Development of Codes of Conduct and Industry Best Practices

September 2008: International Professional Practices Framework (IPPF)

The Institute of Internal Auditors had issued an International Professional Practices Framework (IPPF) as guidance for its members who are involved in internal audit work.

The framework is aimed to equip members who perform internal audit activities either as in-house internal auditors or as outsourced internal audit service providers to be professionally competent in performing these activities in accordance with professional standards and rules of conduct requiring independence, due professional care, and effective quality assurance mechanisms.

The new IPPF structures and associated processes are designed to ensure that authoritative guidance is current, relevant and internationally consistent. The IPPF provides:-

  • A standard for performing internal audit activities
  • A benchmark for evaluating professionalism
  • A standard of reference for internal auditors who may be unduly influenced by others to act inappropriately
  • Standards and guidance for third parties providing internal audit services
  • Standards for quality assurance reviews of internal audit functions

October 2007: Revised Malaysian Code on Corporate Governance

The revision to the Malaysian Code on Corporate Governance which came into effect on 1 October 2007, strives to strengthen the roles and responsibilities of the boards of directors and audit committee, and ensuring that they discharge their duties effectively.

To ensure that the board is represented by the right candidates to serve the board, the Nominating Committee who is tasked to nominate the right candidate to the board is required to evaluate the candidates’

  • skills, knowledge, expertise and experience;
  • professionalism;
  • integrity; and
  • in case of the independent non-executive directors, the nominating committee should also evaluate the candidates’ ability to discharge such responsibilities or functions as expected from independent non-executive directors.

Apart from the above, the Nominating Committee is also tasked to evaluate the effectiveness of the board as a whole, the committees of the board and the contribution of each individual director on a continuous basis.

The composition of the board remains the same as before whereby 1/3 of the board shall be represented by independent non-executive directors. However, the revised Code strives to strengthen the role of audit committee by requiring the Audit Committee to be fully comprised of non-executive directors only. In addition, the financial literacy of the Audit Committee is also emphasized whereby all members of AC should be able to read, analyse and interpret financial statements so that they will be able to effectively discharge their functions.

The revised Code on Corporate Governance is available here (pdf – 87KB).

January 2007: Minority Shareholders Watchdog Group Best Practices for Institutional Shareholders

MSWG launched the Guide of Best Practices for Institutional Shareholders which is in line with recommendation 112 of the Capital Market Master Plan.

The Guide sets out a framework of best practices for Institutional Shareholders in driving shareholder value and in managing investment risks. The Guide marks a milestone in MSWG’s efforts to enhance shareholder activism and to protect minority shareholder interests in Malaysia.

August 2004: Best Practices in Corporate Disclosures

On 20 August 2004, the Taskforce on Corporate Disclosures Best Practices, which was established by the stock exchange and consisted of representatives from the industry, launched its guidance entitled “Best Practices in Corporate Disclosure”. The said guidance sets out best practices that are aimed at assisting and guiding listed companies in meeting both the letter and the spirit of the continuous disclosure obligations under the exchange Listing Requirements and Malaysian securities laws.

August 2002: Institute of Internal Auditors released Guidelines on the Internal Audit Function

The Institute of Internal Auditors Malaysia released in August 2002 a set of guidelines to assist the boards of directors of public-listed companies in the effective discharge of their responsibilities in relation to the establishment of internal audit functions and to facilitate the benchmarking of domestic practices with internationally-accepted best practices and standards in this area. The Guidelines on Internal Audit Function were formulated by an industry taskforce, supported by the Securities Commission and the exchange. The document is available for purchase from the Institute of Internal Auditors Malaysia.

February 2001: Taskforce on Internal Control Issues Guidance for Directors on the Annual Report Statement of Internal Controls

The revamped exchange listing requirements (released January 2001) require the board to make an annual report statement on the state of internal controls of the listed company as a group. In line with this mandatory disclosure requirement and in order to enhance the quality of such disclosures, the guidance entitled “Statement on Internal Control: Guidance for Directors of Public Listed Companies” was issued by the Taskforce on Internal Controls.

In developing the guidance, the Taskforce took note of the recommendations of the Turnbull Report (the guidance issued to directors of companies listed on the London Stock Exchange), the Committee of Sponsoring Organizations of the Treadway Commission, the Basel Committee on Banking Supervision and the International Standards on Auditing as adopted by the Malaysian Institute of Accountants and the Malaysian Institute of Certified Public Accountants.

November 2000: Best Practices published by the Malaysian Association of the Institute of Chartered Secretaries and Administrators

Consistent with the policy direction of the Finance Committee Report on Corporate Governance, the Malaysian Association of the Institute of Chartered Secretaries and Administrators had published the best practice guides entitled “A Guide to Annual General Meetings” and “The Company Secretary: A Reference Kit” in November 2002. Both publications contribute towards the growing body of industry guidance material available dealing in substance with improving the quality of corporate governance amongst listed companies.

March 2000: Malaysian Code on Corporate Governance introduced

The Malaysian Code on Corporate Governance, released in March 2000, provides a set of principles and best practices for companies on corporate governance. The Code is the product of an industry-led working group, established under the auspices of the Finance Committee on Corporate Governance. The revamped exchange Listing Requirements (issued on 22 January 2001) brought the Code into full effect by requiring mandatory disclosures on the state of compliance with the Code by listed companies. The hybrid nature of this approach towards corporate governance regulation is similar to the approach currently employed in relation to the Combined Code on Corporate Governance (United Kingdom), and broadly reflects the objective of the Finance Committee on Corporate Governance in seeking to balance regulatory flexibility and business efficacy with the clear need to strengthen corporate governance practices in the country.