Corporate Governance

Corporate Governance

Corporate governance is defined as:

“The process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realizing long-term shareholders value, whilst taking into account the interest of other stakeholders”

The Malaysian Code on Corporate Governance 2012 (MCCG 2012), set out the broad principles and specific recommendations on structure and processes which companies should adopt in making good corporate governance an integral part of their business dealings and culture.

The MCCG 2012, advocates the adoption of standards that go beyond the minimum prescribed by regulation. The observance of the MCCG 2012 by companies are voluntary, however listed companies are required to report on their compliance in their yearly annual reports beginning 31 December 2012.

The MCCG 2012 focuses on clarifying the role of the board in providing leadership enhancing effectiveness through strengthening its composition and reinforcing its independence. The MCCG 2012 also encourage companies to put in place corporate disclosure policies that embody principles of good disclosure. Companies are encouraged to make public their commitment to respecting shareholder rights.

The MCCG 2012, is arranged as follows:

Principles

The principles of MCCG 2012 encapsulate board concepts underpinning good corporate governance that companies should apply when implementing the recommendations.

Recommendations

The recommendations are standard that companies are expected to adopt as part of their governance structure and processes. Listed companies should explain in their annual reports how they have complied with the recommendations. As there is no ‘one size fit all’ approach to corporate governance, companies are allowed to determine the best approach to adopting the principles. Where there is non-observance of a recommendation, companies should explain the reason.

Comments

Each recommendation is followed by a commentary which seeks to assist companies in understanding the recommendation. Although some of the commentaries provide examples and suggestions, these should not be taken to be exhaustive.

The principles and recommendation of MCCG 2012 focus on, amongst others, laying a strong foundation for board and its committees to carry out their roles effectively, promote timely and balanced disclosure, safeguard the integrity of financial reporting, emphasise the importance of risk management and internal control and encourage shareholder participation in general meetings.

The principles and recommendation of MCCG 2012 focus on, amongst others, laying a strong foundation for board and its committees to carry out their roles effectively, promote timely and balanced disclosure, safeguard the integrity of financial reporting, emphasise the importance of risk management and internal control and encourage shareholder participation in general meetings.

  1. Establish clear roles and responsibilities.
  2. Strengthen composition
  3. Reinforce independence
  4. Foster commitment
  5. Uphold integrity in financial reporting
  6. Recognise and manage risks
  7. Ensure timely and high quality disclosure
  8. Strengthen relationship between company and shareholders