SC Issues Corporate Governance Strategic Priorities 2021-2023

Anchored on Board Leadership, ESG and Responsible Business

24 November 2021

The Securities Commission Malaysia (SC) today issued its Corporate Governance Strategic Priorities 2021 – 2023 (CG Strategic Priorities), to promote among others environmental, social and governance (ESG) fitness and leadership of boards. The SC outlined 11 targeted initiatives such as onboarding programs for directors on sustainability, investor education series on corporate governance and sustainability, and expansion of collaboration with universities to deepen conversations with youth on current corporate governance and sustainability issues.
The CG Strategic Priorities is an important component of the Capital Market Masterplan 3 that was launched in September 2021 to chart the path ahead for the Malaysian capital market over the next five years. The CG Strategic Priorities builds on the SC’s previous plan for 2017 to 2020, where a 90% implementation score was achieved.

The SC Chairman Datuk Syed Zaid Albar said, “ESG readiness is no longer a matter of choice for companies, as stakeholders have come to expect more responsible, sustainable and climate-conscious behaviour. This expectation is going to increase over time and thus, boards need to be ESG-ready.”

Recognising the need for boards to be agile and effective as they navigate challenging and uncertain times, the SC will implement measures to improve board diversity, including accelerating the participation of women on boards and in senior management. Listed companies are reminded that while it will be mandatory for boards to comprise at least one woman director, boards should put in efforts to achieve the target of having 30% women directors in order to further harness the benefits of having a diverse board. Currently, only 162 listed companies have at least 30% women on their board.

For a company to remain resilient and competitive, both through and beyond the pandemic, the board must be able to leverage different ideas, views and solutions from the directors. “Chairs of Nominating Committees must step up and ensure the director selection and nomination process facilitate the appointment of the right individuals on the board,” said Datuk Syed Zaid Albar.

Collaboration with key stakeholders will continue to ensure alignment of corporate governance initiatives in the country. The SC is currently providing technical input to support the Government’s PERKUKUH programme to improve corporate governance practices amongst Government Linked Investment Companies (GLICs) and optimise the performance and contribution of GLICs in nation building.

Meanwhile, alongside the CG Strategic Priorities, the SC also released the Corporate Governance Monitor 2021 report to highlight progress made in the adoption of the 2017 edition of the Malaysian Code on Corporate Governance (MCCG). Adoption levels across majority of the practices remained positive, with 24 out of the 36 best practices recording adoption levels of at least 90% (2019: 23 practices).

The lowest adoption level was for practices relating to the disclosure of senior management remuneration where only 5% of listed companies disclose the detailed remuneration of their senior management.

“Transparency on pay is critical to promote alignment between pay and performance and for shareholders to evaluate if the incentive structure is driving the right behaviour,” said Datuk Syed Zaid Albar.

The CG Monitor 2021 features three thematic essays, including SC’s Audit Oversight Board (AOB) report on the demographics of audit committees in terms of independence, diversity and competence. Additionally, the AOB highlights that the selection criteria for external auditors should include considerations such as independence, competence, level of audit quality and resource capacity. The MCCG recommends that Audit Committees consider information presented in the Annual Transparency Reports issued by the audit firms when evaluating the appointment and reappointment of external auditors.

During April this year, the SC and Institute of Corporate Directors Malaysia jointly conducted a Chairman Survey to assess chairmen’s views on board priorities for 2022 and the state of their board dynamics. A total of 352 chairmen of listed companies participated in the survey. The survey participants identified ensuring business continuity and resilience, managing COVID-19 related risks as well as people management and well-being as the top three priorities for boards in 2022.

Climate Governance Malaysia also shared its views on how boards can lead transformative action on climate change in the CG Monitor 2021.

To learn more, download the CG Strategic Priorities and Corporate Governance Monitor 2021 at www.sc.com.my/cg-priorities

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