MALAYSIAN CODE ON CORPORATE GOVERNANCE (MCCG)

BY: NABAZ SHWANY(NABAZ NAWZAD)

UNIVERSITI UTARA MALAYSIA

MALAYSIAN CODE ON CORPORATE GOVERNANCE

REASONS FOR MCCG UPDATES

MCCG 2012 PRINCIPLES

CONCLUSION

Malaysia listed as number one in Asia for having so many rules and implications for corporate governance practice

MCCG was introduced on March 2000 based on British experience to avoid corporate malefaction

MCCG brought systematical change in the structure of public and Private Corporation.

MCCG revised several times in 2007, 2011 and 2012

The MCCG targeted those companies that are listed on Bursa Malaysia

companies are requiring preparing their annual report and proving that they conducted the principles and recommendations

Shifts are inevitable and necessary requirement to deal with market dynamic and effectively manage corporate governance as part of global sustainable development

To improve the role and the responsibility of directors,

Fostering their commitment,

Promoting board structure effectiveness,

Internal and external auditing

Establishing Clear Role and Responsibilities

The 2012 Codes sets out eight principles and each principle followed by several recommendations.

The board should establish clear functions reserved for the board and those delegated to management

The board should discharging its fiduciary and leadership functions The board should ensure business plan well managed and performed

properly formalize ethical standards Auditing the company sustainability and development the board should have a formula to give a chance to its members for

accessing information & advices through consultation Assigning qualified secretary

Strengthen Composition

Establishing independent nominating committee to compromise with non-executive directors to oversee the selection and assessment of the directors based on the company needs, training for the success of the directors and assessing directors at the end of every year

The head of the committee must be senior independent director and gender diversity should be considered

Committee selection is based on competency, commitment, performance and contribution with board members

The board should establish formal and transparent remuneration policies and procedures to attract and retain directors

Reinforce Independence

Ensure effectiveness of independent directors The independent board should concentrate on the director economic

background and daily relationships and predict whether the independent director could really keep his neutrality or not

The period of the serving directors which should not exceed of nine years, if not should be known as non-independent director

The position of chairman and the chief executive officer separated and must be run by two different individuals

The chairman responsibility is to lead the board and oversight the management

CEO focuses on business and the companies’ day to day management

Foster Commitment

Highly committed individual is the one who: i. “(1) Strong belief in and acceptance of the organization’s goals and

values; ii. (2) Willingness to exert considerable effort on behalf of the

organization; and iii. (3) Strong desire to maintain membership in the organization”

(Samad 2011).

Director must spend sufficient time in carrying out the duties and update any changes and knowledge to enhance their skills

directors and management must have access to appropriate educational programs to challenge any difficulties in complex business environment

Uphold Integrity in Financial Reporting

Committee must ensure to provide reliable financial information in accordance to standards of financial reporting.

Auditing committee should have a policy to oblige external auditors to confirm their independent in auditing process and abide by all the relevant rules and requirements.

Recognize and Manager Risks

Internal auditing to manage and control risks

Maintain control and surveillance over shareholders’ investment and companies assets

The chief of the internal audit must be well educated and have experience in risk management and control process.

Ensure Timely and High Quality Disclosure

Companies are required to have high quality of corporate disclosure policies and procedures

Stake holder rights and utilizing information technology to foster good governance and better relationship and transparency between companies and stakeholders.

Strengthen Relationship between Company and Shareholders

Encourage shareholders to attend in general meetings. The board must provide a clear guideline to the

shareholders on how they could exercise their rights. Fostering the Use of Technology Voting right The board is encouraged to make announcement regarding

election with details Participate in achieving companies’ goals, undermine risks

and facilitate management process;

MCCG was strong move to encourage more investment and better business.

The companies controlling and the auditing system was developed.

Through the eight principles of MCCG we can expect more efficiency, accountability, attainability, transparency and accuracy in the future of Malaysian corporate governance