Malaysia has been traveling the road of improved corporate governance and corporate responsibility for the past twenty years. Milestones in this journey include:

• Firstly the establishment of key institutions promoting the corporate governance and CSR agenda in the form of the Malaysian Institute of Corporate Governance, the Minority Shareholders Watchdog Group and the Institute of Corporate Responsibility Malaysia and the Green Book on Corporate Governance;
• Second, the implementation of policies promoting good governance and social responsibility. I refer to the introduction of the Malaysian Code of Corporate Governance and Bursa Malaysia’s Revised Listing Requirements in 2001, focusing on good governance on the one hand, and to the requirements to declare what companies have done for CSR by the government in the 2007 and 2008 budgets if they want to tender for government business and Bursa Malaysia’s updated listing requirements in 2007 for annual reports on the other. There is of course also the requirement for GLCs to adopt the Silver Book process in devising their CSR policies.
• Third several high profile conferences have been hosted by the SC on CSR; and
• Fourth Malaysia already has a Corporate Governance Index which is being joined today by the Starbiz-ICRM Corporate Responsibility Awards as public ways of measuring and ranking company behaviour.

I am pleased to be able to say that the SC has been involved directly or indirectly in each of these milestones. Given the importance the Honourable Prime Minister attaches personally to ethical business and responsible business practices, it is only fitting that YB Dato’ Sri Effendi Norwawi, Minister in the Prime Minister’s Office should be giving the keynote address this morning.

The support given to the CSR agenda by the government, the SC and Bursa Malaysia as well as the Institute of Corporate Responsibility Malaysia is truly unique. And when we consider the leading role Malaysia has played in developing Islamic Finance, I believe together we have achieved a great deal in charting the path to responsible business. We have had success in raising awareness levels and now we need to move to the next stage, namely of influencing corporate behaviour.

Starbiz-ICRM Corporate Responsibility Awards

That brings me to the Starbiz-ICRM Corporate Responsibility Awards launched today.

I am delighted that the Star should have taken up the challenge of actively contributing to the promotion of the principles and practice of responsible business. Having a major media partner involved in these awards will foster the visibility of responsible business leadership. The media have always had a critical role to play in promoting good business practices and uncovering bad business behaviour. In today’s environment the role of investigative journalism has never been more important. Responsible business flourishes where there is a facilitative regulatory environment, which the SC and Bursa Malaysia provide, coupled with an active civil society and a fair and fearless press that is willing to expose bad practices and praise good behaviour.

Over the coming months, the Star will be putting their investigative journalism efforts to work and reporting on the practices of public listed companies in the run up to the awards which will be given on August 1st 2008. This focus on responsible business by the Star is to be welcomed. I find it most encouraging that this series of awards will not be a one-off event, but rather the first in an annual programme of ranking public listed companies according to how they do their business. For the first time we will be able to compare and contrast performance between all public listed companies across sectors and over time, listing those companies that have done well and ultimately ranking those that have done badly as well.

Why Corporate Responsibility and not CSR?

I would like to dwell briefly on why these awards are for Corporate Responsibility rather than CSR. There are four reasons:

1. There is already an excellent national award for CSR: the Prime Minister’s Anugerah awards. These are open to all comers: public listed companies, unlisted companies, and organisations that have done something good to give back to the community. The Starbiz-ICRM Awards however are open only to public listed companies and they are all automatically screened and assessed by external parties, rather than relying on submissions put forward by organizations wishing to be ranked. We realize that a company can be philanthropic but at the same time have poor governance, damage the environment and create other externalities for which it does not pay. Thus the awards will focus on the additional elements of responsible and ethical practices of public listed companies as well as on their efforts at giving back to the community.
2. The need to look at the underlying intent of the business. Being responsible in business begins with the business purpose. Some businesses are inherently more harmful than others even though they are perfectly legal. This affects primarily those companies that are often screened out of ‘socially responsible investment’ portfolios, and the Starbiz-ICRM awards recognize the importance of this issue in the way in which they are structured.
   
3. The ethical standards that top management brings to the business – what is often called the ‘tone at the top’. If the ‘tone at the top’ is wrong, then everything the business does is put at risk. We only need to think of Enron to know what I am talking about. So the ethical standards and style of the top management team matter greatly and this is best captured in the corporate governance aspects of running the business. Equally important is the extent to which responsible business practices are embedded throughout the business or whether they are merely ‘bolted on’. This is a reflection of the quality of the company’s enterprise governance.
   
4. The need to cover more than social issues. Being responsible is not just about the social or community impact of the business. It is also about the policies the company has for its:

All these are key elements in assessing whether a business is responsible or not.

The mechanics of the awards

As I mentioned earlier, only public listed companies are eligible; and they will be assessed and ranked whether they submit entries or not. The universe of candidate companies has been divided into:

1. Those whose market capitalization exceeds RM 1 billion; and
2. Those whose market capitalization is less than RM 1 billion

This allows smaller companies a chance to shine as well.

The assessment criteria have been designed to reflect emphasis on Corporate Governance (CG) as a key criterion. In addition to the data gathered in the replies to the Bursa Malaysia questionnaire, companies will also be assessed using public domain information such as websites, annual reports and press releases.

To conclude

A very systematic approach to evaluating the performance of public listed companies will be used because the ultimate aim is for the rankings, using Bursa Malaysia’s database, to become Malaysia’s own version of the FTSE4Good or Dow Jones Sustainability Index.

The rankings will matter not just as a matter of pride, but act as a proxy to the outside world regarding the quality of the senior management team. Based on the rankings:

• Socially responsible investors will know in which companies to invest;
• Multinationals and government agencies will know which companies to choose as partners or suppliers; and
• Talent will know which are their employers of choice.

Malaysia and the Malaysian capital market will benefit as well, as the rankings will help differentiate our market and our companies from competition in the rest of Asia.