Speech by

YBhg Dato’ Zarinah Anwar
Chairman, Securities Commission

at the

StarBiz-ICR Malaysia Corporate Responsibility Awards
22 August 2008
Nikko Hotel Kuala Lumpur

His Royal Highness Raja Nazrin Shah, the Crown Prince of Perak Darul Ridzuan

YBhg Dato’ Johan Raslan, Chairman of ICR Malaysia

YBhg Datin Linda Ngiam, Group Managing Director/Chief Executive Officer of Star Publications (M) Berhad

Fellow judges

Distinguished guests

Ladies and gentlemen

Ampun Tuanku

On behalf of the Panel of Judges, thank you for inviting me to make some remarks on the judging process of the StarBiz-ICR Malaysia Corporate Responsibility Awards. Before I proceed, allow me to express my appreciation to The Star and ICR Malaysia for organizing these Awards and for contributing towards raising the visibility of CR as a result.

I have been personally involved with the development of the CR agenda for many years now and I am gratified to see its evolution especially over the past 4 years when many companies recognised the need to evolve CSR into CR, fundamentally integrating ethical and responsible practices into the way they do business.

It is important to recognise that being responsible does not merely involve looking at the social or community impact of a company’s business, but more than that, it is about implementing policies and strategies that will ensure the continued profitable existence of the company, employing ethical practices in all its dealings, ensuring the preservation of the environment in the operation of its business and having in place conditions of service that safeguard the health and safety of its employees, respects meritocracy and rejects discrimination of any form.

In short, it is about embedding responsible business practices and developing a corporate conscience to form a basis for the company to steer its objectives and set its priorities.

How were companies screened?

Let me now move to the Awards itself and the process of screening, short-listing and judging. This Award is different from previous awards because companies were not asked to submit entries to be judged.

PLCs, as you are aware, are bound by the listing requirements of the Stock Exchange to disclose to the public all material information which impacts the company’s financial position and to provide a general description of the company’s performance. Following the 2007 Budget, PLCs are also required to make a statement in their annual reports on the CR activities undertaken by them during the financial year.

In late 2007, Bursa conducted a Survey with the intention of assessing the state of CR in all PLCs. This was not a voluntary exercise, as all PLCs were required to complete the questionnaire. In our view, responding to the Bursa Survey was an important indication of the companies understanding of their obligation to comply with the listing requirements in particular with their disclosure obligations. This therefore formed the first level of screening for the Awards.

Only the 520 public-listed companies which submitted responses to the Bursa Survey by the cut-off date of 1 March 2008 were eligible to be considered. I hasten to add that this does not mean that companies which did not respond to the Survey are not responsible, merely that they have yet to embrace and embed CR practices into their processes so intrinsically that answering a survey like Bursa’s is not considered to be a burdensome task.

Screening also included the removal of 21 companies that were financially distressed and those that had been reprimanded by the regulators. A further 95 companies withdrew and so we were left with 400 companies to assess: 50 companies with market capitalisation of RM1 billion and above; and 350 companies below RM1 billion market capitalisation as at the middle of March 2008.

The next step was to develop questions as well as the associated scoring mechanism based on the four dimensions measured by the Survey, namely: Marketplace, Workplace, Environment and Community. Companies were scored on the basis of the data they provided, and some companies, who may have done well in previous CR awards, may have suffered because they provided incomplete data.

What can we learn from the overall results?

In general, the Survey revealed significant differences in the efforts of PLCs in integrating responsible practices across their business. While the leading PLCs came close to international best practices, on average, companies assessed fell rather short. Much work therefore remains to be done. It is certainly my hope that the enhanced awareness created by the Survey and these Awards will contribute towards catalysing efforts at improvements.

Let me now say a few words on what we learned from the scoring in each of the four dimensions:

On Marketplace,most companies complied with the corporate governance reporting requirements, but many failed to make disclosures on CR despite the requirement to do so. This is not surprising considering that in many companies CR issues have yet to reach the Board level. Many companies lacked a comprehensive code of ethics or training for their employees on ethics and integrity. Stakeholder engagement was also not well understood with many companies confining their stakeholder engagements to engaging shareholders at their AGM. Companies that did well in this area had, in addition to meeting the requirements on corporate governance, CR, and risk and ethical management, also had undertaken initiatives to improve their supply chain and enhanced product and service responsibility.

On the Workplace, companies which scored well were those which had robust management systems on health and safety, invested in human capital development and initiatives to enhance the quality of life of employees and rigorously pursued diversity efforts to ensure equal opportunities for all. Their policies and procedures were clearly documented and communicated to staff throughout the organisation. Leading companies also had measurement systems to assess the effectiveness of their policies and conducted surveys to assess employee satisfaction. On the other hand, there were also many companies (especially those under RM1 billion market capitalisation) which have a long way to go in all these respects, appearing to have a poor understanding of health & safety, non-existent equal opportunities policy statements and poor staff development record.

On Environment,it was apparent thatcompanies whose core businesses have direct impact on the environment scored better overall. These companies had environment management systems, benchmarks and targets to reduce emissions and diligently measured and reported their performance against targets. Many companies were also pursuing energy efficiency measures, water and waste reduction as well as recycling efforts. On the other hand there were the companies that were completely unaware of the impact of their business activities on the environment. Many did not understand how their operations or geographical location can affect biodiversity, and had poor awareness of the importance of environmental impact assessments, and energy conservation. Certainly there is a lot that companies need to do to address and manage the particular environmental impacts of their operations.

Finally on Community,while most companies had some form of community initiatives, many were still organised through ad hoc activities to charities and schools, in the form of donations, disaster relief and scholarships. Few companies were aware of the need to align their community development efforts towards goals to ensure sustainable development, by identifying community issues, allocating resources for implementation and measuring the impact to ensure sustainable benefits to the beneficiaries.

Overall while the Survey demonstrated better performance by the bigger PLCs, and there is major room for improvement amongst many companies, it is heartening to note that there is a fair representation of the smaller companies which have done well in discharging their corporate responsibilities. This indicates that with more attention and commitment given to CR by the highest levels of management and the Boards of PLCs, significant improvements in performance can be achieved.

Areas of improvement for next time

The companies which have been shortlisted have all demonstrated that they have embraced CR and invested resources and expertise to incorporate ethical and responsible business considerations as part of their core business strategies. I must say that deciding the winners in each category was a tough process. There was much debate and deliberation accompanied by careful scrutiny of not only the policies and practices in place, but how these were being implemented and monitored and their impact measured. The shortlisted companies were invited to submit further documents and information to substantiate the initial data provided during the Survey and these had been diligently scrutinized by the panel of judges to corroborate our respective conclusions. For some categories, scores were very close indeed and it was a difficult decision choosing the winner.

To conclude

As judges, we felt comfortable with these Awards as no company knew there was going to be a screening process based on their response to the Bursa Survey when they completed the questionnaire, thus making the responses we did get all the more genuine. Embedded CR and its disclosure is not about preparing something specifically to win an award; what we were evaluating were company habits, genuine efforts to manage operations responsibly, and how seriously CR was taken when it was not being ‘showcased’.

For the future, it is my hope that all companies will make the effort to respond to CR surveys and requests for information, and not treat such an exercise as burdensome, ‘ticking boxes’ dispassionately, or worst, failing to respond at all. Companies that did this, did themselves a disservice. The process of CR disclosure and reporting should be part and parcel of a company’s CR strategy because it fosters integrity and transparency. CR reporting brings with it many benefits. It enhances awareness of the companies’ commitment to responsible and ethical practices, strengthens its ability to advance its brand and reputation, motivates its employees and widens its appeal to shareholders who have the ability to wield influence over its performance on the stock market. Thus what is disclosed, and how it is disclosed, should be treated as a matter for the board to consider rather than an exercise given to the corporate communications team. However, it is my hope that companies will embrace and embed Corporate Responsibility regardless of awards or recognition because it is the right thing to do and because companies must reflect the universal values of accountability, honesty and transparency.

In conclusion, let me commend all those companies which have made the shortlist and congratulate all the winners of the StarBiz-ICR Malaysia CR Awards.

I would also like to express my gratitude to my fellow judges Dato Kok Wee Kiat, Datuk Rafiah Salim, Datuk Yusli Yusuf and Professor Jeffrey Sachs. This was a massive task and I can assure you we undertook it with great diligence and seriousness, working late into the nights and, for some of us, during flights on business travels, poring over reports and manuals and completing very detailed and comprehensive score sheets. For their unstinting efforts, insights, wisdom, assistance and cooperation, I would like to convey my most sincere and heartfelt thanks to my fellow judges.

Finally my appreciation once again to The Star and ICR Malaysia for organizing these important Awards.

Your Royal Highness, ladies and gentlemen, thank you for your attention.