By Mak Yuen Teen
The consultation by Securities Commission Malaysia (SCM) on proposed updates to Malaysia’s corporate governance framework closed on 13 February 2026. GDInstitute (GDI) submitted a comprehensive response which is highly supportive of the proposed updates, with some suggestions of measures that can support effective implementation and issues to watch out for – such as reforms pushing PLCs to engage consultants to tick more boxes without substantive improvements.
The full GDI response can be downloaded from here: https://www.gdi.org.sg/gdi-formal-response-securities-commission-malaysia-discussion-paper-corporate-governance-framework/
In this commentary, I offer some personal observations about SCM’s proposals. The thing that impressed me the most is the willingness of SCM to put almost anything on the table for consideration to improve corporate governance. Other regulators may not even be prepared to consult on many of these proposals. Many of the proposals are consistent with what I have advocated for over the years.
I expect considerable resistance to some of the proposals but I have observed that SCM has in the past been willing to introduce measures that were likely to have faced strong resistance – such as discouraging chairmen of boards from serving on key board committees and political appointees on boards.
Having been actively involved in corporate governance in Malaysia for as long as I have been involved in Singapore, I am familiar with Malaysia’s corporate governance framework and practices. In both public and in-house workshops that I have conducted for directors in Malaysia, some of the measures that Malaysia has adopted which other markets generally have not, have come up for discussion occasionally. For example, Bank Negara Malaysia’s corporate governance rules state that the board chairman, even if independent, cannot chair any of the key board committees. For PLCs, the Malaysian Code on Corporate Governance (MCCG) recommends that board chairmen should not serve on the audit, nominating and remuneration committees. When I discussed these with directors, I have generally found a high level of acceptance that these measures make sense for Malaysia – although there are always exceptions.
I have long admired how Malaysia thinks about corporate governance reforms. She is willing to introduce measures that are needed for its context, rather than blindly following what other developed markets do. Each year, SCM publishes a CG Monitor on implementation of the MCCG. Therefore, the reform agenda is substantially evidence-based.
A very important distinction between many developed Western markets, and Malaysia and many other markets, is the typical ownership structures of companies. The former are often characterised by dispersed ownership in listed issuers while others often by concentrated ownership. This important factor is often ignored when markets are developing their corporate governance rules.
Let us take the issue of mandatory external auditor re-tendering and tenure limit. I was asked about this issue when I was on the panel at the Hong Kong’s Accounting and Financial Reporting Council Regulatory Forum last November. I said if I ask if 50 years is too long for a company to keep the same external auditor, most would say yes. How about 40, 30 or 20 years, I asked? My point is that regulators need to make a call based on their best judgement – research is unlikely to share much light on optimal tenure.
One panelist, citing the Australian market, said there is an independent AC that can decide. My retort is that the typical ownership in an Australian listed company is different from HK and many other markets. In markets where many companies have dominant shareholders who are often also management or related to them, it is these shareholders/management who appoint the independent directors who serve on the AC. Indirectly, the dominant shareholders/management are the ones who select the external auditor. One only has to see how often auditor changes occur in a market like Singapore after very short tenures, citing reasons such as ‘cost savings’ – the real reasons are likely something else. ACs often simply rubber stamp such changes, with their rather unconvincing reasons.
This is where another topic that SCM consulted on impressed me – subjecting the appointment of independent directors to a two-tier vote, including a vote by minority shareholders, from the first appointment, not just after 9 years. And more transparency as to why a director is chosen.
I hope SCM pushes ahead with many of the proposed reforms and resists pressure from vested interests to dial them back.
It is better to be an enlightened leader in corporate governance, introducing corporate governance rules that work for Malaysia, than be a blind follower and adopt corporate governance rules based on so-called ‘international practices’ that are developed for markets that are fundamentally different.
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The views in this commentary are the author’s personal views.
