"Markets can no longer merely expect better standards - markets must contribute to building better standards," he said in his keynote address at the Commonwealth Association for Corporate Governance Annual Conference.
The conference is organised by the Commonwealth Secretariat and The Malaysian Association of the Institute of Chartered Secretaries and Administrators.
Mohd Azlan said there is a guidance for market participants in the fifteen principles for corporate governance already contained in the Commonwealth Association for Corporate Governance (CACG) Guidelines.
"These principles provide very comprehensive and practical recommendations for markets to adopt and practice in contributing not only to industry standards, but to bottomline concerns for sustainable business growth and expansion," he said.
On the role of regulators, Mohd Azlan said that whilst regulators bear the primary responsibility of ensuring that the market operates in a fair and orderly manner, regulations always have to be balanced with business efficacy.
"Otherwise, we might end up stifling legitimate commercial innovation.
"Thus, notwithstanding the enhancements of the regulatory framework, shareholders too can make an important contribution to raising standards in their capacity as the ultimate owners of their companies," he said.
On market practice, Mohd Azlan said investors and shareholders provide market discipline.
"They are in a position to ensure that management and the board, which ostensibly are there to serve their interests, operate efficiently and transparently to achieve the goal of creating value.
"What we want to achieve at the end of the day is a measure of self discipline and market discipline," he said.
Mohd Azlan said the application of corporate governance for sustainable capital generation and investor confidence is more evident today than ever.
"The impact of good governance practices on share price performance cannot be underestimated. In fact, investors are willing to pay a premium for good corporate governance. This has the support of empirical evidence," he said.
Mohd Azlan cited a study by an investment institution, CLSA Emerging Markets which subjected 115 companies across various jurisdictions to a survey among investors. The results showed that the top 30 companies in the survey provided returns over 3 times those generated by the bottom 30 companies.
Mohd Azlan also noted that in recognising the value of good corporate governance, many jurisdictions around the world, and within the Commonwealth itself, have taken this to heart. Extensive reviews and studies on how to improve governance have been carried out via the Cadbury and Hampel Reports in the United Kingdom and the King Report in South Africa.
Mohd Azlan reiterated that good corporate governance is beneficial to all parties, as:
- It creates value and wealth for investors.
- It facilitates corporations to raise capital for expansion and growth
- It contributes to the operation of a fair and orderly market
- It clearly allocates responsibilities and hence, increases protection for investors.
"For the tenets of good governance to become entrenched in business practice, all affected parties - regulators, investors, intermediaries, advisers and most importantly those directly managing the corporations themselves, must work together.
"Such a culture can only be cultivated if everyone contributes positively," Mohd Azlan said.
