CORPORATE
GOVERNANCE
MALAYSIAN CODE OF CORPORATE
GOVERANCE (MCCG)
GROUP MEMBERS:
HOO WAN LING
NG HUI XIAN
ONG PANG SOON
1200162
1200539
1200572
INTRODUCTION
Corporate governance includes all the relationships and
behaviours either the external or internal to a
corporation.
In March 2000, the Malaysia code on corporate
governance2000 (MCCG 2000) was introduced.
The issue of the code represented the notice toward the
importance of the corporate governance reform in
Malaysia.
The MCCG 2000 had clearly defined the principles and
best practices of corporate governance.
The corporate governance model was continuously enhanced over
the years on behalf of protecting the investors interest.
With this, the roles and responsibilities of the board of directors
and audit committees were amended in the revised of MCCG 2007.
Yet, the MCCG 2012 substituted for the MCCG 2007 with arranging
the board principles, standards recommendations for the
companies, and some commentaries, which showed that the views
of stakeholders were concerned in the MCCG 2012.
Thus, we can see that the government is ensuring the excellence in
corporate governance framework for supporting the growth of the
Malaysia capital market.
COMPARISON BETWEEN
MALAYSIAN CODE OF
CORPORATE GOVERNANCE
(MCCG)
FOR YEAR 2012, 2007,
AND 2000
Comparison of approaches
applied in MCCG
MCCG 2000 & 2007 were applied three
approaches.
1. Prescriptive approach
2. Non-prescriptive approach
3. Hybrid approach
However, these approaches are not applying
in the MCCG 2012.
Comparison of
compliance of MCCG
The regulations for compliance of Malaysian Code of Corporate
Governance (MCCG) for year 2007and 200 will be discussed in
follow:
It is stated that by virtue of paragraph 15.26 of the KLSE Listing
Requirements, all listed companies should:
i.
state in their annual report
ii.
how they have applied the principles set out in Part 1 of the Code and
the extent to which they have complied with the best practices set out in Part
2
identify and give reasons for any areas of non-compliance, and
where applicable, state the alternative practices adopted.
The boards of smaller listed companies who unable, for the time being
comply with parts of the Code should note that they may instead give
reasons for non-compliance.
However, when a company fails to disclose the matters that mentioned in
the first statement in its annual report, it is open to the Exchange to take
For Malaysian Code of Corporate Governance
(MCCG) for year 2012,
It is stated that listed companies should explain in their
annual reports how they have complied with the
recommendations.
Companies are given the flexibility to determine the best
approach to adopting the principles within the MCCG 2012.
This is because there is no one-size-fits-all approach to
corporate governance.
Companies should explain the reasons when there is nonobservance of a recommendation.
Comparison of principles and
recommendations of MCCG 2012
with MCCG 2007 and 2000
MCCG 2012
Principle 1:
Establish
clear role and
responsibilitie
s
Recommendatio
n 1.1
The board
should establish
clear functions
reserved for the
board and those
delegated to
management.
MCCG 2007
MCCG 2000
Part 2 : AA XVI Relationship
of the board to management
The board and the chief
executive officer should develop
position descriptions for the board
and for the chief executive officer,
involving definition of the limits to
managements responsibilities.
The board and the chief
executive officer should approve or
develop the corporate objectives
for which the chief executive
officer is responsible to meet.
MCCG 2012
Principl
e 1:
Establis
h clear
role and
responsi
-bilities
Recommendati
on 1.2
The board
should
establish clear
roles and
responsibilities
in discharging
its fiduciary
and leadership
functions.
MCCG 2007
MCCG 2000
Part 1 : A I The board
Every listed company should be headed by an
effective board which should lead and control the
company
Part 2 : AA I Principal responsibilities of the
board
The board should explicitly assume the following
six specific responsibilities, which facilitate the
discharge of the boards stewardship
responsibilities:
a) Reviewing and adopting a strategic plan for the
company;
b) Overseeing the conduct of the companys
business to evaluate whether the business is being
properly managed;
c) Identifying principal risks and ensuring the
implementation of appropriate systems to manage
these risks;
d) Succession planning, including appointing,
training, fixing the compensation of and where
appropriate, replacing senior management;
e) Developing and implementing an investor
relations programme or shareholder
communications policy for the company; and
f) Reviewing the adequacy and the integrity of the
companys internal control systems and
MCCG 2012
Principle 1:
Establish clear
role and
responsibilities
MCCG 2007
MCCG 2000
Recommendation
1.5
The board should
have procedures
to allow its
members access
to information
and advice
Part 1 : A III Supply of
information
The board should be supplied in
a timely fashion with information
in a form and of a quality
appropriate to enable it to
discharge its duties.
Recommendation
1.6
The board should
ensure it is
supported by a
suitably qualified
and competent
company
secretary
Part 2 : AA XIX Access to
information
Directors should have access to
all information within a company
whether as a full board or in their
individual capacity, in furtherance
of their duties.
Part 2 : AA XX Access to
Advice
There should be an agreed
procedure for directors, whether as
a full board or in their individual
capacity, in furtherance of their
MCCG 2012
Principle 1:
Establish clear
role and
responsibilities
MCCG 2007
Recommendation
1.5
The board should
have procedures
to allow its
members access
to information
and advice
MCCG 2000
Part 2 : AA XXI and XXII
Recommendation
1.6
The board should
ensure it is
supported by a
suitably qualified
and competent
company
secretary
All directors should have access
to the advice and services of the
company secretary.
Directors should appoint as
secretary, someone who is capable
of carrying out the duties to which
the post entails, and his removal
should be a matter for the board
as a whole. The board should
recognise that the chairman is
entitled to the strong and positive
support of the company secretary
in ensuring the effective
functioning of the board.
MCCG 2012
Principle 2:
Strengthen
composition
Recommendation
2.1
The board should
establish a
Nominating
Committee which
should comprise
exclusively of
non-executive
directors, a
majority of whom
must be
independent
MCCG 2007
MCCG 2000
Part 1 : A IV
There should be a formal and
transparent procedure for the
appointment of new directors
to the board.
MCCG 2012
Principle 2:
Strengthen
compositio
n
Recommendation
2.1
The board should
establish a
Nominating
Committee which
should comprise
exclusively of nonexecutive directors,
a majority of whom
must be
independent
MCCG 2007
MCCG 2000
Part 2 : AA VIII Appointments to
the board
[Parts that is revised in MCCG 2007:]
In making its recommendations, the
nominating committee should consider the
candidates:
skills, knowledge, expertise and experience;
professionalism;
integrity; and
in the case of candidates for the position of
independent non-executive directors, the
nominating committee should also evaluate
the candidates ability to discharge such
responsibilities/functions as expected from
independent non-executive directors;
The revised Code provides greater clarity on the aspects
which a nominating committee should consider when
recommending candidates for directorships.
MCCG 2012
Principle 2:
Strengthen
composition
MCCG 2007
MCCG 2000
Recommendation Part 2 : AA IX
2.2
The board, through the
The Nominating
nominating committee,
Committee should
should annually review its
develop, maintain
required mix of skills and
and review the
experience and other
criteria to be used
qualities, including core
in the recruitment
competencies which
process and
nonexecutive directors
annual
should bring to the board.
This should be disclosed in
assessment of
directors
the annual report.
Part 2 : AA XIII Directors
training
As an integral element of the
process of appointing new
directors, each company
should provide an orientation
and education programme
for new recruits to the board.
MCCG 2012
Principle 2:
Strengthen
compositio
n
Recommendation
2.2
The Nominating
Committee should
develop, maintain
and review the
criteria to be used
in the recruitment
process and annual
assessment of
directors
MCCG 2007
MCCG 2000
Part 2 : AA X
[Parts that is revised in MCCG 2007:]
The board should implement a
process, to be carried out by the
nominating committee annually,
for assessing the effectiveness of
the board as a whole, the
committees of the board, and for
assessing the contribution of each
individual director, including
independent non-executive
directors, as well as the chief
executive officer.
All assessments and evaluations
carried out by the nominating
o The revised Code places importance on the process
committee in the discharge of all
carried out by the nominating committee in evaluating
its functions should be properly
members of the board, including the independent nondocumented.
executive directors
and chief executive officer.
o A nominating committee should also ensure that its
assessments and evaluations are properly documented.
MCCG 2012
Principle 2:
Strengthen
composition
Recommendation
2.3
The board should
establish formal
and transparent
remuneration
policies and
procedures to
attract and retain
directors
MCCG 2007
MCCG 2000
Part 1 : B I The level and
make-up of Remuneration
Levels of remuneration should
be sufficient to attract and
retain the directors needed to
run the company successfully.
The component parts of
remuneration should be
structured so as to link rewards
to corporate and individual
performance, in the case of
executive directors.
In the case of non-executive
directors, the level of
remuneration should reflect the
experience and level of
responsibilities undertaken by
the particular non-executive
concerned.
MCCG 2012
Principle 2:
Strengthen
composition
MCCG 2007
Recommendation
2.3
The board should
establish formal
and transparent
remuneration
policies and
procedures to
attract and retain
directors
MCCG 2000
Part 1 : B II Procedure
Companies should establish a
formal and transparent
procedure for developing policy
on executive remuneration and
for fixing the remuneration
packages of individual directors
Part 1 : B III Disclosure
The companys annual report
should contain details of the
remuneration of each director.
Part 2 : AA XIV
[Parts that is revised in MCCG 2007:]
o
o
..The board should
record its deliberations, in
terms of the issues
discussed, ..
The revised Code requires the board to properly record not
only decisions made but also all the issues discussed in
arriving at the decisions.
This serves to provide a historical record and insight into
those decisions
MCCG 2012
Principle 3:
Reinforce
independence
MCCG 2007
Recommendation
3.4
The positions of
chairman and
CEO should be
held by different
individuals, and
the chairman
must be a nonexecutive
member of the
board
Part 2 : AA II Chairman and
Chief Executive Officer
Recommendation
3.5
The board must
comprise a
majority of
independent
directors where
the chairman of
the board is not
MCCG 2000
There should be a clearly
accepted division of
responsibilities at the head of
the company which will ensure a
balance of power and authority,
such that no one individual has
unfettered powers of decision.
Where the roles are combined
there should be a strong
independent element on the
board.
A decision to combine the roles
of chairman and chief executive
officer should be publicly
explained.
MCCG 2012
Principle 5:
Uphold
integrity in
financial
reporting
MCCG 2007
MCCG 2000
Recommendation
5.1
The Audit
Committee should
ensure financial
statements
comply with
applicable
financial reporting
standards
Recommendation
5.2
The Audit
Committee should
have policies and
procedures to
assess the
suitability and
independence of
Part 2: BB II
[Parts that is revised in MCCG 2007:]
However, the committee should
meet with the external auditors without
executive board members present at least
twice a year.
o
The revised Code increases the
frequency of meetings
between the audit committee
and the external auditor
without the executive board
members present.
This encourages a greater
exchange of free and honest
views and opinions between
both parties.
MCCG 2012
Principle 6:
Recognise and
manage risks
Recommendation
6.1
The board should
establish a sound
framework to
manage risks
MCCG 2007
MCCG 2000
Part 1 : D II Internal
control
The board should maintain a
sound system of internal
control to safeguard
shareholders investment and
the companys assets.
MCCG 2012
Principle 6:
Recognise
and manage
risks
MCCG 2007
Recommendation
6.2
The board should
establish an
internal audit
function which
reports directly to
the recognises
Audit
o The revised Code
Committee
the importance
of the internal
audit function by requiring all
companies to have an
internal audit function.
o
In order to preserve the
independence of the internal
audit function, the head of
internal audit should report
directly to the audit
committee.
MCCG 2000
Part 2 : BB VII
[Parts that is revised in MCCG 2007:]
identify a head of internal audit who
reports directly to the audit committee. The
head of internal audit will be responsible for
the regular review and/or appraisal of the
effectiveness of the risk management,
internal control, and governance processes
within the company.
Part 2 : BB VIII
The internal audit function should
be independent of the activities
they audit and should be
performed with impartiality,
proficiency and due professional
care. The board or the audit
committee should determine the
remit of the internal audit
function.
MCCG 2012
Principle 8:
Strengthen
relationship
between
company and
shareholders
Recommendation
8.1
The board should
take reasonable
steps to
encourage
shareholder
participation at
general meetings
MCCG 2007
MCCG 2000
Part 3 : I Shareholder
voting
Institutional shareholders
have a responsibility to make
considered use of their votes.
MCCG 2012
Principle 8:
Strengthen
relationship
between
company
and
shareholder
s
Recommendatio
n 8.3
The board
should promote
effective
communication
and proactive
engagements
with
shareholders
MCCG 2007
MCCG 2000
Part 1 : C I Dialogue between
companies and investors
Companies and institutional
shareholders should each be ready,
where practicable, to enter into a
dialogue based on the mutual
understanding of objectives.
Part 2 : CC I The relationship
between the board and
shareholders
The boards should maintain an
effective communications policy that
enables both the board and
management to communicate
effectively with its shareholders,
stakeholders and the public.
This policy must effectively interpret
the operations of the company to the
shareholders and must accommodate
feedback from shareholders, which
should be factored into the companys
MCCG 2012
Principle 8:
Strengthen
relationship
between
company and
shareholders
MCCG 2007
Recommendation
8.3
The board should
promote effective
communication
and proactive
engagements
with shareholders
MCCG 2000
Part 3 : II Dialogue between
companies and investors
Institutional investors should
encourage direct contact with
companies, including
constructive communication
with both senior management
and board members about
performance, corporate
governance, and other matters
affecting shareholders interest.
The New Recommendations in
Malaysian Code on Corporate
Governance (MCCG) for year 2012
1.Roles and responsibilities of the board
The board should formalize a code of conduct to implement ethical
standards
The board should also implement necessary internal systems to ensure the
compliance with the code of conduct.
The board is advised to formalize strategic policies
The board is expected to formalize a board charter that set out key values,
principles and ethos of the company.
The charter should also set out the division of responsibilities between the
board, management, various committees, chairman and chief executive
officer, and the processes and procedures for board meetings.
2.Independent directors
The board is encouraged to undertake an annual assessment of the
independent directors in the company
Tenure of independent directors is capped to a cumulative period of 9
years.
The chairman of the board should generally be an independent director. If
the chairman is not an independent director then the majority of board
members should comprise of independent directors to ensure a balance of
3. Strengthening shareholder relationship
The board should put resolutions to vote by way of poll.
The chairman should also inform the shareholders, their right to demand a
poll vote at the shareholders meetings.
Companies are encouraged to employ electronic means for poll voting.
4. Commitment of directors
The board should set out expectations on the time commitment for its
members to carry out their responsibilities.
The board should also set out protocols for directors accepting new
directorships.
Continuing education programs should be introduced by the board.
5. Corporate disclosure
The board should formalize practical corporate disclosure policies and
procedures which comply with theListing Requirements of Bursa Malaysia
Securities Berhad.
Companies are encouraged to leverage on information technology to
disseminate information, including dedicating a section on corporate
governance on their website.
CONCLUSION
The formation of the Code of Corporate Governance is
essential in reinventing the corporate enterprise in order to
efficiently meet the emerging global competition.
Strong corporate governance is critical for business
success and it is also the key to win investor confidence in
a market.
The compliance of all the companies to the Code is
encouraged which it effectively helps to enhance the
culture of corporate governance for corporate Malaysia.
Thank You
