INTERNATIONALCONFERENCEON“CORPORATEGOVERNANCEREFORM:

CHINAANDEASTASIA“-BOARDOFDIRECTORSINCORPORATEGOVERNANCEByDato’MegatNajmuddinKhasPresidentMalaysianInstituteofCorporateGovernance(MICG)FederationofPublicListedCompaniesBhd(FPLC)BeijingChina1&2November20011WHATIS...

CORPORATEGOVERNANCE?“Corporategovernanceistheprocessandstructureusedtodirectandmanagethebusinessandaffairsofthecompanytowardsenhancingbusinessprosperityandcorporateaccountabilitywiththeultimateobjectiveofrealisinglongtermshareholdervalue,whilsttakingintoaccounttheinterestofotherstakeholders”.-Definitionfromthe

FinanceCommitteeReportonCorporateGovernance2LEGALLY,

BoardofDirectors,jointly,aretheULTIMATE

decision–makersinanycorporation.TheyGOVERNTheyDIRECTTheyareRESPONSIBLETheyLEAD3CORPORATEGOVERNANCEISESSENTIALLYABOUTLEADERSHIP-CommonwealthAssociationforCorporateGovernance(CACG)

LeadershipforefficiencyLeadershipforprobityLeadershipwithresponsibility;andLeadershipwhichistransparentandwhichisaccountableThisbecauseprincipalownersofCorporateGovernanceareDIRECTORS!!4Therefore,BoardofDirectorsmustbetheFIRSTto

BUY

INTO

theideaofGOODCORPORATEGOVERNANCE.

5NewEraofLearningBoardsTRAINING!!AllDirectorsOfPLCsinMalaysiaRequiredto

UndergoMandatoryAccreditationProgrammes(MAPS)–TrainingstartedinApril20016BOARDSMUSTREALISETHAT:-CorporateGovernanceisaboutfocusing

onthequalityoflifenotthequalityofgoods.Three(3)requirementsforqualityoflife:-

SocialCohesionEcologicalIntegrityEffectivedecisionmakingonthelongrunbasis.

7BOARDSMUSTKNOWTHAT:-Anethicalsocietyisfundamental

torunbusiness.CorporateGovernanceisaboutgoingbacktobasics,areturntoa“valueculture”

8Boardsmustreturntobasicvirtuesof:

HONESTY, RESPONSIBILITY, HUMILITYAND LOVE.

9

BOARDSMUSTLOOKATTHETRIPLEBOTTOMLINES:-

Profitability-ShareholdersValueSocialResponsibilityEnvironmentalProtection10

DoweallneedgoodCorporate Governance?

YES !11BECAUSE:

Weneedagoodimage.WeneedagoodreputationtoinstillCONFIDENCE

inus,locallyandinternationally.

12WeneedGoodCorporateGovernance

BECAUSE

NeedArisestoReinventtheCorporateEnterprisetoEfficientlyMeetEmergingGlobalCompetitionwhichwillbeMarket-Oriented13

Wehavenochoicebutto:

prepareforGLOBALISATIONprepareforGLOBALCOMPETITIONbeWORLDCLASS,tobeRELEVANT14BECAUSE:

CHINAANDEASTASIAareallbigtradingnationsEXPORTSareourlifebloodISOLATIONisnotanoption

15

BECAUSE:

WeallneedINVESTMENTStoPROGRESS,TODEVELOP

16

ToattractinvestmentsweneedtobeTRANSPARENT

“Toexploitfullythebenefitsofgreaterandcheapersourcesofinvestmentprovidedbyinternationalcapital,corporationsmustacceptthedisciplinesofbetterfinancialdisclosuresandhighqualityaudits.”

AndrewShengChairmanSecuritiesandFutureCommissionHongKong17ToattractinvestmentsweneedtohaveabetterREPUTATION“Becausemarketsfunctiononinformationandtrust,weincurreputationalrisk.Thedilemmaofinternetspeedisthatyoucanrunbutyoucan’thide!Ultimately,themarketwilljudgethequalityofinformation,yourwork,yourreputation.Itisthereforeineveryone’sselfinteresttomovetowardshigherqualityofinformation.”-AndrewSheng

Chairman,SecuritiesandFuturesCommissionHongKong18“..Tobeagreatcountry,anationmustalsopossessgreatminds,brilliantthinkersandaculturethatencouragesdebate,criticismsandfreedomofexpression.”-AzamArisManagingEditor,TheEdge

“..Intheborderless,knowledge-poweredeconomyofTHEFUTURE,itwillbenewideasthatwillgiveacountrythatextracompetitiveedge.”ATHINKINGNATION19ENGAGINGtheFUTURE“Wehonourthepast,weliveinthepresent,butnowmustengageinthefuture.Ifwedonotengagethefuture,butsimplyacquiescewebecomethevictimsofsomeoneelse’sagenda.Thefutureisnotaplacewherewearegoingbutaplacewearecreating.”-RichardNevilleattheCompanyDirectorsConferenceAdelaide,May199920Therefore,Wehaveto

Reinvent

toCreateourownfuture21“Theoldeorderchangethyieldingplacetothenew.AndGODfulfilhimselfinmanyways,lestonegoodcustomshouldcorrupttheworld…”-LordAlfredTennyson

MorteD’Arthur“Allahwillnotchangethefateofapeopleuntiltheychangewhatisinthemselves”

-Quran13.1122WHATISNEEDEDFORASTRONGERCORPORATEEASTASIAFocusonWhatYouDoBestandBuildonitWorld-ClassinServicesorProductsCompetitiveinGlobalMarketThriveonGlobalDynamicsCreateEconomicValue-

ChooKahYeanTheEdge23GOODCORPORATEGOVERNANCEISMORETHANJUSTLAWSANDMORELAWSBecauseeffectiveenforcementeverywhereintheworldiseasiersaidthandone.24GiventheDifficultiesIntrinsicinaPrescriptiveApproach,ThereisaWorldwideConvergencetoaNon-PrescriptiveSelf-RegulatoryGovernanceRegime

25LeadershipbyExampleandSelfRegulation“Ifyougovernthepeoplelegalisticallyandcontrolthembypunishment,theywillavoidcrime,buthavenopersonalsenseofshame.Ifyougovernthembymeansofvirtueandcontrolthemwithpropriety,theywillgaintheirownsenseofshame,andthuscorrectthemselves.”-ConfuciusTheAnalectsofConfucius26BetterEnforcementNeededButSELFREGULATION

ISTHENAMEOFTHEGAME,Globally.27ExampleofSelf-Regulation:-

THEMALAYSIANCODEON

CORPORATEGOVERNANCELaunchedon25March1999byTheMinistryofFinanceAmendedMarch200028THECODEHASTWOMAINPARTSPart1SetsoutbroadprinciplesofgoodgovernanceinMalaysiaPLCstodisclose,underlistingrules,annually,anarrativeaccounthowtheyappliedtheprinciplestotheirstructuresandprocessesPart2SetsoutbestpracticesforPLCstofollowPLCstoexplainunderlistingrules,circumstancesjustifyingdeparturefromsuchbestpractices29TheBoardEverylistedcompanyshouldbeheadedbyaneffectiveboardwhichshouldleadandcontrolthecompanyBoardBalanceTheboardshouldincludeabalanceofexecutivedirectorsandnon-executivedirectors(includingindependentnon-executives)suchthatnoindividualorsmallgroupofindividualscandominatetheboard’sdecisionmakingSupplyofInformationTheboardshouldbesuppliedinatimelyfashionwithinformationinaformandofaqualityappropriatetoenableittodischargeitsdutiesAppointmentstotheBoardThereshouldbeaformalandtransparentprocedurefortheappointmentofnewdirectorstotheboardRe-electionAlldirectorsshouldberequiredtosubmitthemselvesforre-electionatregularintervalsandatleasteverythreeyears.Part1-THECODE(BroadPrinciples)

Directors30THECODE

Director’sRemunerationTheLevelandMake-upofRemunerationLevelsofremunerationshouldbesufficienttoattractandretainthedirectorsneededtorunthecompanysuccessfully.Thecomponentpartsofremunerationshouldbestructuredsoastolinkrewardstocorporateandindividualperformance,inthecaseofnon-executivedirectors,thelevelofremunerationshouldreflecttheexperienceandlevelofresponsibilitiesundertakenbytheparticularnon-executiveconcerned.ProcedureCompaniesshouldestablishaformalandtransparentprocedurefordevelopingpolicyonexecutiveremunerationandforfixingtheremunerationpackagesofindividualdirectors.DisclosureThecompany’sannualreportshouldcontaindetailsoftheremunerationofeachdirector.31THECODE

ShareholdersDialogueBetweenCompaniesandInvestorsCompaniesandinstitutionalshareholdersshouldeachbeready,wherepracticable,toenterintoadialoguebasedonthemutualunderstandingofobjectivesTheAGMThecompaniesshouldusetheAGMtocommunicatewithprivateinvestorsandencouragetheirparticipation32THECODE

AccountabilityandAuditFinancialReportingTheboardshouldpresentabalancedandunderstandableassessmentofthecompany’spositionandprospectsInternalControlTheboardshouldmaintainasoundsystemofinternalcontroltosafeguardshareholders’investmentandthecompany’sassetsRelationshipwiththeAuditorsTheboardshouldestablishformalandtransparentarrangementsformaintaininganappropriaterelationshipwiththecompany’sauditors33Part2-BESTPRACTICESINCORPORATEGOVERNANCECompanyboardswillberequiredtojustifyintheirannualreportsanysignificantvarianceswiththebestpracticessetouthere.Theimportanceoftheroleofnon-executive,independentdirectorsincorporategovernanceisspeltout.Theguidelinesarequitecomprehensiveandeasytocomprehend.Theguidelinesaretobeusedinaflexiblemannerdependingo