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17. crf 2012 azryain borhan

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  • 1. CORPORATE GOVERNANCE &CORPORATE SOCIAL RESPONSIBILITYRepositioning Corporate Governance and Corporate Social Responsibility in the 21st Century Corporate Environment: The SSM Approach AZRYAIN BIN BORHAN Director, Companies Commission of Malaysia Training Academy Companies Commission of Malaysia @ CRF 2012 1
  • 2. PERSPECTIVE: THE GLOBAL DIMENSION OF CG AND CRCompanies Commission of Malaysia @ CRF 2012
  • 3. PERSPECTIVE: MALAYSIA - A NATION UNDERGOING TRANSFORMATION• 5 key global trends which Malaysia must address “…….99.2% of enterprises in Malaysia are SMEs” Tenth Malaysia Plan Companies Commission of Malaysia @ CRF 2012
  • 4. THE NATIONAL CHALLENGE: ATTAINING HIGH- INCOME DEVELOPED NATION 8 VISION 2020 - INNOVATION DRIVEN ECONOMY Developed country, High income economy [USD17,000 Per Capita Income] WITHIN YEARS NEM - CHARACTERISTICS OF PRIVATE SECTOR-LED MALAYSIA’S ECONOMY IN 2020 ECONOMY • Market-Led  • Well-Governed  EFFICIENCY DRIVEN • Regionally integrated  ECONOMY[USD7,000 Per Capita • Entrepreneurial  Income] • Innovative Companies Commission of Malaysia @ CRF 2012
  • 5. 1. POSITIONING CG AND CR INTO THE NATIONAL ECONOMIC VALUE CHAIN National Knowledge Individual Companies economyEXISTING FUTURE ENHANCED FOREIGN INVESTMENT ECONOMIC INFORMED SUSTAINABLE ORIENTATION & RE-ORIENTATION OFPARTICIPANTS FOREIGN DOMESTIC BUSINESS THE PRIVATE SECTOR HUMAN INVESTORS FRAMEWORK CHARACTERISTICS OF MALAYSIA’S PRIVATE • Subscribes to ECONOMY IN 2020 SECTOR-LED ENHANCED CAPITALEDUCATION & corporate ECONOMY PRIVATE SECTOR • Market-Led AWARENESS governance PARTICIPATION • Well-Governed • Carries out business operations COMPETE • Regionally consistent with the GLOBALLY integrated STRONG Triple Bottom Line • Entrepreneurial FOUNDATION ON considerations • Innovative BUSINESS SUSTAINABILITY • Innovative CAUSATION OUTCOME  Companies Commission of Malaysia @ CRF 2012
  • 6. 2. INTRODUCING A PARADIGM SHIFT INTO CORPORATE GOVERNANCE • Cadbury Report (1992) Conventional Corporate • Greenbury Report Governance (1995) • TurnBull Report (1999) CG 2.0 • Higgs Report • Shareholders primacy (2003) • Profit-centric • Smith Report (2003) • Responsive to crisis • ‘Safety net’ - prevents/minimizes economic/corporate downfall 1997 ASIAN FINANCIAL CRISISCompanies Commission of Malaysia @ CRF 2012
  • 7. 2. INTRODUCING A PARADIGM SHIFT INTO CG - INTEGRATING CR WITH CG 21st Century Corporate Governance CG 2.0 • Stakeholders primacy • Sustainability-centric • Tool for economic advancement - economic catalyst • Holistic • Dynamic considerations/subject matterCompanies Commission of Malaysia @ CRF 2012
  • 8. 2. INTRODUCING A PARADIGM SHIFT INTO CG - INTEGRATING CR WITH CGHIGH  CG 1.0      CG 2.0     LEVEL OF EMPHASIS CG 3.0MED  LOW  Revenue and Shareholders Duties and Society Environment profit dividend responsibilities Auditors of directors Workers National Economy CONVENTIONAL CORPORATE CORPORATE RESPONSIBILITY GOVERNANCE CONSIDERATION Towards Corporate Sustainability Companies Commission of Malaysia @ CRF 2012
  • 9. 2. INTRODUCING A PARADIGM SHIFT INTO CG - INTEGRATING CR WITH CG“The process and structure used • Long term shareholderto direct and manage the valuebusiness and affairs of thecompany towards enhancing • Enhanced businessbusiness prosperity and prosperitycorporate accountability withthe ultimate objective of PROCESSrealising long term shareholder & Direct & managevalue, whilst taking into STRUCTURE the business &account the interests of other affairs of a companystakeholders.” • Enhanced corporate accountability High Level Finance Committee Report on Corporate Governance, • Other stakeholders’ February 1999 interests Companies Commission of Malaysia @ CRF 2012
  • 10. 2. INTRODUCING A PARADIGM SHIFT INTO CG - INTEGRATING CR WITH CG “The process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realising long term shareholder value, whilst taking into account the interests of other stakeholders.” High Level Finance Committee Report on Corporate Governance, February 1999 SSM functions = “….. To instill good corporate governance and promote proper conduct amongst officers of corporations, business owners, industry groups and professional bodies through continuous education”. Subsection 17(c) Companies Commission of Malaysia Act 2001 Corporate responsibility means “commitment by corporations and businesses towards achieving sustainability in the social, economic and environmental conditions in furtherance to the pursuit of profitability“ SSM Corporate Responsibility Agenda, 2009Companies Commission of Malaysia @ CRF 2012
  • 11. 3. EMPHASIZING ON EDUCATION OF CORPORATE ROLE- PLAYERS The Deduction 1. Assigning a definition to the • Under difficult economic ‘corporate governance’ 1997 circumstances, corners were ‘cut’ and ASIAN rules were ‘bent’ 2. Introducing the Malaysian FINANCIAL Code on Corporate • Key issues: related party transactions, Governance CRISIS decisions making by corporate - hybrid approach leaders, asset shifting, conflict of - focuses on directors, interest and lack of disclosure in directors’ remuneration, transactions, by directors poor shareholders,High Level Finance financial management by directors accountability and auditCommittee Report • Ineffective enforcement and influence on Corporate of substantial shareholders. 3. Law reform Governance - 5 • ‘Where were the directors’ and ‘where February 1999 were the regulators?’ 4. Training and education • Weakness in the relationship between • Focus on directors, the company and members, company secretaries, shareholders rights, controlling audit committees, shareholders, duties and shareholders & investors responsibilities of directors. Companies Commission of Malaysia @ CRF 2012
  • 12. 3. EMPHASIZING ON EDUCATION OF CORPORATE ROLE- PLAYERS (Cont) FOCUS:  Strengthening the foundation for sustainable business practises; andHIGH  Supporting the creation of entrepreneurial culture     TRAINING FOCUS AND PRIORITY Domestic Foreign investors Universities & higher companies & businesses learning institutions Schools - Trade missions, - Board of directors - Company - International economic/ business meetings - Graduating students. - Lecturers - Secondary and  Members of the public secretaries primary school - Embassies - Management students - Shareholders Approach: Future Approach: Awareness integration into the Approach: General - Employees Approach: Awareness on setting up, NEM awareness to be in - Auditors through fun but managing and alignment with the - Professionals educational activities winding-up aspirations of the - to prepare for companies NEM Approach: Re- future integration alignment for into the NEM integration into the New EconomicLOW Model (NEM) IMPACT TO THE ECONOMY HIGH LOW Companies Commission of Malaysia @ CRF 2012
  • 13. 4. ENTRENCHING THE BASICS OF CG - IDENTIFY THE STRATEGIC AREA(S)• “Consider a building with a few broken windows. If the windows are not repaired, the tendency is for vandals to break a few more windows. Eventually, they may even break into the building, and if its unoccupied, perhaps become squatters or light fires inside.”• “Or consider a sidewalk. Some litter accumulates. Soon, more litter accumulates. Eventually, people even start leaving bags of trash from take-out restaurants there or breaking into cars.” Broken Windows Theory James Q. Wilson and George L. Kelling Companies Commission of Malaysia @ CRF 2012
  • 14. 4. ENTRENCHING THE BASICS OF CG - KEEP IT SIMPLE1Keep proper 2 3 Tabling of 4Lodgement of Auditing of account during accounting audited account the annual records account general meeting and annual (AGM) return with SSMSection 167 CA 1965• Company to keep Section 169 (4) CA Section 143 CA 1965 accounting records 1965 • A general meeting Section 165 (1) CA which sufficiently • The profit and loss of every company is 1965 explain the accounts and held annually • Every company transactions and balance sheet of having a share financial positions the company shall Section 169 (1) CA capital shall lodge of the company. be duly audited 1965 the Annual Return• Records to be kept before they are laid • Directors table the together with in a manner to during the company’s audited audited account enable them to be company’s AGM account of during with SSM audited AGM Companies Commission of Malaysia @ CRF 2012
  • 15. 5. COMMUNICATING CG TO THE STAKEHOLDER - IN THEIR LANGUAGEEconomic benefits of corporate governance• Contributes to economic prosperity and competitiveness• Attracts investment• Facilitates access to credit facilities• Enhance profit performance• Structured management and clarity• Enhance operations and efficiency• Ensures long term business sustainability Project• Creates premium in the value/shares of a Risk management management & company monitoring• Positive branding and reputation Strategic planning SOPs &• Minimize (if not prevent) corporate fraud, procedures wastage, risk and mismanagement Companies Commission of Malaysia @ CRF 2012
  • 16. 5. COMMUNICATING CG TO THE STAKEHOLDERS - INSPIRE THEM RED BOOK - Reviewing & GREEN BOOK - Revamping Procurement Enhancing Board Practices Effectiveness YELLOW BOOK - ORANGE BOOK - Enhancing Operational Strengthening Talent Efficiency & Effectiveness Management Practices PURPLE BOOK - SILVER BOOK - Achieving Optimizing Capital Value Through Social Management Practices Responsibility BLUE BOOK - KPI & Performance Mgt• Khazanah Nasional’s Prudent Aggression approach: - Realisable asset value rose from RM50.9 billion in May 2004 to RM112.6 billion as at Dec 2010 - Net worth adjusted rose from RM33.3 billion in May 2004 to RM75 billion as at Dec 2010 Companies Commission of Malaysia @ CRF 2012
  • 17. Corporate governance is not about laws and regulations per sebut more on understanding of concept and changing theattitude of economic role players - THE ULTIMATECHALLENGE FOR CORPORATE REGULATORS GLOBALLY Companies Commission of Malaysia @ CRF 2012
  • 18. THANK YOU azryain@ssm.com.my Companies Commission of Malaysia @ CRF 201218