malaysian code on corporate governance (mccg)

MALAYSIAN CODE ON CORPORATE GOVERNANCE

(MCCG)

BY: NABAZ SHWANY(NABAZ

NAWZAD)UNIVERSITI UTARA

MALAYSIA

December 12, 2012

MALAYSIAN CODE ON CORPORATE GOVERNANCE

REASONS FOR MCCG UPDATES

MCCG 2012 PRINCIPLES

CONCLUSION

OUTLINES

Malaysia listed as number one in Asia for having so many rules and implications for corporate governance practice

MCCG was introduced on March 2000 based on British experience to avoid corporate malefaction

MCCG brought systematical change in the structure of public and Private Corporation.

MCCG revised several times in 2007, 2011 and 2012 The MCCG targeted those companies that are listed on

Bursa Malaysia companies are requiring preparing their annual report

and proving that they conducted the principles and recommendations

MALAYSIAN CODE ON CORPORATE GOVERNANCE

Shifts are inevitable and necessary requirement to deal with market dynamic and effectively manage corporate governance as part of global sustainable development

To improve the role and the responsibility of directors,

Fostering their commitment, Promoting board structure effectiveness, Internal and external auditing

Reasons for MCCG Updates

Establishing Clear Role and Responsibilities

The 2012 Codes sets out eight principles and each principle followed by several recommendations.

The board should establish clear functions reserved for the board and those delegated to management

The board should discharging its fiduciary and leadership functionsThe board should ensure business plan well managed and performed

properly formalize ethical standards Auditing the company sustainability and development the board should have a formula to give a chance to its members for

accessing information & advices through consultationAssigning qualified secretary

MCCG 2012 Principles

Strengthen Composition

Establishing independent nominating committee to compromise with non-executive directors to oversee the selection and assessment of the directors based on the company needs, training for the success of the directors and assessing directors at the end of every year

The head of the committee must be senior independent director and gender diversity should be considered

Committee selection is based on competency, commitment, performance and contribution with board members

The board should establish formal and transparent remuneration policies and procedures to attract and retain directors

MCCG 2012 Principles

Reinforce Independence

Ensure effectiveness of independent directors The independent board should concentrate on the director

economic background and daily relationships and predict whether the independent director could really keep his neutrality or not

The period of the serving directors which should not exceed of nine years, if not should be known as non-independent director

The position of chairman and the chief executive officer separated and must be run by two different individuals

The chairman responsibility is to lead the board and oversight the management

CEO focuses on business and the companies’ day to day management

MCCG 2012 Principles

Foster Commitment

Highly committed individual is the one who: i. “(1) Strong belief in and acceptance of the organization’s goals and

values; ii. (2) Willingness to exert considerable effort on behalf of the

organization; and iii. (3) Strong desire to maintain membership in the organization”

(Samad 2011).

Director must spend sufficient time in carrying out the duties and update any changes and knowledge to enhance their skills

directors and management must have access to appropriate educational programs to challenge any difficulties in complex business environment

MCCG 2012 Principles

Uphold Integrity in Financial Reporting

Committee must ensure to provide reliable financial information in accordance to standards of financial reporting.

Auditing committee should have a policy to oblige external auditors to confirm their independent in auditing process and abide by all the relevant rules and requirements.

MCCG 2012 Principles

Recognize and Manager Risks

Internal auditing to manage and control risksMaintain control and surveillance over

shareholders’ investment and companies assets

The chief of the internal audit must be well educated and have experience in risk management and control process.

MCCG 2012 Principles

Ensure Timely and High Quality Disclosure

Companies are required to have high quality of corporate disclosure policies and procedures

Stake holder rights and utilizing information technology to foster good governance and better relationship and transparency between companies and stakeholders.

MCCG 2012 Principles

Strengthen Relationship between Company and Shareholders

Encourage shareholders to attend in general meetings.The board must provide a clear guideline to the

shareholders on how they could exercise their rights.Fostering the Use of TechnologyVoting rightThe board is encouraged to make announcement

regarding election with detailsParticipate in achieving companies’ goals, undermine

risks and facilitate management process;

MCCG 2012 Principles

MCCG was strong move to encourage more investment and better business.

The companies controlling and the auditing system was developed.

Through the eight principles of MCCG we can expect more efficiency, accountability, attainability, transparency and accuracy in the future of Malaysian corporate governance

Conclusion

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