KUALA LUMPUR – The new Malaysian Code on Corporate Governance (MCCG) is a set of best practices to strengthen corporate culture anchored on accountability and transparency.
In releasing the MCCG here today, the Securities Commission Malaysia (SC) Chairman Tan Sri Ranjit Ajit said it placed greater emphasis on internalisation of the corporate governance culture among listed companies, as well as the non-listed entities, including state-owned enterprises, small and medium enterprises (SMEs) and licensed intermediaries.
“For companies and countries to attract long-term capital in today’s globalised market, there must be quality corporate governance arrangements which are effective and in line with international best practices.
“A healthy corporate culture anchored on accountability and transparency is key to delivering long-term business and economic success, and this responsibility rests with the board,” he said before officiating the release of the MCCG.
Ranjit said the new code was an important milestone in Malaysia’s efforts to promote good corporate governance to ensure sustainability and resilience of the capital market.
It will serve as a compass for boards to steer their companies forward, while increasing the understanding of the importance of corporate governance, he added.
The code lists 36 practices in support of three principles, namely board leadership and effectiveness, effective audit, risk management and internal controls, as well as corporate reporting and relationship with stakeholders.
It adopts a differentiated and proportionate approach, requiring certain practices and reporting expectations to apply only to companies on the FTSE Bursa Top 100 and those with a market capitalisation of RM2 billion or more.
Key features of the new code include the introduction of the Comprehend, Apply and Report (CARE) approach, as well as the shift from “comply or explain” to “apply or explain an alternative”, aimed at encouraging listed companies to put more thought and consideration when adopting, reporting their corporate governance practices.
Another new dimension in the code is the introduction of “Step Up’ practices, to encourage companies to go further in achieving corporate excellence.
The new MCCG resulted from a comprehensive review by the SC in 2016, drawing input from domestic and international stakeholders, covering lessons from past and recent corporate governance failures and changes in market structures and business needs.
It was first introduced in 2000 following recommendations made by the High Level Finance Committee the previous year and reviewed in 2007 and 2012.
The SC has also announced a three-year strategic plan to advance key corporate governance priorities, which includes the establishment of the Institute of Corporate Directors Malaysia.
Big data and artificial intelligence capabilities will be deployed to strengthen the regulator’s corporate surveillance and enforcement of corporate governance breaches, and it will also be working with industry players to increase women’s participation on boards.