Friday, July 8, 2011

Securities Commission unveils 5-yr Corporate Governance Blueprint

KUALA LUMPUR: The Securities Commission unveiled its five-year Corporate Governance blueprint to raise the standards of corporate governance in Malaysia on Friday, July 8.

The blueprint focuses on six themes of corporate governance -- shareholder rights, the roles of institutional investors, boards, gatekeepers and influencers, disclosure and transparency as well as public and private enforcement.


The thrust of the blueprint was to layout the action plan to raise the standards of corporate governance in Malaysia, by focusing on strengthening of self and market discipline and promoting greater internalisation of the culture of good governance.

SC chairman''Tan Sri Zarinah Anwar said: 'The essence of the blueprint is to achieve Excellence in Corporate Governance by inculcating good corporate governance culture. It is the mutual responsibility of all participants in the capital market to exercise greater care and effort to create value and meet shareholder expectations".

The blueprint was unveiled by Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah.

The blueprint, developed through a highly consultative, is the first major deliverable of the Capital Market Masterplan 2 (CMP2), the SC said.

The 10-year CMP2, which was launched in April, would focus on expanding the role of the capital market in invigorating national economic growth. However, the emphasis is that growth is only sustainable if it is underpinned by a proper system of accountabilities and governance.

The SC said extensive research and international benchmarking were undertaken to prepare the blueprint. This, it said, was to ensure the recommendations were sufficiently robust and suitable for Malaysian corporate governance.

The major points of the blueprint, which was developed through a highly consultative process, were corporate governance ecosystem namely shareholder rights, the roles of institutional investors, boards, gatekeepers and influencers, disclosure and transparency as well as public and private enforcement.

The SC said it welcomed feedback from all parties and the public on the blueprint and the deadline for the submission of comments was Sept 15.

Highlights of the blueprint:

Facilitating the exercise of shareholder rights

A number of measures are recommended to stimulate greater shareholder activism.'' These include mandatory poll voting on resolutions approving related-party transactions and a requirement for the chairman at general meetings to inform shareholders of their right to demand a poll vote before voting is introduced.

Responsible ownership by institutional investors

The blueprint also recognises the leadership role that can be played by institutional investors through the exercise of responsible ownership. A new stewardship code and an umbrella body for institutional investors will therefore be formulated to promote responsible ownership.

Boards as active and responsible fiduciaries

On the role of boards, the Blueprint proposes measures to enable boards to become more active and responsible fiduciaries. These measures include''a mandatory formal board charter, limitation on the''tenure of independent directors and''a reduction in the number of directorships in listed companies that''directors may hold, separation of chairman and CEO roles and the setting up of a taskforce to conduct an industry-led study on directors' compensation.'' The Blueprint also mandates the establishment of a Nominating Committee, chaired by an independent director, which should focus on recruitment, assessment, diversity and training needs of directors.

Role of gatekeepers and influencers

Noting that boards do not function in isolation, the Blueprint highlights the important role of gatekeepers and influencers - professionals like corporate advisers, company secretaries, and the media - and recommends measures such as clarifying the role of company secretaries in corporate governance, exploring the extension of whistleblowing obligations to some professionals and enhancing internal codes of conduct to prevent the abuse of market sensitive information.

Improving disclosure and transparency

Proposals for improving disclosure and transparency includes a shortening of the submission period for quarterly and annual reports and making companies focus on substance rather than form in meeting corporate governance requirements.

Facilitating private enforcement actions

To facilitate shareholders in undertaking private enforcement actions to pursue civil remedies, a working group will be set up to study the feasibility of third party funding of litigation to assist investors in private enforcement actions.

The SC also said the'' recommendations in the blueprint would'' be implemented over a five-year period. Most of the recommendations will be applied through a corporate governance code and changes to the Listing Requirements, both of which would take effect by early 2012.



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