Keynote Address
Y Bhg Tan Sri Zarinah Anwar
Chairman, Securities Commission Malaysia

at the

Launch of the
Securities Commission – Bursa Malaysia
Corporate Governance Week 2009

Monday, 8 June 2009

Yang Amat Berbahagia Tun Mohamed Dzaiddin Hj Abdullah, Chairman of Bursa Malaysia
Yang Berbahagia Dato’ Yusli Yusuf, CEO of Bursa Malaysia
Ladies & Gentlemen

Good afternoon


It is a great pleasure to have been invited to deliver the keynote address at this inaugural Corporate Governance Week. This CG Week, which is being held in such form for the first time in Malaysia, underlines the strong commitment by the SC, Bursa Malaysia and other CG advocates and proponents in propelling the CG agenda forward. The week-long event will provide an excellent opportunity for all capital market participants to share insights and learn how best corporate governance can be further enhanced in the light of current global financial challenges.


The current volatility in global financial markets has highlighted the importance of maintaining market confidence, and confidence in markets can be achieved when investors feel that they can rely on, amongst other things, high standards of corporate governance to prevail in the market.
Ladies & Gentlemen

Emerging Stronger After the Financial Crisis


A decade ago, we saw the launch of the Report on Corporate Governance commissioned by the High Level Finance Committee on Corporate Governance. While it can be said that this Report was influenced by the events of the Asian financial crisis, it was primarily motivated by the belief that good governance is essential for the promotion of the role of companies in the creation of wealth and development of the nation.


The Report made wide-ranging recommendations on improving corporate governance, at both regulatory and institutional fronts. The SC, together with other governmental and regulatory agencies, front-line regulators such as Bursa Malaysia and industry associations, worked extremely hard on implementing the reform agenda.


The result was a set of new laws, rules and regulations, the introduction of new institutional mechanisms for market activism and regulatory enforcement, as well as capacity building, through training and education. We believe that the comprehensiveness of that reform was unprecedented at that time.


Indeed the Report was well received domestically and internationally. It was reputed to be one of Asia’s most far-reaching and comprehensive corporate governance reform exercise. Global Proxy Watch (on 26 March 1999) said that the reform represented a “landmark emerging market vote of confidence in the need for transparency, board accountability to shareholders and protection of minority shareholders”.


It is often said that CG is a journey, not a destination. Indeed while CG in Malaysia has come a long way, our journey continues, but under more challenging circumstances today. With the advent of globalization and liberalization, there is greater competition for capital. And now as the world is beset by one of the worst financial turmoils in history, we are faced with new challenges, one of which is the strengthening of corporate governance practices, post crisis.


The protracted global financial turmoil has revealed large cracks in financial markets costing the world trillions of dollars, lost jobs and a huge loss of confidence in the financial markets. Directors, market intermediaries and auditors have come under close scrutiny by governments, regulators and investors. Various aspects of governance, from the integrity of individuals to the remuneration and rewards they are drawing, are being scrutinised and analysed. Very few could have predicted the extent and severity of this financial storm and in spite of unprecedented policy intervention measures worldwide, pressures on global systemic stability have yet to abate.


It is important that we learn from the present crisis. It gives us the opportunity to re-evaluate, contemplate and mend the cracks. In Malaysia, the experiences we went through and the lessons learnt from the Asian financial crisis have enabled us to make significant advances over the last 10 years to promote market stability by strengthening the regulatory and supervisory framework. This has enabled our financial system to operate with relative stability over the last decade, and be spared from the kinds of imbalances and extreme adjustment processes now plaguing other markets.

Trends in Corporate Governance


A quick stock-take will clearly highlight very specific trends in corporate governance over the last several years. The areas of disclosure and transparency, shareholder activism, professional and ethical management of companies and increased enforcement efforts have been of paramount importance. Indeed directors and professionals – the accounting profession, the analysts and fund managers, the legal and other financial advisers have all been put under the corporate governance microscope to identify areas that need improvement.


Thus in dealing with area of CG, we have moved from the approach where focus had been primarily on a strong regulatory framework to one that places equal emphasis and importance on self-regulation and market regulation in addition to regulatory discipline.

Ladies & gentlemen

A shared responsibility


As events in capital markets worldwide indicate, there is a need for constant vigilance to maintain the confidence and integrity of the capital market. This is not a task that is the sole preserve of the regulators or the Government but a shared responsibility between the reputational intermediaries that understand their role as gatekeepers, of corporations who understand that shareholder value is enhanced by meeting their responsibilities for sustained development of society and creation of value for all shareholders, by boards who understand that their resolve is strengthened by placing the interest of the company above theirs and by investors who understand that they protect their interests best by being vigilant and knowledgeable.


The successful development of a strong and credible corporate governance environment must be premised on a dynamic synthesis of the efforts of both the regulators and the market. Each must fully discharge its respective roles and responsibilities. Every player is an integral cog in the wheel of corporate governance that holds the market forces in balance and must fully bear their responsibility in setting and implementing the corporate governance standards within their respective spheres of influence.


It only requires one to fail in this responsibility for the structural integrity of the wheel to be affected. Whilst sound regulation may exist, it is in the implementation and application of the principles on which the regulations are based that determines their effectiveness. The beneficiaries of a market place must as such, play their part in ensuring an environment that is facilitative and conducive to good corporate governance practice.

Corporate Governance Ratings & Shareholder Activism

Ladies and gentlemen


Corporate governance is today an established investment criterion. Investors are increasingly weighing corporate governance as a critical factor in deciding on the quality of a particular investment. The ability of companies and markets to obtain and retain a reputation for good corporate governance has become as fundamental as the very practice of good corporate governance itself.


In this regard, shareholders must play their role in ensuring that the Boards and management of companies direct their efforts and resources into the best interest of the companies and their shareholders. It is particularly important that institutional investors intensify their voice as they have the clout to influence the conduct of directors and corporations, by being vigilant and enquiring, and by exercising their influence over shareholder resolutions.


Corporations on the other hand, must take the initiative in providing cyrrent and accurate information to investors, so that opinions and decisions which investors make are based on an accurate and complete picture of the state of health of the companies they are investing in.


There is an increasing amount of empirical data to support the position that better governance correlates to better shareholder value. This increasing focus on governance has also resulted in various published rating systems that rank corporate governance practices of public listed companies.


Upholding the best virtues of corporate governance indicates not only accountability to shareholders, but can also help determine the actual business performance of the company by enabling it to produce better results.


In this context, I would like to commend the Minority Shareholders’ Watchdog Group (MSWG) for initiating the Malaysian CG Index and Award 2009 which is to be launched tomorrow. The Capital Market Development Fund (CMDF) is funding this comprehensive CG rating system which will rank companies based on compliance with, among others, the Malaysian Code on Corporate Governance and the Listing Requirements of Bursa Malaysia. The CG index is designed to track and identify companies that not comply with the disclosure standards and requirements and are fair and transparent to its stakeholders, but also companies that demonstrate strong financial performance.

Ladies & gentlemen

Board Aboveboard


In today’s environment, companies are increasingly being judged by consumers, investors, and the community on their perceived corporate morality. Good corporate governance is a proxy to the world regarding the quality of the board and management of the company. It demonstrates commitment to creating enhanced shareholder value.


As regulators, we are keenly aware that we cannot rest on our laurels. It is for this reason that the regulatory framework has been continuously enhanced; and these efforts have been recognised by the international community.


But our rules alone are not enough. In this regard, directors and managements must take it upon themselves to improve accountability by setting the “tone at the top” honoring the responsibilities that arise from the trust placed in them by investors. All directors and managements should implement their own best practices for corporate governance that promote integrity, transparency and accountability.


In addition directors also need to have a good understanding of their roles and responsibilities. This attribute is not static, but one that must continuously evolve to meet the demanding expectations of stakeholders, business complexities and associated business risks. Unfortunately however, continuous training programmes for directors often come across as lip service and as something that is reactive rather than something that is integral to the business and to its culture.


A recent study conducted by the SC revealed that 13% of PLCs have not disclosed directors’ continuing education in their annual reports, despite such disclosure being a requirement under Bursa Malaysia’s Listing Requirements, while a large number of those who did, made very superficial disclosures which comply merely in form rather than the substance and the true spirit of what’s really required.


This is certainly not acceptable particularly in the light of the recent survey conducted by Bursa which revealed that a significant proportion of directors were not aware of the explicit principal responsibilities of the board.


An informed Board is an asset to the company. This is why there is an urgent need to change governance strategies and get directors truly on board. The rapid change taking place all around us cannot allow directors to remain aloof and leave the job to management. Boards today have to be proactive and not pliant, invasive and not noiseless, innovative and not incremental.


What we need most is not more rules but education and training to change the mindset and approach of how things will work in the new era. In this regard, I must commend and congratulate Bursa Malaysia for putting together a comprehensive Corporate Governance Guide that will serve as an educational and practical tool which will help directors and relevant management personnel understand their roles and duties.


Creating and developing a talent pool of professional directors is another area that needs focus. Diversity of skills among directors provides companies with a varied mix of skill sets to deal effectively with increasingly complex business situations. But many companies here rely on appointing directors from a small if not limited talent pool. As more local companies globalise, they will meet different and challenging business environments and standards of conduct. Candidates for Board appointment must therefore be suitably skilled, competent, and have the ability to offer fresh perspectives to the board, while ensuring appropriate challenge and enquiry.


In this regard the newly founded Malaysian Alliance of Corporate Directors (MACD) marks a major development on the corporate directors’ front. The objective of this initiative, which is lead by industry players, is to cultivate and develop a higher appreciation for board governance and professionalism in corporate directorship. I certainly welcome this effort which is intended to fill a gap that has long been identified and look forward to the MACD contributing towards making a difference.

Ladies & Gentlemen



The dynamic nature of today’s capital markets means that market participants often have to grapple with questions for which there are no easy answers. It is in this realm that judgment and integrity are indispensable for effective corporate governance. In some respects, a renewed commitment to the highest corporate governance practices may require a cultural shift in the way all market participants think about their duties. I hope the events organised during this inaugural CG Week will contribute towards making that shift.


Let me end with a borrowed quote – “to be worthy of leadership we must do more than complain about the few bad apples ruining it for the rest of us and seek someone to blame; we must embrace greater transparency and accountability, for no other reason than that it will shine the light on the vast majority of us who are trying to do things the right way.”

Thank you for your attention, and I hope you have an insightful and productive week ahead.