Business Ethics &

Corporate Governance
Chapter 6: Development of Corporate
Governance

Dr TAN Shen Kian

Corporate Governance Reforms (2000-2007)

Malaysia government implemented several reforms and initiatives during

the period from 2000 to 2007 to enhance corporate governance in the
country. Key reforms included:
• Introduction of the Malaysian Code on Corporate Governance in 2000:
• Establishment of the Minority Shareholder Watchdog Group (MSWG) in 2000
• Strengthening the role of the Securities Commission (SC)
• Promotion of independent directors: Efforts were made to increase the number of
independent directors on company boards to ensure a higher level of objectivity and
accountability.
• Enhancing shareholder rights: Implementation of corporate governance training
programs
Corporate Governance Blueprint 2011

Key features of the Corporate Governance Blueprint 2011:

• Board Structure and Composition.
• Risk Management and Internal Controls
• Transparency and Disclosure
• Shareholder Rights
• Whistleblower Protection
• Institutional Investors
• Enforcement and Compliance
Importance of Corporate Governance

Investor Confidence

Protection of Shareholder Rights

Stakeholder Management

Risk Management

Long-Term Sustainability and Growth

Ethical Conduct and Reputation

Framework of Corporate Governance in Malaysia: Institutional
Framework

Malaysian Institute of Corporate Malaysian Institute of Integrity (IIM)

Governance (MICG)
Framework of Corporate Governance in Malaysia: Regulatory
Framework

Bursa Malaysia Berhad Securities Commission Companies Commission

(SC) of Malaysia (SSM)
Framework of Corporate Governance in Malaysia: Statutory
Framework

Companies Act: Other Statutory

Requirements:
Corporate governance in the UK: The Cadbury Report (1992)

Composition
Role of the Role of Non-
and
Board of Executive
Independence
Directors Directors
of the Board

Audit Disclosure and Remuneration

Committees Transparency of Directors

Ethical
Shareholder Conduct and
Rights Corporate
Culture
Corporate governance in the UK: The Greenbury Report ( 1995)

Disclosure and Transparency

Performance-related Pay

Long-Term Incentives

Non-Executive Directors' Role in Remuneration

Independent Remuneration Consultants

Simplification and Clarity

Shareholder Consultation and Approval

Corporate governance in the UK: The UK Stewardship Code
(2010)

Institutional Disclosure of Engagement

Investor Stewardship with Investee
Responsibility Activities Companies

Monitoring of Collaboration
Investee Voting with Other
Companies Investors

Monitoring
and Reporting
Corporate governance in the US: The Sarbanes-Oxley Act
(2002)
Enhanced Financial Reporting and Disclosure

Establishment of Public Company Accounting Oversight Board (PCAOB)

Auditor Independence

Whistleblower Protection

Corporate Governance Reforms

Criminal Penalties for Fraud

CEO and CFO Personal Liability

Protection for Investors

(OECD) Principles of Corporate Governance

Equitable
Rights of Role of
Treatment of
Shareholders Stakeholders
Shareholders

Responsibilitie The Role of

Disclosure and
s of the Board Institutional
Transparency
of Directors Investors

Disclosure and Corporate

Role of Responsibility
Auditors and Ethics
Case Study Scenario

Company ABC is a medium-sized manufacturing company based in

Malaysia. It operates in the automotive industry and has been in business
for five years. The company has a board of directors, shareholders, and
employees. It is subject to the statutory framework provided by the
Companies Act in Malaysia.

Recently, Company ABC underwent a review of its corporate

governance practices to ensure compliance with the Companies Act. The
review highlighted a few areas where the company needs to improve its
adherence to statutory requirements. These areas include financial
reporting, shareholder meetings, and director responsibilities.
Case Study Scenario

Imagine you are a shareholder of company ABC….

1. Why you are concerning of accurate and timely financial reporting from
Company ABC?
2. What are you expecting the company in ensuring effective shareholder
participation and engagement?
3. What are the director responsibilities that you are expecting directors
of company ABC to act?
End