLCs - 1998
Mandatory disclosure on extent of CG Code Compliance - 2001
Transparency in share ownership –1998
Revamped Takeovers & Mergers Code – 1999
Quarterly reporting - 1999Directors certification of
accounts - 1965
Move towards DBR
Annual Report – financial statements
Directors statement on internal controls - 2001
Continuous disclosure framework – listing
requirements
Are essential pre-requisites to effective CG…..
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Responsibilities Of The Board
Best Practices –Code on Corporate Governance 2000
Enforcement – Accountability of principal officers /
controlling stakeholders
Power to Bar/suspend directors - enhanced
Directors certification of accounts - 1965
Independent directors – 1/3rd requirement 2001
Directors eligibility
Mandatory Independent directors – 1987
Directors Fiduciary duties – common law and
statutory obligations
Audit committees mandatory – 1994
Power to Bar/suspend directors
Best Practices –Guidelines on Internal Audit Function
2002
Directors statement on internal controls 2001
Audit Committee – composition & function 2001
Are also continuously enhanced…..
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Responsibilities Of The Board
Training and Awareness Component
Mandatory Accreditation Programme (MAP) for directors of PLCs Continuing Accreditation Programme (CEP) for directors of PLCs Securities Industry Development Centre Malaysian Institute of Corporate Governance Industry Corporate Awards
Ongoing changes to the law
• Codification of directors duties
• Business judgment defence
• Enhancement and rationalisation of related part and substantial property transaction provisions in Companies Act 1965
Training and awareness programmes are vigorously pursued….
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Regulatory Reform Efforts Are Supported By Other Initiatives
Acceleration of corporate restructuring
Appointment of
professional managers
Ongoing education and
awareness programmes
Engagement with
constituents
Stepping Up on Enforcement
Compounding powers enhanced
Powers to impose civil penalties
SC’s supervisory and enforcement capabilities
civil enforcement powers in relation to insider trading
provisions
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Corporate Governance Initiatives in Malaysia – a snapshot
True and fair certification by Directors on financial statementsAudit Committee RequirementIndependent Accounting Standard Setting BoardDirectors and CEOs to disclose interests in PLCQuarterly Reporting Revamped Takeovers & Mergers Code Code on Corporate Governance Mandatory disclosure on CG Code compliance Establishment of MSWG Mandatory Accreditation Programme for Directors Internal Audit guidelines for PLCs
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Way Forward - Ongoing commitment
To continue to facilitate the hybrid vigour of a multi pronged approach in efforts to enhance CG
To further build on the recommendations of Report on Corporate Governance (1999) and the Capital Market Masterplan(2001) within a holistic framework for longer-term market development
To continue to facilitate the hybrid vigour of a multi pronged approach in efforts to enhance CG
To further build on the recommendations of Report on Corporate Governance (1999) and the Capital Market Masterplan(2001) within a holistic framework for longer-term market development