Corporate Governance History,

Principles and Issues

in Malaysian Corporate Governance
PM Dr Mohd Fairuz Bin Md Salleh

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 Outlines
• Definition of Corporate governance
• Objectives Of Corporate Governance
• Corporate Governance Environment
• History/ the improvement of corporate governance in Malaysia
• Reasons for MCCG updates
• Improvement of CG adoption in Malaysia
• Benefits of Corporate Governance
• The core principles of Corporate Governance
• Implementation of Corporate Governance Framework
• Corporate Governance Structures
• Elements of Corporate Governance
• The principles of MCCG 2017 and general highlights
• Current issues of CG in Malaysia

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 Definition of Corporate governance

• Malaysian Code On CG (2017)

• “... as the process and structure used to

direct and manage 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.

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 Definition of Corporate governance
• Cadbury Report, 1992 : The system by which organisations are directed and control

• Organisation for Economic Co-operation and Development 2014: A set of relationships

between a company’s director, its shareholders and other stakeholders.

• It also provides the structure through which the objective of the company are set, and the
means of achieving those objectives and monitoring performance, are determined.

• G20/OECG in 2015: “CG should build an environment of trust, transparency and

accountability … for fostering long-term investment, financial stability and business
integrity thereby supporting growth and more inclusive societies

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Objectives Of Corporate Governance
• To create shareholder value and attract new investment.

• To monitor BOD and top management.

• To enhance investors’ confidence to invest in the country’s capital market.

• To comply with laws and regulations.

• To avoid repeats of corporate scandals as a results of power abuse of

corporate managers.

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 Corporate Governance Environment

• Ethical leadership • Ethical culture

-Truly Independent and Diverse - Integrity of Corporate Reporting

Boards

-Incentive Structures Aligned with - Constructive Engagement with

Long-term Objectives Stakeholders

“An organization is ethical only if its leaders are ethical”

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History of corporate governance in Malaysia

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Improvement of CG principles in Malaysia

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 Reasons for MCCG Updates
• 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.

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 Improvement of CG adoption in Malaysia
• Corporate governance blueprint 2011-2020
• To sets out the desired corporate
governance landscape going forward,
promote good compliance and
corporate governance culture and
acheiving ethical and sustainable
adoption.
• Malaysian Code for Institutional Investors
(MCII) on 27 June 2014
• The purpose of the Code is to
enhance the communication
between institutional investors like
EPF,  Khazanah Nasional Berhad,
KWAP, Lembaga Tabung Haji etc. and
its investee companies that are
publicly listed to help improve long
term returns to shareholders and
further promote good corporate
governance among the listed
companies.
• ASEAN corporate governance
• to raise the corporate governance
standards and practices of ASEAN
publicly listed companies (PLCs),
• to give greater international visibility
to well-governed ASEAN PLCs and
showcase them as investable
companies, and
• to complement other ACMF initiatives
and promote ASEAN as an asset
class.
• BNM Corporate Governance
• The adoption of sound corporate
governance standards and practices
by financial institutions serves to
protect the critical role of financial
institutions in intermediating funds to
support the real economy.
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 Benefits of Corporate Governance
• Increasing investors’ confidence • Enabling better strategic planning

• Improving access to capital market • Encouraging positive behaviour

• Reducing cost of capital
• Improving top-level decision-
making
• Assuring internal controls
• Improving reputation
• Fewer fines, penalties and lawsuits
• Decreased conflicts and fraud

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Potential consequences of poor CG
• Failing companies

• Reputational problems

• Excessive regulations

• Lack of investment in capital

markets

• Rise of shareholders watchdog

groups

• Powerful regulators

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