Malaysia, together with Hong Kong (

Malaysia, together with Hong Kong (China), Singapore, Pakistan and Chinese Taipei, is one of the few Asian countries with such a requirement (OECD, 2011).

The board of a listed issuer is also required to provide a statement in the annual report on how it has applied the best practices set out in the Corporate Governance Code. In case of non-compliance with the Code, the statement must identify the areas and reasons for the non-compliance.

Enforcement

A number of agencies are in charge of enforcing different aspects of corporate governance in Malaysia (Table 5.2). Co-ordination has been addressed through both formal and informal mechanisms, e.g. joint investigations, sharing of findings and joint charges (SCM, 2011). A series of reforms to improve enforcement have been introduced over recent years, including the establishment of the Oversight Board mentioned above. Also, the SCM was allowed to pursue civil action and its powers were enhanced in 2010 to be able to prosecute company directors and officers for causing wrongful losses to the company.


There continue to be some constraints, however, with regards to the capacity of public agencies to effectively enforce Malaysia’s corporate governance standards. The Securities Commission in its Corporate Governance Blueprint recommended that private sector initiatives be explored further and that related funding issues be addressed (SCM, 2011).


Table 5.2. Corporate governance enforcing agencies in Malaysia

Laws/Regulations Enforcing Agency

Capital Markets and Services Act Securities Commission Malaysia
Companies Act Companies Commission of Malaysia

Banking & Financial Institutions Act Bank Negara Malaysia
Penal Code Police

Malaysian Anti-Corruption Act Malaysian Anti-Corruption Commission
Bursa Listing Requirements Bursa Malaysia


Voluntary corporate governance initiatives and training

Despite some shortcomings in corporate reporting that will be highlighted below, many companies are adopting standards and best practices beyond the minimum imposed by the law. This is evident from the Securities Commission’s own findings, as well from the MSWG’s Corporate Governance Index reports. The challenge lies in encouraging more companies to follow suit. In view of promoting and developing an ethical and healthy corporate culture, various corporate governance awards have been given, including the National Annual Corporate Report Awards and the Malaysian Corporate Governance Index Award.



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It is hoped that these awards will incentivise more listed companies to go beyond the minimum compliance in form.

Various organisations have been established to promote a good corporate governance culture, such as the MSWG (mentioned above) and its CG Index and the Malaysian Investor Relations Association, which was established in June 2007 by the Stock Exchange of Malaysia and the Capital Market Development Fund. It is the first and only professional association for investor relations in Malaysia. Its membership comprises public-listed companies, investment banks, brokerages and intermediaries and investor relation service providers. Its objectives and functions include supporting members through seminars, workshops and policy briefs; conducting education and training programmes to raise the levels of investor relations in Malaysia; and “hand holding” companies who are keen on establishing an investor relation function and programme.


The Association offers an incentive programme to help public-listed companies to set up investor relations programmes internally. It has also hosted Investor Expo briefings and produced an Investor Relations Manual & Workbook to guide public-listed companies on principles and management of investor relations.

In Malaysia, directors’ training is required where the individual is appointed as a director of a listed issuer for the first time or is a director of a company that is seeking listing on the exchange. In its efforts to improve the effectiveness and capacity of the boards of its GLCs, the government launched a number of initiatives, leading i.a. to the establishment of the Directors Academy in Malaysia (Box 5.1) (OECD, 2010).

Malaysia has several programmes focusing on continuing education for directors. On June 2009, Bursa Malaysia issued the Corporate Governance Guide: Towards Boardroom Excellence and collaborated with several organisations such as the Malaysian Institute of Accountants, the Institute of Internal Auditors and the Malaysian Institute of Corporate Governance to hold training programmes for directors. The Companies Commission of Malaysia also organises training programmes specifically for non-listed directors. In 2009, the Malaysian Alliance of Corporate Directors was established by directors to provide education, information and networking opportunities for corporate directors.


Other voluntary initiatives to promote good corporate governance include the Bursa/SCM CG week, during which participants are exposed to various corporate governance initiatives and are able to network with corporate governance practitioners. Bursa Malaysia also released its CG Guide and established a CG department to work with public-listed companies to raise corporate governance standards.