SC unveils improved set of best practices
By Cecilia Kok, The Star Paper
KUALA LUMPUR: An improved set of best practices aimed at strengthening the Malaysian corporate culture has been introduced with the launch of the new Malaysian Code on Corporate Governance (MCCG) by the Securities Commission (SC).
Among the significant changes is for large companies with a market capitalisation of more than RM2bil to have a two-tier voting system when it comes to the election of independent directors. Under the two-tier voting system, minority shareholders will have equal strength as the majority shareholders in deciding on the appointment of independent directors.
Under the best practices of the code, the majority shareholders holding more than 33% of the company would not be able to decide on the appointment of independent directors unilaterally.
Another significant change of the code is that companies are encouraged to fully disclose the detailed remuneration of each member of the senior management. At the moment, the practice is to state the remuneration of the senior management in bands of RM50,000.
The new code also encouraged large companies to spell out reasons why they are not able to appoint women to their boards. The code suggests that women should comprise 30% of the boards.
It also recommends that companies’ audit committee to comprise only independent directors and the establishment of a risk management committee.
The first batch of companies expected to report their application of the practices in the new code would be those with financial year ending Dec 31, 2017.
According to SC chairman Tan Sri Ranji Ajit Singh, the new MCCG would place greater emphasis on the internalisation of corporate governance culture, not just among listed companies, but also among non-listed entities, including state-owned enterprises, small and medium enterprises and licensed intermediaries to embrace the code.
“For companies and countries to attract long-term ‘patient’ capital in today’s globalised market, corporate governance arrangements, which are effective and in line with international best practices must be in place. These are increasingly seen as conditions for sound risk management, cost reduction and access to capital,” Ranjit said.
“A healthy corporate culture anchored on accountability and transparency is key in delivering long-term business and economic success. This responsibility rests with the board,” he said when officiating at the release of the new MCCG. The code now identifies certain practices and reporting expectations to only apply to companies in the FTSE Bursa Malaysia Top 100 Index and those with a market capitalisation of RM2bil or more.
This new code is an important milestone in Malaysia’s continued journey in promoting good corporate governance to ensure the sustainability and resilience of the capital market. It serves as a compass for boards to steer their companies forward and deepen understanding on the importance of corporate governance,” Ranjit explained.
Separately, the SC also announced a three-year strategic plan to advance key corporate governance priorities, including the establishment of the Institute of Corporate Directors Malaysia and a Corporate Governance Council to coordinate all corporate governance initiatives.
|Changes in code on corporate governance|
|MCCG 201||2017 Onwards|
|Board Composition||The board must comprise a majority of independent directors where the chairman of the board is not an independent director||At least half of the board comprises independent directors. For large companies, the board comprises majority independent directors|
|Gender diversity on boards||Commentary of the Code recommended companies to establish a policy on boardroom diversity||The board to disclose the company’s policies to appoint women to the board, its targets and measures to meet those targets.*For large companies, the board comprises at least 30% women directors|
|Tenure of independent directors||Tenure of independent directors should not exceed nine years. After which annual shareholders’ approval is required.||Tenure of independent directors should not exceed nine years, but annual shareholders’ approval applicable from year 9-12 only, thereafter the annual two-tier voting process should be adopted|