MALAYSIAN CODE ON CORPORATE GOVERNANCE (MCCG)BY: NABAZ SHWANY(NABAZ NAWZAD) UNIVERSITI UTARA MALAYSIA
MALAYSIAN CODE ON CORPORATE GOVERNANCEREASONS FOR MCCG UPDATESMCCG 2012 PRINCIPLESCONCLUSION
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