OAG 5223

Corporate Ethics, Social Responsibility & Governance

Group 2 - Assignment (Report)

Programme: MBA in Energy Management

May 2023

Lecturer: AP Dr Satirenjit Kaur Johl

A Case Study on:

Transmile Group Berhad

# Scholars’ Names ID

1 Puvaneswari Danarajan 22002022

2 Iwan Schani Ibnu 20001954

3 Mustafa Abdulaziz Almubayed 20001975

4 Ahmad Afif Mohamad Zen 22008094

Submission Date:

24/06/2023
 Table of Contents
1.0 Introduction on Corporate Ethics, Social Responsibility & Governance........................ 3
1.1 Background & Overview of Transmile Group Berhad....................................................4
1.1.1 Transmile Group Berhad............................................................................................ 4
1.1.2 Chronology of the Scandal and Its Impact............................................................... 5
2.0 Key Governance Issues of Transmile Group Berhad........................................................ 6
3.0 Role of Board Members........................................................................................................ 7
4.0 Role of Chairman...................................................................................................................9
4.1 Ensuring Effective Communications...............................................................................10
4.2 Overseeing The Performance of The Board.................................................................. 10
4.3 Ensuring Effective Risk Management............................................................................ 11
4.4 Ensuring Compliance with Laws and Regulations......................................................... 11
5.0 Impact on remuneration structures on governance........................................................ 12
6.0 Ownership Structure and Governance.………………………………………………………. 14
7.0 Ownership Structure and Governance – Key Takeaways………………………………….15
8.0 Conclusion……………………………………………………………………………………........16
References................................................................................................................................. 17
Appendices................................................................................................................................ 18
1.0 Introduction on Corporate Ethics, Social Responsibility & Governance

In the context of freedoms, responsibilities, advantages to society, justice, or particular

qualities, ethics is defined as well-founded norms of acceptable and unacceptable behavior that
specify what people ought to conduct (International Network for Corporate Social Responsibility
(IN-CSR) [IN-CSR], 2019). According to research, ethical practices are what motivate corporate
governance (CG) and corporate social responsibility (CSR) (ElGammal et al., 2018). Corporate
Ethics, Social Responsibility, and Governance place an emphasis on an organization's
adherence to ethical business practices as well as attentiveness to its stakeholders and the
surrounding community throughout which it is operating.
Corporate governance related to the market for capital, which has a significant
connection to CSR as well as corporate ethics, is unable to be reduced to the legal and legally
binding aspects of the management of business organizations. Instead, it might encompass the
viewpoint of governance as developed in light upon political theory as well as ideology, which is
often put forward as an organizing principle for corporate ethics (Rendtorff, 2020). Since
long-term investors like institutional shareholders, retirement savings plans, and various other a
long-term investors need to concentrate on corporate ethics along with CSR in order to make
sure the reliability associated with their investments, that should additionally be developed to be
a framework upon which to comprehend profitable and sustainable organizations at productive
financial markets.
According to Rendtorff (2020), in the real world, this strategy aimed at contributing to
accountable corporate governance for organizations with the perspectives of ethical
investments as well as feasible markets for capital includes notions of management of
sustainability and the triple bottom line alongside a particular emphasis on the United Nations'
Sustainable Development Goals (SDGs). Accordingly, in order to encourage evolving
investments within long-term points of view, both the technical and legal facets of corporate
governance must be conceived within the context of ethical business conduct in conjunction
with CSR and managing stakeholders as the cornerstone of solid corporate governance
pertaining to the worldwide shift towards sustainable growth.
1.1 Background & Overview of Transmile Group Berhad

1.1.1 Transmile Group Berhad

An investment holding firm called Transmile Group Berhad (Transmile) specializes in
providing freight flights, in the field of engineering, maintenance, and repair services for aircraft.
Gan Boon Aun established the business in November 1993 (Wan Abdullah et al., 2012). Based
in Kw (2021), Transmile listed on the second board in 1997 only four years after its founding.
Based on the case study by Wan Abdullah et al. (2012), the clientele of Transmile, which
included some well-known corporations such as DHL International Express, United Parcel
Service (UPS), Pos Malaysia Berhad, Nationwide Express, Citylink, BaxGlobal, and Nippon
Express, was equally outstanding. Therefore, most of the industries that were served by
Transmile were based on e-commerce, manufacturing, pharmaceuticals as well as perishable
goods.
Operationally, Transmile had continued to offer frequent flights between Peninsular
Malaysia and East Malaysia, as well as to important cities in the Asia Pacific area and nations
including China, Thailand, and India. Based on Liau (2019), Transmile runs a fully integrated
facility in Kuala Lumpur's Subang Airport, wherein the company is capable of being
self-sufficient to manage its own maintenance levels, logistics, transportation of cargo, and other
associated services. As of the current update on Google, the firm has been permanently closed.

Figure 1: The logo of Transmile Group Berhad

Source: Google Image
1.1.2 Chronology of the Scandal and Its Impact

This event of scandal is known as an accounting scandal that occurred in mid-2000s and
well known to be one of the famous scandal cases in Malaysia other than the 1Malaysia
Development Berhad (1MDB). Figure 2 below shows the timeline of occurred scandal event that
occurred in between of 2006 and 2007 which also presented the established year of the
company and in a short period of investment industry, the company was already listed on Bursa
Malaysia.

Figure 2: The chronology of Transmile’s scandal

Source: Wan Abdullah et al. (2012).

This accounting scandal has created a huge impact in various ways such as in terms of
financial performance decline, investors’ confidence were lost and eventually portrayed the poor
leadership by the top management of Transmile which also caused some legal actions to be
taken during the particular event. For instance, one of the Kuak Group's alternate directors has
said that they put the company totally in the management's hands because they believed it
would operate with good corporate governance while additionally maintaining them all updated.
This demonstrated that management was not providing effective leadership, which led to
investors being unhappy with their performances and a fall in financial performance.
On the basis of the timeline shown in Figure 2 above, a special audit was requested. The
group quickly launched a special audit for the accounts as a result of the audit's inadequacy as
well as the shortage of consensus for the bill being submitted. According to the results of the
special audit, the reports had exaggerated the company's income by RM197 million in 2005 and
RM333 million in 2006 (Liau, 2019).
Directors might consequently face jail time or a fine (refer to Appendix 1). Sanctions
against the auditors may also be applied. The accounting fraud caused a loss of faith in the
majority of cases. According to Cai et al. (2022), their data suggests that an accounting scandal
at a peer member firm devalues the market value of other peer member firms by raising investor
concerns about the possibility of accounting fraud for these companies. Similar to this,
Transmile's situation had an effect on the external auditor as well, which consequently led to a
conflict of interest.

2.0 Key Governance Issues of Transmile Group Berhad

Fraud in accounting is a moral problem whereby management makes unauthorized

changes to the financial statement in order to deceive the people who utilize the financial
information. The company's reputation was undoubtedly harmed by his accounting deception.
The value of the company's shares fell, and overseas investors hurried to sell their holdings as
well. It will be challenging to win back investors' faith. The business broke the rules of corporate
governance and ethics. They wrote off the original loss as profit, which is also morally wrong,
and purposefully misled the public and innocent investors.
The concept of accountability states that those who commit accounting fraud should be
held responsible for their choices and deeds. In accordance with the definition of transparency,
a corporation must disclose all relevant information to potential investors without holding any
information back. The Transmile Group Berhad obviously withheld information regarding the
actual accounting situation. The specific issues with corporate governance include the
independence of the board of directors and the audit committee, the application of independent
directors in expertise in finance on the board or audit committees, disputes of interest involving
external auditors offering advisory services to the business, the inclusion of independent
directors with significant stakes on the board or audit committee, and the impact of the chief
executive officer on the members of the board.
In certain cases, company boards' audit committees do not appear extremely active.
They often only get together on two or three occasions throughout the year. In light of this, even
if the committee is made up of independent directors, it might be challenging for a small group
of outsiders to identify fraud or accounting errors in a huge, sophisticated organization in a
relatively brief amount of time. On the contrary, the board or audit committee may actually be
less successful if the person with the knowledge is ineffective at monitoring (which may have
been due inadequate time is devoted to supervising) (Liau, 2019).
According to Kiflee and Khan (2019), the governance variables looked at include board
independence, board size, board gender, auditor independence, and auditor tenure. To sum up,
the Transmile incident was brought on by a lack of board oversight of managerial and business
operations, inaccurate information in the annual report, and the regulatory body's failure to
impose necessary regulations on Malaysian listed firms. This problem brought to light the
necessity for the corporation to have improved corporate governance procedures, which is often
only possible through the introduction of regulations. To protect the interests of investors and
guarantee that the management goal is in line with the interests of investors, efficient corporate
governance is essential. To ensure that everybody strives to reach the best of the company's
ability, the board of directors must have clear obligations and duties.

3.0 Role of Board Members

The role of board members in an organization is crucial for effective corporate

governance and oversight. Board members are responsible for making strategic decisions,
providing guidance and direction to management, and ensuring the organization operates in the
best interest of its stakeholders.

1. Strategic Decision-Making: Board members are crucial to determining the organization's

strategic course. They take part in the formulation and endorsement of the organization's
purpose, vision, and long-term objectives. Major strategic initiatives including mergers and
acquisitions, capital investments, and forays into new markets are also reviewed and approved
by them.

2. Management Performance: Board members are in charge of monitoring how the

organization's management team is performing. They keep an eye on how strategic plans are
being put into action, evaluate management's effectiveness, and hold them responsible for
accomplishing organizational goals. This includes assessing the CEO's performance, creating a
succession plan, and making sure the company has strong leadership in place.

3. Risk management: Board members are in charge of locating and controlling hazards that can
affect the company's operations, standing in the community, and financial stability. They
collaborate with management to create frameworks for managing risks, examine risk
assessments, and make sure the right risk mitigation measures are taken. This includes keeping
an eye on whether laws, rules, and moral guidelines are being followed.
4. Financial Oversight: Board members have a fiduciary duty to uphold the organization's
financial stability and integrity. Financial statements, budgets, and significant financial
transactions are examined and approved by them. To ensure accurate and transparent financial
reporting, they also supervise the work of internal and external auditors.

5. Stakeholder Engagement: Board members are in charge of preserving strong relationships

and lines of communication with important parties, including as shareholders, staff members,
clients, and the general public. They ensure that the organization's actions are consistent with
its values and satisfy stakeholder expectations. This includes developing guidelines for ethical
behavior, corporate social responsibility, and shareholder participation.

6. Board Composition and Governance: The selection, assessment, and compensation of board
members and executives are decisions made by the board. For effective oversight and
decision-making, they set up governance structures, such as board committees. They also
support the development of an ethical, accountable, and honest culture within the company.

The failure of board members can have significant consequences for an organization,
including reputational damage, financial losses, and legal liabilities. In the case of Transmile
Group Berhad, the failure of board members to fulfill their responsibilities had severe
consequences for the company and its stakeholders.

1. Ineffective Monitoring: The board members of Transmile Group Berhad did not keep a close
eye on how the organization's management team was performing. They handed over many of
their duties to various agents and gave management complete control of the company. Due to a
lack of control and responsibility, management was able to commit fraud, which resulted in the
accounting scandal that cost the company and its shareholders a lot of money.

2. Failure to Uphold Fiduciary Duty: Board members have a fiduciary duty to act in the
organization's and its stakeholders' best interests. In Transmile, the board members did not
uphold their fiduciary responsibility to safeguard the interests of the shareholders. They failed to
take the necessary steps to stop the management's dishonest behavior, which led to significant
financial losses for the company and its shareholders.

3. Lack of Independence: For efficient corporate governance, board members' independence is

essential. Concerns were raised in Transmile regarding the efficiency and objectivity of the
independent directors on the audit committee. The majority of the committee's members were
independent directors, and the public anticipated that their participation would improve the
committee's monitoring capabilities. However, the independent directors were part of the
accounting fraud because they did not carry out their duties.

4. Failure to ensure effective risk management: Board members are in charge of identifying and
managing risks that may have an impact on the business operations, public perception, and
financial stability of the organization. The board members of Transmile did not make sure that
efficient risk management procedures were in place. They did not establish adequate internal
controls and reporting procedures, which allowed the fraudulent activities to go unnoticed and
unchecked.

5. Lack of Accountability: Board members are held fully accountable for the general
performance and conduct of the business's operations. The board members of Transmile
declined to accept accountability for the accounting crisis and its consequences. They failed to
take the necessary steps to remedy the company's lack of corporate governance and business
ethics, which further diminished shareholder confidence.

4.0 Role of Chairman

The Chairman of the Board of Directors (BOD) plays a crucial role in ensuring effective
corporate governance. The Chairman is responsible for leading the board and ensuring that it
fulfills its responsibilities in overseeing the management of the company. Some of the key roles
and responsibilities of the Chairman in terms of governance include:

1. Leading board meetings: The Chairman is in charge of setting the agenda, presiding over
board meetings, and facilitating conversations. The Chairman makes sure that decisions are
taken in the best interests of the business and its stakeholders and that all board members have
the chance to voice their opinions.

2. Ensure efficient communication: The Chairman is in charge of maintaining efficient

communication between the board, management, and stakeholders. This includes informing
stakeholders on the company's strategy, performance, and risks and keeping the board updated
on any noteworthy changes or problems.

3. Monitoring the board's performance: The Chairman is in charge of monitoring the board's
performance and making sure it performs its duties. This entails assessing the efficiency of the
board and its committees as well as making sure the board possesses the abilities, information,
and expertise required to carry out its duties.
4. Ensuring effective risk management: The Chairman is in charge of making sure the
organization has systems in place for effective risk management. This entails managing the risk
identification, evaluation, and management process and ensuring that the board is aware of any
serious risks the company is facing.

5. Ensuring adherence to rules and regulations: The Chairman is in charge of making sure the
business abides by all relevant laws and regulations. In order to maintain compliance, this
includes supervising the creation and execution of policies and procedures. It also entails
keeping the board updated on any relevant legal or regulatory developments.

4.1 Ensuring Effective Communications

The Chairman, who serves as the board's leader, is in charge of making sure that there
is good communication among board members, between the board and management, and with
stakeholders. This entails making sure that pertinent information is exchanged, risks are
recognised and addressed, and suitable measures are implemented to mitigate any problems.
In the case of Transmile, the fraudulent operations included the fabrication of false
transactions and the falsification of invoices, which were done with the express intent of fooling
auditors and inflating the firm's earnings. Concerns are raised about the effectiveness of the
company's internal controls, governance frameworks, and the oversight provided by the BOD,
including the Chairman, given that these activities went unnoticed for a sizable amount of time.
It is significant to remember that fraud can be intricate and is frequently committed by
those who deliberately mislead others. Strong governance procedures can't always prevent
determined personnel from getting around security measures and misleading auditors.
However, depending on the steps taken to stop, identify, and deal with fraudulent conduct, the
effectiveness of the Chairman's oversight and the broader governance structure can be
assessed. Hence, the occurrence of fraud does raise concerns about the efficiency of oversight
and communication inside the business, particularly the Chairman's role.

4.2 Overseeing The Performance of The Board

The Chairman of the board of directors is in charge of monitoring the board's operations
and making sure it performs its duties. This entails making sure the board is informed of any key
developments or challenges and that it has the expertise, knowledge, and experience to carry
out its duties.
In the specific case of Transmile, the BOD which includes the Chairman had given
various agents, including the CEO, part of its duties. The effectiveness of the board's oversight
and the possibility of conflicts of interest are questioned by this distribution of duties. Concerns
exist regarding the efficiency and impartiality of the independent directors on the audit
committee as well. The company's internal control procedures, financial reporting, and external
auditor's independence and impartiality are all under the control of the Audit Committee. It is
anticipated that having independent directors will improve the standard of oversight and
monitoring.

4.3 Ensuring Effective Risk Management

It is significant to remember that the Chairman of the BOD is in charge of making sure
proper risk management is carried out and of supervising the risk identification, evaluation, and
management processes. This involves making sure that the right procedures and controls are in
place to reduce risks and that the board is aware of any material risks the company is
experiencing.
In this case of Transmile, Deloitte & Touche had twice notified the Audit Committee and
the top executives of the critical accounting errors discovered in the company's unaudited 4th
Quarter of 2006 report. The Audit Committee made the decision to request the BOD's review
and permission for the release of the unaudited annual account while being aware of the
auditor's worries. The unaudited Fourth Quarter 2006 report was made public prior to the
submission deadline. The effectiveness of the company's risk management and governance
procedures is questioned by the fact that the Chairman, who is also a member of the BOD,
permitted the publication of the unaudited report and did nothing to address the external
auditor's concerns.
The Chairman and the BOD might not have understood the gravity of the dangers
involved or might have been swayed by other circumstances. Notably, the choice to carry out a
special audit was decided following the publication of the unaudited report and the subsequent
identification of the accounting problems. The purpose of the special audit was to address the
concerns brought up by the external auditor and offer a more thorough evaluation of the
financial statements and internal controls of the organization.

4.4 Ensuring Compliance with Laws and Regulations

Despite the auditor's reservations regarding the accounting issue, the release of the
unaudited annual reports for 2006 to Bursa Malaysia had violated the Exchange's listing
requirements. Listed companies must abide by a set of guidelines known as the Exchange's
Listing Requirements in order to keep their listing status. The unaudited report's distribution in
defiance of the auditor's concerns and in violation of the Exchange's listing requirements raises
concerns about the company's adherence to legal and regulatory requirements.
The Chairman and the BOD might not have understood the seriousness of the breach or
might have been swayed by other circumstances. It is also worth noting to mention that Section
99E of the Securities Industry Act, which requires auditors to immediately submit a written report
to the Securities Commission if they are of the professional opinion that there has been a
breach of securities laws or rules of the exchange or any matter which may adversely affect the
financial position of the listed company.
The long-standing association between Deloitte & Touche and Transmile may cast doubt
on the auditor's neutrality and independence. Auditors are supposed to conduct themselves
independently, objectively, and without any conflicts of interest that can skew their professional
judgment. Furthermore, it was discovered that Deloitte & Touche's fees were much lower than
those of KPMG, which took over Transmile's audit in 2007. Deloitte & Touche's cheap fees may
make it more difficult for auditors to carry out their tasks effectively, which may violate the idea of
competence and due care.

5.0 Impact on remuneration structures on governance

Remuneration Structure of Transmile was manipulated and implemented towards

achieving individual benefits for the executive ranking as we can see in the following paragraph.
Initially, this conflict of interest was not registered as an associated risk outcome during the
study and implementation of the external audit risk management.
Therefore, remuneration structure and its implementation towards achieving personal
benefit regardless of the company strategic guidelines and objectives could lead to significant
risk on its governance practices under the execution of manipulated external audit as in the
Transmile Group case study where the remuneration structure of the company was found to
have contributed to the breakdown in corporate governance as follows:

1. CEO's Salary and Bonuses Tied to Financial Performance:

• Large salary and bonuses linked to the company's financial performance.

• Incentive to manipulate financial statements to meet targets and receive higher

compensation. The conspiracy issue reinforced when the external auditors informed of the
rejection of the latest report is two months and 20 days late compared to the date of
unaudited report was released that is on 15 February 2007. Deloitte supposed told directly
 to the BOD regardless after being ignored many times by the audit committee and top
management about unaudited reports.

2. Audit Committee's Compensation Linked to Financial Performance:

• Committee members paid a large fee tied to the company's financial performance. In the
case of the Transmile, the boards had formed the Audit Committee to assist them in terms
of the legislation duties and responsibilities relating to accounting and reporting practice of
the company and subsidiaries. But the committee had failed to fulfill their responsibilities
where they the committee had been informed about the serious accounting issues found
in the company’s unaudited 4th quarter of 2006 report on 14th and 15th February of 2007
and they hid this from the boards. The boards only know the issues on 4th May 2007 via a
letter from an external auditor. This ended up that the boards had failed to fulfill their
responsibilities in 5 overseeing the performance of the company and the company had
breached the Listing requirement of the Exchange.

• Incentive to overlook irregularities to maintain financial performance and receive higher

compensation. The boards have the responsibilities to oversee the risk management
system to ensure the internal control of the company. The boards of Transmile had passed
the responsibilities to the Audit committee to determine the adequacy of the company’s
internal control system. Since 2014, Transmile had outsourced the internal control function
however the sales and finance division were not under the service of the internal control. It
happened in 2014, the boards of Transmile had failed to fulfill their responsibility in risk
management.

3. Adequate internal control structure: The sales and finance division are vital divisions related
to revenue. The boards should have to make sure adequate internal control on the divisions
and the whole company. The fraud has happened since 2014 where the sales are overstated
from year 2014 to the year 2016. Inadequate internal control in the sales and finance division
should be one of the reasons for letting a chance for the fraud to be conducted. The boards
fail their responsibilities in risk management in the company and fail to appoint a committee
which are competent in carrying out the responsibilities given.
4. The BOD should practice the principles of corporate governance. The boards should carry
out their responsibilities on their own instead of passing all the responsibilities to the agents.
The boards should have the self-awareness to carry out their duty and be more proactive in
communication with the audit committee, internal and external auditors.
5. Audit procedures and practices integrity and independence shall be the responsibility of the
BOD and audit committee. In the case of Transmile, the auditor is appointed to audit
Transmile by the audit committee, but it is the responsibility of the auditor to uphold integrity
and independence as they are responsible not to the audit committee but to every
shareholder of Transmile. Therefore, whenever a serious accounting issue is found out by
the auditor, a management letter must be sent to the board of directors to get clarification at
the very first place and not after two months, 4th May 2007. If the board of directors were to
ignore, auditors still must be responsible to other minority shareholders that do not hold any
position in the company by reporting it to Securities Commissions.

In summary, the audit committee’s responsibility is to oversee and monitor the integrity,
quality, and reliability of the financial reporting process without stepping into the managerial
functions and decisions relating to the preparation of financial statements. Members of the audit
committee must be financially literate, professionally qualified, operationally knowledgeable, and
functionally independent to effectively fulfill their vigilant oversight responsibility. The audit
committee should meet regularly and as needed with the board of directors, CEO, CFO,
treasurer, controller, director of the internal audit function, and external auditors as a group, also
in private with each individual to review and assess the integrity, and reliability of financial
reports.

6.0 Ownership Structure and Governance

Transmile was an investment holding company, with several major shareholders who held
significant stakes in the company. These major shareholders had significant influence over the
company's decision-making processes and could potentially override the decisions of the Board
of Directors (BOD).

• Influence of Major Shareholders:

Major shareholders could potentially override decisions of the BOD and Influence on the
corporate governance and strategic direction. The Board of Directors is a body of elected or
appointed members by shareholders who will be responsible for monitoring the running
company on behalf of the shareholder for the benefit of the shareholder.
• Conflicts of Interest:Personal and Business Relationships:

Members of the BOD had relationships with major shareholders and thus conflict of interest
compromised objectivity and decision-making. The boards of directors have the responsibilities
on the fraud that occurred. The boards play an important role in overseeing the management and
performance of the company. They have to ensure and implement adequate internal control for
the company to prevent any fraud. “Prevention is better than cure”, even though the BOD has
formed a special audit to investigate the issues found after being informed by the external
auditor. However, it was too late for them to notice.

7.0 Ownership Structure and Governance – Key Takeaways

Importance of Independent Governance:

Safeguarding Fiduciary Duties: Ensuring BOD acts in best interests of the company and
shareholders. One of the roles of external Auditors in corporate governance is protecting the
interests of shareholders. This is possible because external audition reports are conducted
independent of the company’s influence. External auditors report the state of a company's
finance and attest to the validity of financial reports that may have been released. They ensure
that the board receives accurate and reliable information. Other things are avoiding undue
influence that compromises governance integrity of shareholders. They ensure that the board
receives accurate and reliable information. In this matter Deloitte should inform BOD sooner in
order to protect the interests of shareholders. If an external auditor detects fraud, it is his
responsibility to bring it to the management's attention and consider withdrawing from the
engagement if management does not take appropriate actions. Normally, external auditors
review the entity's information technology control procedures when assessing its overall internal
controls. They must also investigate any material issues raised by inquiries from professional or
regulatory authorities, such as the local taxing authority. As we can see after Deloitte informed
BOD, BOD immediately appointed a special audit. So if Deloitte had informed earlier, maybe
Transmile may be listed company by now with released the audited financial report

Strengthening Governance Structure:

Ensuring Independent BOD without conflicts of interest. The Board of Directors must be able to
exercise objective and independent judgment to effectively complete their responsibilities. The
board of directors is also responsible to oversee the risk management system and systems
designed to ensure that the corporation obeys applicable laws, including tax, competition, labor,
environmental, equal opportunity, health and safety laws. The board is not only accountable to
the company and its shareholders but also has a duty to act in their best interests.

Mitigating influence of major shareholders on decision-making. We recommend that the BOD

should practice the principles of corporate governance. The boards should carry out their
responsibilities on their own instead of passing all the responsibilities to the agents. The boards
should have the self-awareness to carry out their duty and be more proactive in communication
with the audit committee, internal and external auditors. The boards have to make sure the
information reached is relevant and in the right timing. The boards have to make sure the audit
committee and auditors being appointed are competent in carrying out the responsibilities given.
Evaluation of the boards should be implemented too to ensure for the quality of monitoring of
the management of the company

8.0 Conclusion

The case study of Transmile Group Berhad highlights several governance issues that led to
a breakdown in corporate governance. Failure to properly monitor the company's CEO and top
management, delegated responsibilities without adequate oversight, and conflicts of interest within
the Board of Directors were key factors contributing to the governance failures. These issues
emphasize the importance of effective oversight and monitoring by the Board of Directors, clear
communication and transparency between internal and external auditors, and the need to avoid
conflicts of interest that compromise fiduciary obligations. The ownership structure of a company
can also impact governance practices, emphasizing the need for independence and ensuring
major shareholders do not exert undue influence on decision-making processes. Strengthening
governance structures, promoting transparency, and establishing independent oversight
mechanisms are essential for maintaining good corporate governance and safeguarding the
interests of the company and its shareholders. In a nutshell, Learning from the Transmile case
study, it is crucial for organizations to prioritize strong governance practices and maintain a culture
of accountability to prevent similar governance failures in the future. In conclusion, it’s the
responsibility of a listed company and its directors and chief executive to prepare and present
financial statements in accordance with approved accounting standards issued or adopted by the
Malaysian Accounting Standards Board (MASB). Failure to fulfill this obligation is an offense.
Furthermore, the culprits should carry out their responsibilities and comply with regulations and
accounting standards in order to protect the innocent parties such as shareholders and investors.
References

Cai, G., Ge, R., Pittman, J., & Zolotoy, L. (2022, January 7). The Spillover Effects of
Accounting Scandals in Business Groups. Retrieved June 23, 2023, from
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4003327
ElGammal, W., El-Kassar, A., & Messarra, L. C. (2018). Corporate ethics, governance
and social responsibility in MENA countries. Management Decision, 56(1),
273–291. https://doi.org/10.1108/md-03-2017-0287
Kiflee, A. K. R. B., & Khan, M. N. a. A. (2019). Relationship between Corporate
Governance and Risk Disclosure Practice from Malaysia Perspective. KnE Social
Sciences. https://doi.org/10.18502/kss.v3i22.5045
Kw, T. (2021, November 15). The Rise & Fall of Transmile: What Can Investors Learn? -
Bursa Dummy. I3investor. Retrieved June 23, 2023, from
https://klse.i3investor.com/web/blog/detail/kianweiaritcles/2021-11-15-story-h159
3840410-The_Rise_Fall_of_Transmile_What_Can_Investors_Learn_Bursa_Dum
my
Liau, S. K. (2019). Corporate Governance and Bankruptcy of Transmile Group Berhad: A
Study of Firm Specification and Macroeconomic in Malaysia. Social Science
Research Network. https://doi.org/10.2139/ssrn.3385207
Rendtorff, J. D. (2020). Corporate citizenship, stakeholder management and Sustainable
Development Goals (SDGs) in financial institutions and capital markets. Journal
of Capital Markets Studies, 4(1), 47–59.
https://doi.org/10.1108/jcms-06-2020-0021
Wan Abdullah, N., Bin Mohd Nor, M., & Bin Omar, A. (2012). Case Study: Transmile
Group Berhad. NIDA Case Research Journal, 4(1), 71–85.
Appendices

Appendix 1: News on former Transmile’s CEO jailed & fined