Corporate Governance Monitor 2019
06 May 2019   |   By : Datuk Syed Zaid Albar, Chairman of Securities Commission Malaysia

Datuk Syed Zaid Albar
Chairman of Securities Commission Malaysia
at the Launch of the Corporate Governance Monitor 2019
in Kuala Lumpur on 6 May 2019

 

Yang Berhormat Tuan Tony Pua, Political Secretary to the Minister of Finance;
Members of the SC Board;
Distinguished guests, ladies and gentlemen, To all Muslims “Selamat Berpuasa”

1.

Welcome to the launch of the SC’s inaugural Corporate Governance Monitor 2019 [CG Monitor].

2. Yang Berhormat, on behalf of the SC, we would like to thank you for taking the time to be here this morning, to officiate the launch of this report on behalf of YB Tuan Lim Guan Eng, Minister of Finance.
3. Today’s launch of the Corporate Governance Monitor marks a new chapter in the SC’s journey in driving and promoting good corporate governance. This report, which is the outcome of thoughtful collection and analysis of data from CG reports, will enable SC to track and highlight year-on-year progress (or gaps) in the adoption of CG practices in the CG Code and the quality of disclosures.
4. The findings in this annual publication will inform SC’s future policy reform and intervention action to address areas, where gaps have been identified.
5. The SC hopes that the data and observations presented in the report will assist boards, and management to reflect on their practices and put in place initiatives to close gaps identified.
6. As for shareholders and stakeholders, I hope this report will assist you in your company engagements, and in the discharge of your respective roles in driving corporate governance excellence.
Ladies and gentlemen,
7. Laws and regulations govern the everyday life of business and citizens, and it help achieve policy objectives such as economic growth, social wellbeing and environmental protection. A robust regulatory policy is therefore needed to ensure the quality and effectiveness of regulations. However, I am sure you will agree with me, that achieving regulatory quality and effectiveness has become increasingly difficult due to rapid changing trends in technology, consumer demands and the market landscape.
8. In order to ensure that capital market regulation achieve its desired outcomes in promoting economic activities and protect investors, SC will seek to enhance the application of its evidence-based policy-making approach when designing development and regulatory policies for the capital market.
9. As much as investors need information to make informed investment decisions, regulators too, require relevant information and data to design policies driven by analysis of all available options which are to enable it to come up with the most appropriate response to address a development need or a regulatory concern.
10. In this regard, I would like to record my appreciation to board members who have taken the effort to ensure that their company’s CG disclosures are clear, comprehensive and meet the disclosure standards set by SC and Bursa. Your efforts will enable us to continue to dedicate our resources towards corporate governance practices which require greater support and guidance from regulators and CG advocates.
Ladies and gentlemen,
11. Let me now share with you some of the findings from the CG Monitor, focusing on board composition.
12. The report shows that we still have 447 companies with long serving independent directors on their boards – some with tenure of more than 30 years.
13. A recent survey conducted by the Institutional Shareholder Services Inc showed that 70% of the institutional investors who participated in the survey, agreed that having a large number of directors with long-tenure is a concern. Lengthy tenures are believed to prevent boards from introducing new skills and ideas to the running of the business.
14. A refresh board on the other hand, lets the company make improvements and there is also something to be said for new viewpoints and greater diversity. Given all that, there are merits for boards to openly discuss what a Harvard Law School Forum called “a topic on fire”. I encourage boards to reflect on board refreshment in the context of self-assessment, succession planning and in the interest of building an effective board.
15. To assure you that the CG Monitor, gives you a balanced report, I must mention that 25 listed companies have put in place a 9-year tenure limit for independent directors, with no further extension - and 14 of these companies are mid and small cap companies. In fact, I would like to highlight that mid and small companies are among the trailblazers in the adoption of other best practices introduced in the Code.
16. 164 listed companies have also started exercising greater scrutiny on the retention of long serving independent directors through the use of the two tier voting process. There were also 116 independent directors with a tenure of more than 12 years who resigned and did not seek re-election after the introduction of the two-tier voting process.
Ladies and gentlemen,
17. The Malaysian Code on Corporate Governance recommends, that companies have in place a board diversity policy, which takes into consideration age, skills, experience, and gender diversity targets.
18. Diversity brings competing perspectives to the board. As Malcolm Forbes once said “Diversity is the art of thinking independently together”.
19. In this regard, empowering women in the economy and closing gender gaps in the office, are key to achieving the 2030 Agenda for Sustainable Development. Women’s economic empowerment boost productivity, increases economic diversification and income equality. According to a PWC study in 2018, increasing female employment rates in OECD countries could boost GDP by over $6 trillion.
20. Companies too, greatly benefit from increasing employment and leadership opportunities for women – this is shown to increase organizational effectiveness and growth (and for your information in SC close to 54% of our Heads of Department are women).
21. In the corporate sector, Malaysia has made slow but steady progress with a seven-percentage point increase in women participation on boards of the top 100 listed companies, from 16.6% in 2016 to 23.7% in 2018. Women also accounted for 28% of senior management positions in all listed companies - this is higher than the Asia Pacific average of 23%.
22. What we can take pride in is that, unlike other countries, progress in gender diversity on boards and senior management in Malaysia were achieved without mandating a quota in the law. I encourage all listed companies to work together with us to ensure that the target of 30% women on boards by 2020 is achieved.
23. An interesting observation from the CG Monitor is that the percentage of women director increases in the younger age groups - women accounted for 15% of the 51 to 60 age group; compared to 43% in the 20 to 30 age group; suggesting a strong pipeline for gender diversity on boards in the future.
Ladies and gentlemen,
24. Moving forward, the focus this year will be to review the anti corruption measures of listed companies as part of SC efforts to support the National Anti Corruption Plan. Pursuant to the Budget 2019 announcement, the SC will also be looking at key pay ratios of listed companies. Findings from both reviews will be included in the 2020 edition of the Corporate Governance Monitor.
25. I will not give away the entire report contained in the CG Monitor; plus, we have an esteemed panel lined up for you to discuss the findings in the report.
26. I must emphasize that the release of this report is not an end in itself, but rather a start to more meaningful conversations and engagements on corporate governance.
 
Thank you.

 

1  Calculations based on The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution
2  Halal Industry Development Corporation
3 State of the Global Islamic Economy Report 2018/2019
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