Welcome Address at Seminar on Corporate Governance - Towards Good Corporate Governance
25 March 1999 |   By : Encik Ali Abdul Kadir, Chairman, Securities Commission
Welcome address by

Encik Ali Abdul Kadir
Chairman, Securities Commission

at the
Seminar on Corporate Governance - Towards Good Corporate Governance
Proposals to the Securities Commission

25 March 1999
The Legend Hotel, Kuala Lumpur

Yang Berbahagia Dato' Mustapa bin Mohamed, Second Minister of Finance,
Distinguished Members of the Finance Committee on Corporate Governance,
Honourable Guests,
Ladies and Gentlemen.

Assalamualaikum wbt. A very good morning and welcome to the Seminar on Corporate Governance.

  1. The SC is indeed most honoured to have been asked by the Honourable Second Minister of Finance, Y.B. Dato' Mustapa Mohamed to organise this seminar on Corporate Governance which is a very significant event in the country's calendar of corporate developments. Y.B. Dato' Mustapa's presence with us this morning to officiate the seminar and to deliver a keynote address on "Corporate Governance in Malaysia - Challenges, Opportunities, Reforms" is a clear indication of the government's commitment and determination to work closely with the industry and other concerned parties in further strengthening the standards of corporate governance in Malaysia.
  2. Today's seminar on Corporate Governance is a particularly special event as it serves as a curtain raiser for the Finance Committee Report on Corporate Governance. Today, for the first time since the establishment of the Finance Committee a year ago under the Chairmanship of Y. Bhg. Datuk Dr. Aris Othman, the Secretary General of Treasury, the report is being made public. Participants at today's seminar are indeed the first members of the public to get copies of the report. Several key members of the Finance Committee will also be making presentations on various issues pertaining to corporate governance at this seminar.
  3. Efforts to enhance standards of Corporate Governance in Malaysia have been an on-going one. Long before the start of the financial crisis, laws, regulations and listing rules were continuously being reviewed and strengthened by the relevant regulators with a view to enhancing the standards of corporate governance in the country. Undeniably, however, these efforts were piecemeal in nature.
  4. The formation of the Finance Committee on Corporate Governance was therefore a watershed. It brought together illustrious members of the government, the corporate sector, industry organisations and the regulatory agencies to undertake a comprehensive review of corporate governance in Malaysia. As you will no doubt learn in the course of the seminar, the report contains no less than 70 recommendations covering areas ranging from legal reform to code of best practice to enforcement and education and training. You will be hearing a lot more about the report over the next day and a half, hence, I do not propose to take the thunder from any of the speakers, by going into detail on any aspect of the report.
  5. All I wish to add at this stage with regard to the Report is that it is a beginning, not an end. It provides a comprehensive action plan, it identifies the various paths that we must take in order to move ahead. The next stage which is the timely and effective implementation of the recommendations is extremely crucial. In this regard I am pleased to note that the government has agreed to the recommendation of the Finance Committee for the formation of Implementation Committees and for the continued existence of the Finance Committee to oversee the programme and progress of the Implementation Committees and to report from time to time on their progress to the government. The SC as Secretariat to the Finance Committee, looks forward to the continued support and contribution of every member of the Finance Committee for the next phase of our task.
  6. It is trite but true that enhanced corporate governance standards will result in more equitable treatment of shareholders, particularly minority shareholders. It will increase board accountability as well as ensure greater transparency of corporate practices. Increased accountability and greater transparency will ensure even higher standards of disclosure, higher standards of business conduct and business ethics and more rigorous due diligence. All these are necessary pillars in ensuring investor protection as well as market integrity and efficiency.
  7. Enhanced corporate governance standards are also the pre-requisites for the shift from a merit approach to regulation to one that is based on disclosure; a process that commenced in 1996 and that is expected to be fully in place by 2001. Before such a regime is fully established, there must be a level of corporate governance that would give confidence that a company is professionally and well managed in an even handed manner in the interest of all of its shareholders.
  8. The Commission will continuously review market readiness for a full DBR framework and as part of that review, will take all appropriate measures to improve standards of corporate governance, disclosure and due diligence responsibilities.
  9. But lest I be misunderstood, let me make it clear that enhancing corporate governance is not the sole responsibility of the government or of regulators. It cannot be. It is a shared responsibility - among the government, the regulatory agencies, professional bodies, standard setters, corporate leaders, board members, company secretaries and most importantly, the investors or shareholders themselves.
  10. Malaysian investors have to start to understand the businesses and the activities of the companies they invest in better. While directors are there to represent shareholder interests, through insisting on good company management and direction, active involvement of shareholders and investors in the affairs of the company will make them more conscious of their responsibility and accountability. Furthermore, the future are not determined by transient factors but by good solid business plans and management. There is insufficient weight given to a company's fundamentals. And while it is the SC's hope that the individual investor will mature, it is also our intention to expand local institutional activity and share of the market so as to give the necessary ballast to the market.
  11. As you will no doubt find out in the course of this seminar, good corporate governance or should I say enhanced corporate governance, can only be achieved if all responsible groups "put their act together".
  12. Effective surveillance and enforcement of laws by regulators for instance is undeniably important. While good securities market conduct and investor protection laws can be enhanced, such as through statutory amendments introducing civil remedies for aggrieved parties or provisions that tighten the Commission's and Exchange's control over listed companies, its directors and key officers, regulators must act against transgressors effectively, when the situation so requires. Therefore the Commission and its Frontline Self-Regulatory Organisations must steel themselves to perform this task more effectively.
  13. But enforcement alone is insufficient as corporate governance is not just about complying with laws. Similarly, education and training for directors as well as investors is essential but in itself will again be insufficient. A code of best practice is useful, indeed necessary but like everything else, it only forms part of the whole picture. The Corporate Governance report has, I believe, provided us with an idea of what the whole picture should be. Every piece of the jigsaw must be in place for the whole picture to be completed
  14. Good corporate governance brings benefits to all parties and so it is only right that the responsibility must be shared by all. Good governance is certainly about enhancing shareholder's value. It is also about protection of minority shareholders and investors. And it is also about enhancing the competitive edge not just of individual companies but also of the nation as a whole as the process of globalisation continues to bring the world closer together. Naturally, any securities regulator, any Exchange, any company or any country wishing to attract global capital will have a strong incentive to meet the increasing expectations of these capital providers for good corporate governance practices.
  15. Once again on behalf of the SC, I would like to take this opportunity to thank Y.B. Dato' Mustapa Mohamed for his presence today and to thank all the speakers, who have agreed to speak at today's seminar despite their hectic schedules. My final thanks goes to the participants for their presence today. The overwhelming response to this seminar is indeed a clear indication of the level of interest in the area of corporate governance.

Thank you.

Issued by Securities Commission. For assistance, please contact Corporate Affairs Department at tel. no. (603) 6548513 (Ann Teoh) or (603) 6548107 (Ida Mariana Azmi) or fax no. (603) 6515078.
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