corp gov practices

8/8/2019 Corp Gov Practices

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CORPORATE GOVERNANCEPRACTICES IN

EMPLOYEES PROVIDENTFUND


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CORPORATE GOVERNANCE

PRACTICES Corporate Governance (CG) definitions:OECD:A set of relationships between a companysmanagement, its board, its shareholders and otherstakeholders. It provides the structure throughwhich the objectives of the company are set, andthe means of attaining those objectives andmonitoring performance are determined.

Malaysian Code of Corporate Governance:A processand structure used to direct and manage the

business and affairs of the company towardsenhancing business prosperity and corporateaccountability with the ultimate objective ofrealizing long term shareholder value, whilst taking

into account the interests of the stakeholders.


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PRACTICES

In essence, CG is about systems, processesand structures by which organizations aredirected and managed. It influences how the

objectives are set and achieved, how risk ismonitored and assessed, and howperformance is optimized.


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PRACTICESBackground

In Asia, emphasize on the importance of goodCG really came about after the Asian financialcrisis.

The 1997 Asian financial crisis brought to theforefront the importance of the CG. Poor CG

was cited as the key reason for corporatefailure.


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PRACTICES In Malaysia, the direct response to poor CG was the

introduction of the Malaysian Code of Corporate

Governance (MCCG) issued in February 1999.

Whilst it is a code for listed companies, a number ofkey recommendation were subsequently incorporatedinto legislation.

Today, the need for good CG practices has moved

beyond public listed companies. CG is also expectedof private limited companies, government, non-profitorganizations, etc.


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PRACTICESCG and EPF

The EPF is the single largest institutional investor in

Malaysia. Therefore, it is in the interest of EPF toensure that our investee companies practice good CG.

Steps taken by EPF to ensure good governance in

investee companies: Setting up the Minority Shareholder Watchdog

Group

Formation of a dedicated unit within EPF to engage

and monitor public listed companies on CG issues.Also actively attend and exercise proxy voting incompanies AGM and EGM.


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PRACTICESCG practices within the EPF

Whilst advocating CG on our investee companies, itis also crucial for the EPF itself to practice good CG.

Good CG practices will ensure integrity, optimal

performance and instill confidence of ourstakeholders in EPF.

In EPF, we have adopted CG practices as one of the

key component in our Balanced Scorecard.

We have designed a Governance Index to track andmonitor implementation of good CG practices.


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PRACTICESCG Index Main Components

The key components of the CG Index:

Transparency

Independence

Accountability

Focus

Risk Management

Regulatory Compliance

Fairness

Social Awareness Responsibility

Environmental Responsibility


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PRACTICESCG Index Main Components

Transparency:

Statement of Mission and Vision

Statement of Corporate Governance

Statement of Internal Control

Statement of dividend policy

Disclosure of Board Members and Panel Membersprofiles, honorarium and allowances, boardattendance

Disclosure of Corporate KPI Quarterly and annual financial statements

Clear, accurate and timely disclosure ofinformation

etc


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CORPORATE GOVERNANCEPRACTICES

Accountability & Responsibility:

Boards regular monitoring and review of management

performance vs KPI

Management compensation based on KPI

Adoption of the Green Book on Board Effectiveness(GLC Transformation).

Board review of Strategic Business Plan

Establishment of Business Continuity Plan, KnowledgeManagement and Succession Plan


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Independence:

Position of Chairman and CEO 2 separate persons

Board/Panel members declaration of interests/ abstainfrom voting where it involves conflict of interest

Internal Auditors monitor, supervise and reportdirectly to Board Audit Committee

External Auditors report directly to Auditor General of

Malaysia


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Risk Management:

Establishment of enterprise wide riskmanagement framework and system - CorporateRisk Scorecard (operational risk and investmentrisk).

Establishment of a Board/Investment Panel andSenior Management Risk Committees

Focus:

Clearly defined core businesses and competencies


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Fairness:

Establishment of proper channels for

communication and dialogue with stakeholders

- Emails, medias, specific counters

- Special Fraud Unit

- Regular dialogue with Union, EmployersFederation and Focus Group

- A designated Senior Management personnel for

all corporate communication- Regular issuance of member statement


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Regulatory Compliance:

Compliance with laws including the EPF Act

1991 and the policy directives of the Ministry ofFinance

Environmental & Corporate Social Responsibility:

Establishment of policy on CSR

Establishment of policy on EnvironmentalResponsibility


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CONCLUSION

As a trustee of members old age retirement, the Boardbelieves that good corporate governance practices isessential for the effective discharge of its fiduciaryresponsibility.

The fact is, there is no single model of good governance.

Any model needs to take into account the broadermacroeconomic policies, legal & regulatory, social andcultural environment.

The model we have developed is not static. We willcontinue to improve the model, adding new requirementwhile removing which ever is no longer relevant.

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