The document discusses corporate governance in Malaysia. It explains that the Malaysian Code on Corporate Governance (MCCG) was first introduced in 2000 and has since been revised in 2007, 2012, and 2016. The MCCG sets out principles and recommendations for good corporate governance practices for public listed companies in Malaysia. It aims to enhance business prosperity and corporate accountability. The key principles in the MCCG include establishing clear roles and responsibilities of the board, strengthening the board's composition, upholding independence, fostering commitment, upholding integrity in financial reporting, recognizing and managing risk, ensuring timely disclosure, and strengthening relationships between companies and shareholders. The document also discusses components of corporate governance in Malaysia and the Shariah governance framework for Islamic banks

1. DPD6033 Ethics In IslamDPD6033 Ethics In Islam

2. 4.1 Construct
Malaysian Code of
Corporate
Governance

3. Corporate Governance IS
INTRODUCED IN MALAYSIA?
•Malaysian Code on Corporate Governance (Code)
in the year
2000  first code introduced

4. WHAT IS Corporate Governance?
Corporate governance is defined by High
Level Finance Committee Report 1999 as:
“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.”

5. THE MILESTONE OF Corporate
Governance IN M’SIA
MCCG 2000  March
MCCG 2007 (Revised)  1st
oct
MCCG 2012  31st
Dec
- BLUEPRINT JULY
2011

6. SECURITIES COMMISSION MALAYSIA
1. Who is the Malaysian Code on Corporate Governance targeted at?
 The Malaysian Code on Corporate Governance is specifically targeted at
companies listed on Bursa Malaysia.
 All companies are however encouraged to adopt the principles and
recommendations of Malaysian Code on Corporate Governance
2. How do listed companies comply with the Malaysian Code on Corporate
Governance ?
 Listed companies should explain in their annual reports how they have
complied with the recommendations.
 As there is no 'one-size-fits-all' approach to corporate governance,
companies are given the flexibility to determine the best approach to
adopting the principles within the Malaysian Code on Corporate
Governance .
 Where there is non-observance of a recommendation, companies should
also explain the reasons.
3. Why is Malaysian Code on Corporate Governance been revised?
The Malaysian Code on Corporate Governance was revised after taking into
account changing market dynamics, international developments and the
need to continuously recalibrate and enhance the effectiveness of the
corporate governance framework.

7. COMPONENTS OF MCCG
MCCG 2000 & 2007 MCCG 2012
1) PRINCIPLES OF CORPORATE
GOVERNANCE
1) PRINCIPLES
2) BEST PRACTICES IN CORPORATE
GOVERNANCE
2) RECOMMENDATIONS
3) PRINCIPLES & BEST PRACTICES FOR
OTHER CORPORATE PARTICIPANTS
3) COMMENTARY
4) EXPLANATORY

8. MCCG 2016
 Recognising the need for regular enhancement to corporate governance
practices, the MCCG 2016 adopts a different approach from previous Codes.
The new approach aims to encourage progression, and emphasises on
conduct and outcomes from corporate governance practices.
 The MCCG 2016 streams corporate governance practices into two categories –
Core and Core+. Companies are expected to disclose their adherence to the
Core practices on an ‘apply or explain an alternative’ basis, which encourages
greater thought process in undertaking the practices, and in making disclosures
 While Core+ practices are voluntary companies are strongly encouraged to
adopt them and disclose in the annual report how these practices are being
undertaken or implemented.

9. 4.1.1 Determine the
principles of corporate
governance.

10. PRINCIPLES OF CG
MCCG 2000 MCCG 2007 MCCG 2012
1) Directors 1) Directors 1) Establish clear roles &
responsibilities
2) Directors remuneration 2) Directors
remuneration
2) Strengthen composition
3) Shareholders 3) Shareholders 3) Reinforce
independence
4) Accountability & audit 4) Accountability & audit 4) Foster commitment
5) Uphold integrity in
financial reporting
6) Recognized & manage
risks
7) Ensure timely & high
quality disclosure
8) Strengthen relationship
between company &
shareholders

11. THE PRINCIPLE OF CORPORATE GOVERNANCE
Principle 1:
Establish clear roles and responsibilities
Principle 2:
Strengthening Composition
Principle 3:
Reinforce independence
Principle 4:
Foster commitment
Principle 5:
Uphold integrity in Financial reporting
Principle 6:
Recognize and manage risk
Principle 7:
Ensure timely and high quality disclosure
Principle 8:
Strengthen relationship between company and shareholders

12. ESTABLISHED CLEAR ROLES AND
RESPONSIBILITIES
■ The responsibilities of the board, which should
be set out in a board charter, include
management oversight, setting strategic
direction premised on sustainability and
promoting ethical conduct in business
dealings.

13. STRENGTHEN COMPOSITION
■The board should have transparent
policies and procedures that will assist in
the selection of board members. The
board should comprise members who
bring value to board deliberations.

14. REINFORCE INDEPENDENCE
■The board should have policies and
procedures to ensure effectiveness of
independent directors.

15. FOSTER COMMITMENT
■Directors should devote sufficient
time to carry out their
responsibilities, regularly update
their knowledge and enhance their
skills.

16. UPHOLD INTEGRITY IN FINANCIAL
REPORTING
■The board should ensure financial
statements are a reliable source of
information.

17. RECOGNISE AND MANAGE RISKS
■The board should establish a sound
risk management framework and
internal controls system.

18. ENSURE TIMELY AND HIGH QUALITY
DISCLOSURE
■Companies should establish corporate
disclosure policies and procedures to
ensure comprehensive, accurate and
timely disclosures.

19. STRENGTHEN RELATIONSHIP
BETWEEN
COMPANY AND SHAREHOLDERS
■The board should facilitate the
exercise of ownership rights by
shareholders.

20. The Principles of the MCCG 2016
■ MCCG 2016 adopts a new approach - ‘apply or explain an alternative’ where companies are
required to provide clear and meaningful explanation on how they have adopted the Core
practices in MCCG 2016, and achieve the Intended Outcome of each practice. ‘Apply’ requires
greater thought process and consideration in implementing or undertaking the practices,
including in disclosing information on these practices.
■ The Principles of the MCCG 2016 encapsulate the fundamentals underpinning good
governance practices that companies should apply when implementing the Practices. There
are four Principles in the MCCG 2016:
 Supporting board leadership and effectiveness;
 Safeguarding the integrity of financial and corporate reporting;
 Managing risks to preserve and create value; and
 Strengthening relationship with shareholders.

21. Please refer to;
■ Proposed Draft of the Malaysian Code on
Corporate Governance 2016
■ MALAYSIAN CODE ON CORPORATE GOVERNANCE
2012
■ MALAYSIAN CODE ON CORPORATE GOVERNANCE
(Revised 2007)

22. 4.1.2 Identify the
significance of the
importance of good
corporate Governance for
Islamic banks.

23. ■ sets out the broad principles and specific recommendations
on structures and processes which companies should adopt
in making good corporate governance an integral part of
their business dealings and culture.
■ advocates the adoption of standards that go beyond the
minimum prescribed by regulation
■ clarifying the role of the board in providing leadership,
enhancing board effectiveness through strengthening its
composition and reinforcing its independence.
■ also encourages companies to put in place corporate
disclosure policies that embody principles of good
disclosure

24. 4.1.3 Explain
Corporate
Governance

25. Governance
Structure
Diagram

26. Governance structure
■ Components that focus on the following tasks: providing project leadership, defining
the business of justice, and analysing technical environment, policies and solutions
EG: power of chain in org.
■ 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 realizing long-term shareholder value, whilst taking
into account the interests of other stakeholders.”

27. External regulatory
■ Auditor from outsider the company, such as SIRIM, LHDN, SPRM or others
■ Others body that regulate the corporate governance regulation

28. Internal regulatory system
■ Internal Audit unit or division, corporate department or Laws department of
company e.g.: code of ethics, governance code of company.

29. Internal control system
■ Governance monthly report, risk management, financial, organisational, operational
and compliance control.

30. 4.1.4 Describe the
component of corporate
governance in Malaysia.

31. Component of Corporate
Governance in Malaysia
1. Islamic Banking Act 1983
2. Takaful Act 1984
3. Government Investment Act 1983
4. The Companies Act 1965
5. Other Common Law
6.Exchange Control Act 1953
7. The Anti-Money Laundering act 2001(AMLA)
8. The payment system Act 2003(PSA)
9. The Securities Industry Act 1983 (SIA) and the Securities
Commission Act 1993
10. Bursa Listing Requirements

32. LIST COMPANY
– Companies listed in Bursa Malaysia (PETGAS, NESTLE and others)
BANK AND FINANCIAL INSTITUTION
– Bank or FI that operates in Malaysia (BIMB, CIMB and others)
INSURANCE COMPANY
– Insurance or takaful provide (Takaful Ikhlas, Bsn Prudential and others)
INVESTMENT MANAGER OR FUND MANAGER
– Person that manage the fund that has been invested (ITTIKAL, ASB, and
others)
FAMILY ENTERPRISES
– Company or enterprises that belong to family legacy (NAZA)
STATE ENTERPRISES
– Company that belong to state government (Matrix concept, Syabas, SAJ)

33. 4.1.5 Discuss the
Shariah governance of
Islamic bank.

35. ■ In Malaysia, the Islamic Banking Act 1983 and Takaful Act 1984 require the establishment of an
independent Shariah Committee within each IB with a minimum of three and a maximum of seven
Muslim religious scholars. The first Shariah Committee was set up in 1983 by Bank Islam Malaysia
Berhad (BIMB) which started its operations as Malaysia’s first IB on 1 July 1983.
■ According to the Financial Stability and Payment Systems Report (2010), the SAC was established
in 1 May 1997 as the highest authority and sole reference on all Shariah matters pertaining to
banking and takaful. The SAC is responsible for all Shariah compliancy matters and also for
validating all Islamic banking and takaful products to ensure their compliance with Shariah. The
Shariah Committee will refer to the SAC for its resolutions on a Shariah issue. The SAC serves as
the final arbiter in the interpretation of Shariah principles on Islamic banking and takaful matters
and practices.
■ The aim is to ensure uniformity and harmonization of Shariah interpretations and strengthening
the regulatory framework and promoting good governance within the Islamic financial sector. Apart
from the central SAC, Shariah Committee at the IB level remains the most important governance
mechanism to ensure compliance with Sharia. The IB need to receive approval from the financial
authorities to appoint any Shariah scholars as SB members. Both the SAC in the Central Bank and
the Sharia Committee have set the standard for any Sharia matters and governance for the
operations of the IB.

36. ■ In December 2004, Bank Negara Malaysia issued the Guidelines on the Governance of
Shariah Committee for the IB outlining the role, scope of duties and responsibilities of a
Shariah Committee and its members and the relationship and working arrangement
between the Shariah Committee at individual institutions and the SAC at the national
level. Only the SB of Bank Negara and the Securities Commission can issue fatwa, the
role of the Sharia Committee of IB is to ensure that this fatwa is implemented with
respect to the contracts offered. Members of the SBs of Bank Negara and the
Securities Commission cannot serve on the boards of Islamic financial institutions and
vice versa.
■ For reasons of confidentiality, Shariah Committee members can only serve as a
member of Shariah Committee in one financial institution in the same industry (Islamic
banking and takaful are considered as different industries).
■ The Central Bank of Malaysia, Bank Negara, has tightened Shariah rules for IB by
requiring them to set up Shariah review, audit and risk management functions to
reinforce compliance.

38. THANKS