Keynote Address
YBhg Tan Sri Md Nor Yusof
Chairman, Securities Commission
at the
Launch of the Nottingham University Business School and Minority Shareholder Watchdog Group (MSWG)
“Corporate Governance Survey Report 2004″
21 December 2005

Yang Berbahagia Tan Sri Abdul Halim Ali, Chairman of the Minority Shareholder Watchdog Group,
Distinguished panelists,
Honoured guests,
Ladies and gentlemen.
Assalamualaikum and a very good morning.

It is my privilege to provide this introduction for Nottingham University Business School (“NUBS”) and Minority Shareholder Watchdog Group’s (“MSWG”) “Corporate Governance Survey Report 2004″. I would also like to congratulate NUBS and MSWG for undertaking such a commendable exercise. Set against the best practices as recommended in the Finance Committee Report on Corporate Governance this survey will serve as a useful marker of the level of governance of public listed companies in Malaysia. Indeed good governance generally has become a guiding principle today in building national competitiveness, investor confidence and promoting sustainable economic growth.

We would recall that in the early 1990s, international capital flowed to this country in record levels. A large proportion of it went to prime the stock market. And it would seem then that as long as returns remained spectacular, few investors paid attention to the behind-the scenes manner in which companies went about their business. Not until the crash of 1997 when it was exposed that considerable contributors of the crisis were found in corporate misconduct and unsound management practices. Indeed the High Level Finance Committee formed at that time was specifically tasked to formulate an action plan to correct those transgressions and develop policies to stem future recurrence of financial crises. Hence, the establishment of the Malaysian Code of Corporate Governance.

On that note, it is very heartening to note that findings of the NUBS-MSWG’s Corporate Governance Survey Report 2004 indicate that overall, there has been general improvement over the previous survey’s findings in terms of companies’ compliance with local and international CG principles and best practices. A worthy point to note is the presence of government-linked companies amongst the survey’s top 10 corporate governance leaders. This can be seen as a positive indicator of Government’s initiatives to enhance the governance structure of government-linked companies. Having said that, though, there are also improvement opportunities identified by the survey, in particular, the adoption of internationally benchmarked corporate governance best practices. It would be fair to say that a number of other things must also be required in order to foster a comprehensive good governance environment.

The financial market constituencies like the investment banks, securities companies, fund managers and SROs can contribute towards enhancing good governance generally. Today, traders, fund managers, and investment banks are transaction driven. Since their compensation is not tied to investor wealth creation, their personal interest is invariably not aligned with investor interest. This gives rise to a serious conflict of interest. Controlling constituencies like investors, regulators and the Government have a proactive role in fostering good governance. Investors, for example, can request a direct role in structuring the governance bodies of corporations and mutual funds. In short we need a shift to a culture of good governance generally.

The SC believes that the NUBS-MSWG publication of the Corporate Governance Survey Report 2004 is a positive step towards enhancing the standards of corporate governance in Malaysia in particular towards building an internationally recognised corporate governance benchmark for listed companies. We certainly applaud the progressive inclusion of international best practices’ benchmark that conveys the message that the corporate governance phenomenon is not just for the purposes of compliance with the Malaysian Code. We appreciate the efforts that have gone into developing this survey and certainly hope that it will assist in the formation of quality Malaysian companies with globally respected responsible practices. We also hope to see this survey to be carried out annually leading up eventually to an annual survey of all listed companies in Malaysia.

With that, it gives me great pleasure and honour to officially launch the NUBS-MSWG Corporate Governance Survey Report 2004.