Title: Effective corporate governance practices by public listed company.

Corporate governance is a set of guidelines used to direct and manage the business and affairs
of the company towards promoting business prosperity and corporate accountability with the
ultimate objective of realising long term shareholder value while taking into account the
interest of other stakeholders. Such governance provides a framework that facilitate its goals
while addressing the concerns amongst investors and other stakeholders. The pillars of
corporate governance such as ethical behaviour, accountability, transparency and
sustainability are critical to the company’s governance and stewardship of investors ‘capital.
Such companies that practice these pillars have greater chance to produce long term value
creation compared to companies that lack in one or all. Corporate governance takes care of
the shareholders’ interests and address the concerns of the stakeholders such as employees,
customers, suppliers and others where the business is conducted. It emphasizes on the rights
and responsibilities among executive directors, independent directors and non-executive
directors in the company and outlines control and procedures for overall risk management,
decision making process and internal control. Malaysian’s corporate governance framework
comprises of several pieces of legislation and guidelines such as the Companies Act 2016
(CA 2016), the Financial Services Act 2013 (FSA 2013), the Capital Markets and Services
Act 2007 (CMSA), the Malaysian Code on Corporate Governance 2017 (MCCG), Bank
Negara Malaysia’s Guidelines on Corporate Governance, Bursa Malaysian’s Main Market,
Ace Market and Leap Market Listing Requirement and the Code of Ethics for Company
Directors issued by the Companies Commission of Malaysia. The Malaysian Code on
Corporate Governance (MCCG) is a set of guidelines on the best practices for companies to
adopt. It is mainly targeted for listed companies to disclose their governance practice and
implementation in a section of annual report. However, non listed entities including state-
owned entities, licensed intermediaries, small and medium enterprises (SMEs) are
encouraged to adopt the guidelines as they see fit to enhance their business organization in
the aspect of accountability, transparency and sustainability.

In order for listed companies to follow good corporate practices, there are a number of
elements to be considered. Setting appropriate corporate governance framework to the
company’s overall organization which is designed in a way to ensure effective boards,
transparency in the roles and responsibilities of the among the participants in the company,
promote accountability and engagement within the stakeholders and sustainability overall
business practices. As a public listed company (Berhad), the board should place strategic
aims for the company to ensure that it meets the objectives and review management
performance as well as engage with stakeholders. Setting appropriate company culture and
values by the board in order to reflect the same to the senior management, down line
employees and other stakeholders. The roles and responsibilities are properly outlined so
every director can be able to conduct their fiduciary duties. Meanwhile the board take on an
independent stand to review and scrutinize the executive directors’ activities, oversee the
strategic plan of the company to facilitate long term value creation, set appropriate risk
appetite for the overall company’s organization and appropriate risk management to take
necessary control measures towards the identified risk. Good governance practices
encourage a clear separation role between the Chairman and Chief Executive Officer (CEO)
as opposed to one person holding the two roles and responsibilities at the same time. In this
regard, no individual would have dominant power and authority to exert that can adversely
impact independent judgement and decision-making process.

Balanced board composition also contributes to effective governance practice whereby the
board members should have the right skills, knowledge and expertise which is needed to
facilitate in achieving the overall business strategy. A public listed company is encouraged to
have at least half of independent directors to emphasize strong independence element.
Meanwhile, according to the Bursa’s Listing Requirements, the board should have one third
of independent directors or two director whichever is higher. Besides, balanced board
composition should also include diversity in age, cultural background and gender. This not
only helps avoid groupthink among the board but also facilitate more diverse perspectives for
better decision-making process and enable the board to deliver value to business
organization. The nomination committee which is normally comprised of independent
directors are responsible for the appointment of board to ensure the right balance as well as
the senior management based on their merits and criteria needed for the nature of business.
The nomination committee is also responsible to carry out board evaluation using various
approaches to ensure the board effectiveness. The conduct must be disclosed fully in the
annual report.

The remuneration committee comprising independent directors is responsible to develop fair

and transparent policy and procedures for the remuneration of the board directors and
management. This is to ensure the remuneration packages are line with overall business
objectives and they are determined based on the roles and responsibilities, qualification,
capability, performance and the average market rate. With this governance practice in giving
fair remuneration, directors are easily driven by high motivation to perform their targets and
as for the independent directors on the board, they are also motivated to provide unbiased and
objective judgement to the board matters. In order to ensure effective corporate governance
practice, engagement with stakeholders on the activities and decision made are fully
disclosed in the annual report including the detailed remuneration of each member on name
basis and the remuneration breakdown to assess whether it is commensurate with their
performance as well as company’s performance.

Effective audit committee is also a part of good governance practices which also comprises of
independent directors. Their roles and responsibilities are to set policies and procedures in
order to review and challenge the company’s financial reporting process, transactions and
other financial information as well as provide the findings to the board. It is expected that
audit committee are to perform their due diligence in accordance with the professional
requirement. Cooling off period is typically given to former audit partner that is too familiar
with the company’s overall operation and objectives to ensure no potential risks and threats
that can impact the independent judgement on the audit preparation. Well balanced risk
management and strong internal control are also attributing to a good corporate governance
practice that helps making better informed decision on the risk level and introduce necessary
control measures to either accept, rectify or avoid the risk. Proper polices and procedures are
set to ensure strong internal control and that the board is responsible to review the internal
control framework to ensures its effectiveness. Such conduct and findings should be fully
documented and disclosed in the annual report covering on the risk areas such as finance,
operation and IT and the type of controls taken on the risk areas. This helps investors to make
use of this information to evaluate their investment risk and understand the business
environment as a whole.

Proper documentation on the governance processes and procedures as well communication

with the stakeholders on the strategic aims and overall company’s objectives are important to
be disclosed in an integrated report. This aims to make stakeholders understand the
company’s governance, strategy, performance and the future prospects for long term value
creation. Besides, it allows greater transparency and gain trust from the investors and
stakeholders as the company addressed concerns affecting them.
The board commonly makes strategic decision and other important decision during the
general meeting with the presence of the shareholders to ensure that shareholders exercise
their right to challenge, provide their opinion and vote at the meeting. Hence, it is rather
crucial to prepare proper notice which will be given to shareholders 28 days prior to the
general meeting. The notice outlines the resolutions to be discussed and decided upon the
meeting and other detailed explanation beyond the requirement to ensure that shareholders
are well informed to exercise their voting rights. During the general meeting, it is rather
crucial to communicate effectively with the shareholders by answering to their direct
concerns and provide them reassurance.

Overall, the purpose of corporate governance is to facilitate effective overall business

management that can deliver value creation for long term success of the company. It is
instilled to promote transparency, accountability and sustainability. As much as it is
commonly associated with public listed companies, non-listed entities with varying sizes are
still encouraged to apply the practices. However, MCCG may not necessarily be suitable for
all types of organization due to its accountability structures.

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