Y Bhg Tan Sri Zarinah Anwar
Chairman, Securities Commission Malaysia
Official Announcement of
StarBiz-ICR Malaysia Corporate Responsibility Awards 2010
3 August 2010
Securities Commission Malaysia
Yang Berbahagia Datin Linda Ngiam, Executive Director Star Publications (M) Bhd
Yang Berbahagia Dato’ Johan Raslan, Chairman Institute of Corporate Responsibility Malaysia
Ladies and gentlemen
I am very pleased to announce the third annual StarBiz-ICR Malaysia Corporate Responsibility Awards and very deeply honoured to have been invited once again to be Chief Judge.
The importance of corporate responsibility has become more pronounced in the light of developments over the couple of few years, and these Awards have a very important role to play in helping to raise the standards of corporate behaviour in Malaysia.
Importance of Corporate Governance & Corporate Responsibility
Although the Starbiz-ICRM Awards promote corporate responsibility, I would like to say a few words about the link between responsible business and good governance. In the past two years since we launched the StarBiz-ICR Malaysia Corporate Responsibility Awards, we have seen the failure of several large global companies with long histories and traditions. These were the result of poor governance: caused by the adoption of flawed strategies, reinforced by less than responsible behaviour by their senior managers and CEOs due in part to inappropriate rewards that encouraged risky short-term behaviour at the expense of the long-term viability of the companies themselves and of the financial system as a whole. The result has been a dramatic erosion of trust with repeated calls for better corporate governance.
Malaysia operates in a globalised business environment and if we are to make our capital market more relevant and attractive to investors, we must take steps to strengthen our corporate governance and be seen to be adopting responsible corporate practices. As I pointed out at the recent Corporate Governance Week that we held with Bursa, “trust, integrity and responsibility are the cornerstone of any reputable and sustainable business.”
The issues of corporate governance and corporate responsibility are inter-connected by their impact on how businesses are run. Good corporate governance makes it clear that company directors are responsible for setting direction, developing appropriate strategies, managing talent as well as planning for succession. The choices and decisions boards make do not just determine whether their organisations will prosper, they also have an impact on the marketplace, the workplace, the communities in which the company operates and on the environment-all of which are issues of corporate responsibility as laid out in the annual reporting framework mandated by Bursa Malaysia. Sound strategy, well executed, directly affects the marketplace aspect of corporate responsibility. Likewise, board decisions regarding the management of talent and succession planning are strategic human resource issues that are linked to workplace practices, another key element of corporate responsibility. Boards are accountable for effective risk management. And this requires a proper understanding not just of the risks that affect their companies individually, but also of the systemic risks that could arise when all companies adopt the same practices at the expense of the community as a whole. Such systemic risks with their costly externalities damage the environment; and weaken the economy as a whole when they undermine the financial system. We saw this with the global financial crisis triggered by the practice of subprime lending by many. Thus, at the heart of corporate responsibility lies good governance.
That is why the Securities Commission is working on formulating a new blueprint on corporate governance. The blueprint will establish a new set of corporate governance policy recommendations for the next 5 years and will cover strategic priorities from board governance to active shareholder participation.
But let me return to the narrower issue at hand, namely the importance of corporate responsibility-essential not only to help regain lost trust and build brand reputation, but also to earn companies their long-term “licence to operate” and create sustainable jobs and profits. Companies have multiple stakeholders and those that recognise this fact are able to identify and manage their risks better by understanding the context in which they exist with its wider set of business challenges. Companies that do this and adhere to responsible corporate practices-through having strict policies on bribery and corruption; complying with ethical marketing standards; encouraging work-life balance for employees; ensuring proper disposal of toxic waste or making meaningful investments in the community-will be able to attract and retain talent, become business partners of choice with their suppliers, attract more discerning customers, and increasingly, attract a new breed of investors concerned with environmental, social and governance issues. According to the SRI Funds portal of the Association for Sustainable and Responsible Investments in Asia (ASrIA), the number of SRI funds in Asia has climbed 70% since May 2008. This is therefore a source of funds to be taken very seriously indeed.
While the terms “corporate responsibility” and “sustainability” are sometimes used interchangeably, “sustainability” is a broader concept that embodies wider issues including resource scarcity and climate change. Whether we like it or not, sustainability issues have come to the fore as indicated by a recent study entitled, “A New Era of Sustainability” carried out by UN Global Compact together with Accenture. According to the study that surveyed more than 800 Global Compact member CEOs, chairpersons and presidents, 93% of CEOs believe that sustainability issues will be critical to the future success of their business. This belief holds true with CEOs across geographical regions and business sectors.
Interestingly, from the same study, 96% of CEOs believe that environmental, social and governance issues should be fully integrated into the strategy and operations of a company, which brings me back to good corporate governance. Another interesting finding is that 93% of CEOs believe that sustainability issues should be routinely discussed and acted upon by their boards-again, emphasising the important role the board of directors play. These findings reinforce our view that corporate responsibility and sustainability practices are driven by the strategic direction of the business-how it is run and how it manages its risks as opposed to being focused on philanthropy. At the risk of repeating myself, I would like to emphasise again that corporate responsibility is not about what companies do with the money once they have made it; it is about how they make their money in the first place.
StarBiz-ICR Malaysia Corporate Responsibility Awards
Ladies and gentleman,
Obviously, if Malaysian companies do not want to lag behind, they will need to take note of this global trend and embark on the sustainability journey now. We are looking at a timeframe of 15 years where 80% of CEOs in the UN Global Compact-Accenture study envisage a tipping point occurring-that is, a point at which sustainability will be embedded in the core business strategies of the majority of companies globally. To my mind, what better place is there to start than to incorporate corporate responsibility throughout the company’s business operations?
In this respect, I must congratulate the organisers of the StarBiz-ICR Malaysia Corporate Responsibility Awards for conducting these awards for the third year running to honour and reward leading companies with exemplary corporate responsibility practices.
As in previous years, there will be four categories of awards following Bursa’s CSR framework-namely, marketplace, workplace, environment and community-within two market segments, market capitalisation of RM1 billion and above, and companies with market capitalisation of below RM1 billion. In total, there will be eight awards. By allowing for two market capitalisation segments, it provides for smaller companies with fewer resources to be recognised for their efforts.
With the support of Bursa, all public-listed companies are invited to participate in an online survey. Based on the survey responses, the companies will be assessed and scored. A shortlist of leading companies will then be subjected to further assessment based on additional information available on the public domain (annual reports, company websites, press releases, etc.) and obtained through interviews. The best of these companies will then be considered for the Awards.
As happened last year, companies that make the shortlist must meet the minimum requirements in all four categories though they may demonstrate strength in one particular CR area. For this year, the selection criteria have been tightened further to reward third-party assurance, audit processes and external stakeholder engagement which the companies may have in place.
I sincerely hope all PLCs will take this opportunity to participate in the online survey. Last year, we received responses from more than 330 companies; I hope many more companies will participate this year. Responses to the online survey will help reveal the state of corporate responsibility in Malaysia.
To me, participating in the survey is important for three reasons. First, companies should treat their participation in the survey as an opportunity to review their own internal policies and procedures against good CR standards, to gauge how they fare against other companies and if they have improved over time. Second, it is important to show investors both domestic and foreign that individual Malaysian companies take corporate responsibility seriously as this is an increasingly important criterion for investment. Third, it is important for the Malaysian capital market as a whole to show that standards are being monitored and the bar is being raised continuously. Only in this way can we hope to attract more interest from the SRI funds that have grown by 70% in Asia since May 2008.
As I see it, if companies do not win the Awards, it does not necessarily mean they are no good; it just means that there are better companies that should serve as role models. Equally, it is important for companies with good CR track records to participate to demonstrate leadership for other companies to emulate. Companies should not shy away from participating just because they did not win previously or because they are afraid of not winning this time. Just participating in the Awards is an indication of the commitment of the management to being responsible, and a reassurance to potential investors of the attractiveness of the company.
It is my sincere hope that the survey will highlight the real progress made by Malaysian companies over the years, and distinguish the Malaysian capital market from its competitors in other countries. So it is only natural that as Chairman of the Securities Commission, I want to encourage all companies to participate to lift the standards of CR in corporate Malaysia in line with developments in the rest of the world.
I wish all public listed companies the best, and I am sure that being evaluated on an annual basis will not just raise the standards in the companies that participate, but will benefit all in corporate Malaysia.