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