By Mak Yuen Teen
Rankings of corporate governance of Asian markets by the Asian Corporate Governance Association over the past two decades have placed Malaysia between fourth and seventh. The recent 1MDB scandal and political upheavals reversed an upward movement in recent years, resulting in a joint fifth ranking among 12 Asian markets in the latest ranking.
However, a closer analysis suggests that the regulatory framework and corporate governance for issuers listed on the Malaysian stock exchange are better than commonly perceived. Corporate governance reforms are guided by roadmaps and specifically target corporate governance problems identified through regulatory reviews. Rules are often prescriptive and there is high compliance. Enforcement for breaches in rules and regulations committed by listed issuers is better than some higher-ranked markets.
However, realisation of the full benefits of good corporate governance requires that companies move away from a “box-ticking” mindset. The challenge and priority, like for many other markets, is implementation of the substance and spirit of good corporate governance to enhance long-term value of companies for all stakeholders. Poor government and public governance has held back Malaysia in achieving its full potential in corporate governance.
This paper examines the evolution of corporate governance in Malaysia over the last 20 years, the current state of corporate governance, recent developments and what is needed for Malaysia to move beyond compliance.
Some key takeaways from this paper are:
- In general, corporate governance rules and guidelines in Malaysia are relatively stricter and more prescriptive than in many other markets.
- There has been clear progress in the adoption of corporate governance best practices, such as separation of CEO and Chairman roles and number of independent directors (IDs).
- Malaysia is one of the most progressive markets in promoting gender diversity in Asia.
- With a two-tier vote requirement for IDs who have served more than 9 years and a mandatory 12-year limit for IDs to be introduced, the days of long-serving IDs on Malaysian boards are coming to an end. This can help further improve independence, competencies and renewal on boards.
- Areas of improvement remain in terms of age diversity and director selection processes.
Here is the full report:
