SC releases new code on corporate governance
KU CHIN G: Securities Commission Malaysia ( SC) yesterday released the new Malaysian Code on Corporate Governance ( MCCG), a set of best practices to strengthen corporate culture anchored on accountability and transparency.
The new MCCG places greater emphasis on the internalisation of corporate governance culture, not just among listed companies, but also encourages non-listed entities including state- owned enterprises, small and medium enterprises (SMEs) and licensed intermediaries to embrace the code.
The code has 36 practices to support three principles namely board leadership and effectiveness; effective audit, risk management, and internal controls; and corporate reporting and relationship with stakeholders.
“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
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. Tan Sri Ranjit Ajit Singh, SC chairman
the importance of corporate governance,” said SC Chairman Tan Sri Ranjit Ajit Singh in his speech to officiate the release of MCCG.
A key feature of the new code is the introduction of the Comprehend, Apply and Report (CARE) approach, and the shift from “comply or explain” to “apply or explain an alternative”. This is meant to encourage listed companies to put more thought and consideration when adopting and reporting on their corporate governance practices.
The MCCG also adopts a differentiated and proportional approach in the application of the code taking into account the differing size and complexity of listed companies.
The code now identi f ies 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 RM2 billion or more.
Another new dimension in the code is the introduction of ‘Step Up’ practices to encourage companies to go further in achieving corporate excellence. This includes the practice which requires Audit Committee to comprise only of independent directors and the establishment of a Risk Management Committee.
The new MCCG is the result of a comprehensive review by SC in 2016 drawing inputs from domestic and international stakeholders, lessons from past and recent corporate governance failures and changes in market structures and business needs. The code, which was first introduced in 2000 following the recommendations made by the High Level Finance Committee in 1999, had been reviewed twice in 2007 and 2012.
Alongside the MCCG, SC also announced a three-year strategic plan to advance key corporate governance priorities, which includes:
Strengthening the ecosystem: SC will work with stakeholders to establish the Institute of Corporate Directors Malaysia ( ICDM) to provide a professional development pathway for di re c t or s . A Cor porat e Governance Council will be established to coordinate all corporate governance initiatives.
The MCCG took to effect yesterday, and the first batch of companies that are expected to report their application of the practices in the new code will be those with financial year ending December 31, 2017.