Boardroom Excellence: The Way Towards Enhanced Corporate Governance - Bursa Malaysia Calls For Compliance To Substance And Not Just Form

Bursa Malaysia today urged directors of listed companies to embrace and move the bar higher on the practice of corporate governance by enhancing the knowledge of their duties and responsibilities. Bursa Malaysia acknowledged that Malaysian listed companies have high standards of compliance to corporate governance to the required form and mandatory requirements as prescribed in the Listing Requirements.  However, more needs to be done to elevate corporate governance standards to the next level.

Dato’ Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia, at the launch of the SC-Bursa Malaysia Corporate Governance Week 2009 (CG Week) said, “The continued growth and progress of the Malaysian capital market lies in the collective will of its participants – to be more responsible, to be more accountable. In this sense, as guardians of corporate governance, directors should embrace to the spirit of the principles, rather than being limited by form as good corporate governance is proven to have positive impact on a company’s reputation and business sustainability.”

The inaugural CG Week 2009, which began today and will continue till 11 June 2009, is a collaborative effort by the Securities Commission and Bursa Malaysia that is aimed to increase understanding of directors of listed companies on corporate governance best practices as well as to provide a platform for the exchange of views among practitioners.

As part of its on-going initiative as a front-line regulator to maintain high standards of corporate governance and quality of market, Bursa Malaysia launched the Corporate Governance Guide: Towards Boardroom Excellence today. The Guide is intended for directors of listed companies to gain a clear and constructive direction on corporate governance best practices. This Guide focuses on bringing clarity to the roles and requirements needed to enhance corporate governance practices among their boards and committees, which will go far in contributing towards the achievement of their strategic goals and values in their businesses.

Dato’ Yusli hopes the Guide will encourage boards, managers and shareholders to eschew a tick-the-box approach in favour of thoughtful governance and to raise the level of corporate governance through the structuring and implementation of sound practices and processes which engender an effective board.

The Exchange observed that the boards of some listed companies in Malaysia practice exemplary corporate governance by going beyond what is mandated by the Malaysian Code of Corporate Governance and the Listing Requirements.

Some of the observation by the Exchange was that while it is mandatory for one third of Board members to comprise of Independent Directors, many boards have more than the required one third. Most listed companies also practiced having Board Chairmen who are independent, although the Listing Requirements and Code did not stipulate that.  

On the other hand, the Exchange noted that half of the directors of listed companies were not aware of the key principle responsibilities of their roles as a director and most situations were left to management or the company secretary to initiate. This brings about the need for directors to equip themselves with adequate training in order to become well informed and knowledgeable directors, which will lead them to performing their fiduciary duties effectively. Bursa Malaysia, in fact, advocates continuous education for directors and has provided support and avenues for mandatory accreditation and training programmes for directors on an annual basis.

In addition to the Guide, the Exchange also introduced the revamped Regulation web-section of the Bursa Malaysia website.  This section offers listed issuers, market participants and investors comprehensive information relating to the exchange’s regulation approach, philosophy, rules and regulatory actions that are relevant to the Malaysian capital markets.

Dato’ Yusli also commended companies which already established a dedicated corporate website for the benefit of investors. He said, “Our companies realise the importance of continuous information to the market in order to aid investors in making informed investment decisions. Our assessment has pointed out that 75% of the companies have set up corporate website, which enables investors to access corporate information on timely manner.”

While there were some positive demonstrations of best practices in relation to corporate governance, the big picture points to a greater need for listed companies to raise the bar in corporate governance practices through better understanding corporate governance philosophy and embracing corporate governance practices from top-down approach, he concluded.