Y Bhg Tan Sri Zarinah Anwar
Chairman, Securities Commission Malaysia
at the Announcement of
the Second StarBiz-ICR Malaysia Corporate Responsibility Awards
31st July 2009
Securities Commission, Kuala Lumpur
It is a great pleasure to be able to announce the second annual Starbiz-ICRM Corporate Responsibility Awards. I am deeply honoured that I’ve been entrusted to be Chief Judge once again when my fellow judges are themselves such distinguished and eminent persons.
In the few minutes that I have, I would like to speak about Malaysia’s progress in promoting corporate responsibility and about the Starbiz-ICR Malaysia Awards and their role in raising the standards of corporate behaviour.
Last year I talked briefly about the road Malaysia has travelled to improve the standards of Corporate Governance and Corporate Responsibility. I am pleased to be able to report that we have made progress in the year that has passed.
The importance of good corporate governance was recently highlighted by the Prime Minister in his “Invest Malaysia” speech where the SC was tasked by him to become the custodian of the processes for raising the bar in both the area of corporate governance and corporate responsibility.
I am pleased to see that the MSWG and the University of Nottingham, in collaboration with the National University of Singapore, are promoting corporate governance through their award scheme. Equally it is gratifying to see the headway that is being made on improving investor relations through Malaysian Investor Relations Association, financed by the CMDF. Bursa launched its guide to corporate governance earlier this year and SIDC and PriceWaterhouseCoopers have developed a high level training programme for directors of public listed companies, designed to assist independent directors think through the issues they face on their boards.
Although a great deal that is good is being done, the journey we have embarked on is a race without a destination. We must keep improving; we must keep raising our standards; and we must never let ourselves become complacent.
There is a compelling reason why we need to improve continuously and not relax or let our guard down.
We live in a competitive world where every company, every stock exchange and every country has to compete for funds. Investors looking for a good return increasingly incorporate good governance and ethical and responsible behavior by companies in their decision making criteria. Worldwide, Socially Responsible Investment or SRI funds are steadily growing in importance and we in Malaysia cannot afford to ignore what these fund managers look at -the criteria they use to assess whether it is a good idea to invest in a company or not.
The current financial crisis in the US and the UK reminds us of the importance of good corporate governance and of responsible business practices. At the heart of the crisis was a terrible failure of “Tone at the Top” that drove CEOs and their companies to behave in an ever more irresponsible fashion, driven by rewards that recognized short term income without taking into account the longer term downsides that could materialize as risky trading positions unwind.
Starbiz-ICRM Corporate Responsibility Awards
That brings me to the Starbiz-ICRM awards that are now entering their second year.
Last year, was the first year when we moved from working to raise awareness of CR to attempting to influence behavior through the Starbiz-ICRM awards.
I was delighted to see how effectively the Star took up the challenge of actively contributing to the promotion of the principles and practice of responsible business. Having a major media partner involved in these awards fostered the visibility of responsible business leadership. The media have always had, and will continue to play a critical role in promoting good business practices and uncovering bad business behaviour. In today’s environment the role of investigative journalism has never been more important. Responsible business flourishes where there is a facilitative regulatory environment, which the SC and Bursa Malaysia provide, coupled with an active civil society and a fair press that is willing to expose bad practices and praise good behaviour.
I find it most encouraging that this series of awards has proved not to be a one-off event, as we now enter the second year in an annual programme of ranking public listed companies according to how they do their business. For the first time we will be able to compare and contrast performance between all public listed companies across sectors and over time, listing those companies that have done well and those that have improved since last year.
Why Corporate Responsibility?
Last year I explained why the Starbiz-ICRM awards were for CR and not CSR. I think the explanation is worth repeating and so I would like to dwell very briefly on why these awards are for CR rather than CSR. There are three reasons:
First, there is the continuing need to look at the underlying intent of the business. Being responsible in business begins with the business purpose. Some businesses are inherently more harmful than others even though they are perfectly legal. This affects primarily those companies that are often screened out of ‘socially responsible investment’ portfolios, and the Starbiz-ICRM awards recognize the importance of this issue in the way in which they are structured.
Second, there are the ethical standards that top management brings to the business – the “tone at the top” I mentioned earlier. If the “tone at the top” is wrong, then everything the business does is put at risk. We only need to think of Wall Street to know what I am talking about. So ethical standards and style of the top management team matter greatly – best captured in the corporate governance aspects of running the business. Equally important is the extent to which responsible business practices are embedded throughout the business or whether they are merely ‘bolted on’. This is a reflection of the quality of the company’s enterprise governance.
Third, we need to cover more than social issues. Being responsible is not just about the social or community impact of the business. It is also about the policies the business has for its:
- Continued profitable existence;
- Ethical practices in terms of fair dealing, avoiding corruption and misleading marketing;
- Value chain impact on the environment in terms of climate change, pollution, waste and water management;
- Employees with respect to health and safety, the terms and conditions of employment and its policies regarding discrimination and meritocracy;
- Supply chain’s impact on the environment, employment and ethical dealings;
All these are key elements in assessing whether a business is responsible. That is what I emphasized last year, and that is what I would like to emphasize again this year because these basic fundamentals do not change.
The mechanics of the awards
As was the case last year, only public listed companies are eligible; and they will be assessed and ranked whether they submit entries or not. Once again, candidate companies have been divided into:
- Those whose market capitalization exceeds RM 1 billion; and
- Those whose market capitalization is less than RM 1 billion
This allows smaller companies a chance to shine as well, as indeed some did last year.
The assessment criteria follow the framework used last year where companies were assessed on their marketplace importance, their workplace practices, their environmental policies and their impact on the community. This is an internationally accepted way of evaluating corporate responsibility. Companies will be surveyed and they will also be assessed using public domain information such as websites, annual reports and press releases.
The rankings will matter not just as a matter of pride, but act as a proxy to the outside world regarding the quality of the senior management team. Based on the rankings:
- SRI funds will know in which companies to invest;
- Multinationals and government agencies will know which companies to choose as partners or suppliers; and
- Talent will know which are employers of choice.
Malaysia and the Malaysian capital market will benefit as well, as the rankings will help differentiate our market and our companies from competition in the rest of Asia.
I wish all listed companies well and very much hope that being evaluated on annual basis does not just raise the standards in the companies that win, but raising the standards for all companies that form Corporate Malaysia.