Kuala Lumpur, 8 July 2011
Five-year Corporate Governance Blueprint to strengthen self and market discipline
The Securities Commission Malaysia’s five-year Corporate Governance Blueprint (Blueprint) was launched today by Dato’ Seri Ahmad Husni Mohamad Hanadzlah, Minister of Finance II, Malaysia.
The Blueprint provides the action plan to raise the standards of corporate governance in Malaysia by strengthening self and market discipline and promoting greater internalisation of the culture of good governance.
“The essence of the Blueprint is to achieve Excellence in Corporate Governance by inculcating good corporate governance culture. It is the mutual responsibility of all participants in the capital market to exercise greater care and effort to create value and meet shareholder expectations.” said Tan Sri Zarinah Anwar at the launch of the CG Blueprint.
The Blueprint is the first major deliverable of the Capital Market Masterplan 2 (CMP2). Launched in April, the 10-year CMP2 aims to expand the role of the capital market in invigorating national economic growth but emphasises that growth is only sustainable if it is underpinned by a proper system of accountabilities and governance.
In formulating the Blueprint, extensive research and international benchmarking were undertaken to ensure that the recommendations are sufficiently robust while contextualised to suit the Malaysian corporate governance landscape.
Developed through a highly consultative process, the Blueprint focuses on six connected themes of the corporate governance ecosystem namely shareholder rights, the roles of institutional investors, boards, gatekeepers and influencers, disclosure and transparency as well as public and private enforcement.
Facilitating the exercise of shareholder rights
A number of measures are recommended to stimulate greater shareholder activism. These include mandatory poll voting on resolutions approving related-party transactions and a requirement for the chairman at general meetings to inform shareholders of their right to demand a poll vote before voting is introduced.
Responsible ownership by Institutional investors
The Blueprint also recognises the leadership role that can be played by institutional investors through the exercise of responsible ownership. A new stewardship code and an umbrella body for institutional investors will therefore be formulated to promote responsible ownership.
Boards as active and responsible fiduciaries
On the role of boards, the Blueprint proposes measures to enable boards to become more active and responsible fiduciaries. These measures include a mandatory formal board charter, limitation on the tenure of independent directors and a reduction in the number of directorships in listed companies that directors may hold, separation of chairman and CEO roles and the setting up of a taskforce to conduct an industry-led study on directors’ compensation. The Blueprint also mandates the establishment of a Nominating Committee, chaired by an independent director, which should focus on recruitment, assessment, diversity and training needs of directors.
Role of gatekeepers and influencers
Noting that boards do not function in isolation, the Blueprint highlights the important role of gatekeepers and influencers – professionals like corporate advisers, company secretaries, and the media – and recommends measures such as clarifying the role of company secretaries in corporate governance, exploring the extension of whistleblowing obligations to some professionals and enhancing internal codes of conduct to prevent the abuse of market sensitive information.
Improving disclosure and transparency
Proposals for improving disclosure and transparency includes a shortening of the submission period for quarterly and annual reports and making companies focus on substance rather than form in meeting corporate governance requirements.
Facilitating private enforcement actions
To facilitate shareholders in undertaking private enforcement actions to pursue civil remedies, a working group will be set up to study the feasibility of third party funding of litigation to assist investors in private enforcement actions.
The recommendations in the Blueprint will be implemented over a five-year period. Most of the recommendations will be applied through a corporate governance code and changes to the Listing Requirements, both of which would take effect by early 2012. A number of recommendations will need to be examined and further studied through the formation of taskforces and working groups expected to be driven by industry in collaboration with the SC. There are also recommendations which would involve legislative amendments. All the recommendations of the Blueprint will only take effect after appropriate transitional mechanisms are put in place to ensure minimum disruption.
The SC welcomes feedback from all interested parties and the public on the Blueprint. Submission of comments is open until 15 September 2011 and can be made via email to [email protected] seccom.com.my.
SECURITIES COMMISSION MALAYSIA