ASSIGNMENT TWO :: (QUESTION, Select A Topic Of Your Interest And Create A Question Out Of The Topic And Answer)

CORPORATE GOVERNANCE IN MALAYSIA

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MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012

1) question : what is the malaysian code on corporate governance for 2012 ?

The Malaysian Code on Corporate Governance (Code), first issued in March 2000, marked a significant milestone in corporate governance reform in Malaysia.It codified the principles and best practices of good governance and described optimal corporate governance structures and internal processes.

Since the release of the Code, the Malaysian corporate scene has made significant strides in corporate governance standards. The mandatory reporting of compliance with the Code has enabled shareholders and the public to assess and determine the standards of corporate governance by listed companies.

While significant improvement has been achieved, it is now timely to review the Code to further strengthen corporate governance practices in line with developments in the domestic and international capital markets. In this respect, the Prime Minister, Dato’ Seri Abdullah Ahmad Badawi had announced in the Budget 2008 speech that “the Code is being reviewed to improve the quality of the board of public listed companies (PLCs) by putting in place the criteria for qualification of directors and strengthening the audit committee, as well as the internal audit function of the PLCs…. To ensure the effectiveness of the audit committee of PLCs, executive directors will no longer be allowed to become members of the audit committee. In addition, the internal audit function will be mandated for all PLCs, and the board of directors will be responsible for ensuring the adherence to the scope of internal audit functions….”

The Malaysian Code on Corporate Governance as revised in 2007 represents the continued collaborative efforts between Government and the industry. The Securities Commission (SC) would like to thank the Companies Commission of Malaysia, Bursa Malaysia Berhad, Bank Negara Malaysia, the Bar Council, the Federation of Public Listed Companies, the Malaysian Institute of Corporate Governance, the Minority Shareholders Watchdog Group, the Malaysian Accounting Standards Board, the Malaysian Institute of Accountants, the Malaysian Institute of Certified Public Accountants, The Institute of Internal Auditors Malaysia, the Malaysian Institute of Chartered Secretaries and Accountants and the Malaysian Investment Banking Association

for their invaluable feedback and comments. 

2) question : what is the malaysia's corporate governance journey ?

1.   Malaysia recognises the value of good governance and it is for this reason that we are committed to promoting and sustaining a strong culture of corporate governance. Investor confidence in Malaysia was severely affected during\ the 1997/98 Asian Financial Crisis. Policy makers learnt valuable lessons and focused their attention, amongst others, on the need to raise corporate governance standards. We undertook numerous initiatives including the issuance of the Malaysian Code on Corporate Governance (Code) in the year 2000 to strengthen our corporate governance framework.

2.   Since then, we have embarked on a journey to continuously improve our corporate governance framework. The Code was revised and securities and companies laws were amended. The Audit Oversight Board was established to provide independent oversight over external auditors of companies. The Securities Industry Dispute Resolution Center was established to facilitate the resolution of small claims by investors. Statutory derivative action was introduced to encourage private enforcement action by shareholders.

3.   In 2011, the Securities Commission Malaysia issued the Corporate Governance Blueprint 2011 (Blueprint) which outlines strategic initiatives aimed at reinforcing self and market discipline. The Malaysian Code on Corporate Governance 2012 (MCCG 2012) is a key deliverable of the Blueprint.

3) question : Corporate governance PRINCIPLES AND RECOMMENDATIONS ?

4) What are the key amendments made in the MCCG 2012?

Some of the key areas that have been strengthened in the MCCG 2012 are as follows:

Roles and responsibilities of the board
The board is required to formalise ethical standards through a code of conduct and ensure company strategies promote sustainability. It is also expected to formalise a board charter.

Composition of the board
The board should establish a Nominating Committee, chaired by a senior independent director, who is responsible to oversee the selection and assessment of directors. The Nominating Committee is charged with developing a set of criteria including policies formalising its approach to diversity of the board.

Independence of independent directors
The tenure of independent directors is capped to a cumulative period of nine years. Upon completion of the nine years, such directors can be re-designated as non-independent directors or in exceptional circumstances; the shareholders may decide that an independent director can remain in that capacity after serving a cumulative term of nine years. The board should provide strong justification to the shareholders in such exceptional circumstances.

The calculation of the tenure starts from the time the individual is first appointed as an independent director of a company. Listed companies should seek shareholders' approval at the nearest AGM before the director reaches the nine year term limit. Shareholders' approval should be sought annually after the nine year term limit. Rotation of independent directors within a group of companies is not advisable. Failure to seek shareholders' approval for the extension of the tenure of any independent director prior to the nine year term limit must be explained in the annual report.

Separation of Chairman and CEO
The positions of Chairman and CEO should be held by different individuals and the chairman must be a non-executive member of the board. Where the Chairman is not an independent director, the board should comprise a majority of independent directors. The term 'Chairman' refers to the Chairman of the Board of Directors while the 'CEO' refers to the Chief Executive of the company, whatever name called, who may or may not be a member of the board. The responsibilities of the Chairman should include leading the board in the oversight of management, while the CEO focuses on the business day-to-day management of the company and this division should be clearly defined in the board charter. Listed companies that do not comply with any of the recommendations of MCCG 2012, including the separation of positions of chairman and CEO, must explain their circumstances and reasons or justifications for doing so in their annual report.

Commitment of directors
The board is required to set out expectations on time commitment for its members and protocols for accepting new directorships. Directors should notify the chairman before accepting any new directorship. Such notification should include an indication of time commitment expected of the new appointment. The Nominating Committee should take cognisance of such new appointment in its annual assessment of directors.

Remuneration of directors
The board should establish formal and transparent remuneration policies and procedures to attract and retain directors. A Remuneration Committee can perform this function.

Risk management framework and internal controls system
The board is required to establish a sound framework to determine the company's level of risk tolerance and actively identify, assess and monitor key business risks.

Integrity of financial reporting
The Audit Committee should ensure financial statements comply with applicable financial reporting standards and assess the suitability and independence of external auditors. These recommendations are in addition to the requirements of an Audit Committee under the Listing Requirements.

Relationship between company and shareholders
The board should encourage shareholder participation at general meetings and voting on resolutions by way of poll. The chairman should inform shareholders of their rights to demand a poll vote at the commencement of a general meeting.The board is encouraged to put substantive resolutions to vote by poll and make an announcement of the detailed results showing the number of votes cast for and against each resolution.

Substantive resolutions are those which are not procedural and administrative in nature; for example, the appointment of directors and auditors, approval for issuance of shares, share buy-backs, related party transactions and resolutions that are tabled by way of supplementary circular to shareholders

REFERENCES:

http://www.sc.com.my/eng/html/cg/cg2012.pdf

http://www.sc.com.my/main.asp?

pageid=1154&menuid=1035&newsid=&linkid=&type=

http://www.investopedia.com/terms/c/corporategovernance.asp#ixzz2JfXMtUQl

http://www.businessdictionary.com/definition/corporate-governance.html#ixzz2JfUYrXUo

http://en.wikipedia.org/wiki/Corporate_governance

QUESTION 2:: ~What Is The Definition Of Corporate Governance ?~

QUESTION 2:

~What Is The Definition Of Corporate Governance ?~

The framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company's relationship with its all stakeholders (financiers, customers, management, employees, government, and the community).

The corporate governance framework consists of :

(1) explicit and implicit contracts between the company and the stakeholders for distribution of responsibilities, rights, and rewards,

(2) procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles.

(3) procedures for proper supervision, control, and information-flows to serve as a system ofchecks-and-balances. Also called corporation governance. See also Cadbury rules and governance.

Read more: http://www.businessdictionary.com/definition/corporate-governance.html#ixzz2JfUYrXUo

Investopedia explains 'Corporate Governance' :

Corporate governance became a pressing issue following the 1992 introduction of the Sarbanes-Oxley Act in the U.S., which was ushered in to restore public confidence in companies and markets after accounting fraud bankrupted high-profile companies such as Enron and WorldCom.

Most companies strive to have a high level of corporate governance. These days, it is not enough for a company to merely be profitable; it also needs to demonstrate good corporate citizenship through environmental awareness, ethical behavior and sound corporate governance practices.

The system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company - these include its shareholders, management, customers, suppliers, financiers, government and the community. Since corporate governance also provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure.

Read more: http://www.investopedia.com/terms/c/corporategovernance.asp#ixzz2JfXMtUQl

WIKIPEDIA explains 'Corporate Governance' :

Corporate governance  the system by which companies are directed and controlled. It involves regulatory and market mechanisms, and the roles and relationships between a company’s management, its board, its shareholders and other stakeholders, and the goals for which the corporation is governed. Lately, corporate governance has been comprehensively defined as a system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks stemming from the devious deeds of these corporate officers.

Corporate governance consists of the set of processes, customs, policies, laws and institutions affecting the way people direct administer or control a corporation. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the corporate goals. The principal players include the shareholders, management, and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.

Read more: http://en.wikipedia.org/wiki/Corporate_governance

QUESTION 1 : ~What Is The Definition Of “Business Ethic” And Why Business Ethics Is Considered “OXYMORON”~

QUESTION 1 :

~What Is The Definition Of “Business Ethic” 

And
Why Business Ethics Is Considered “OXYMORON”~

When a company's ethics will determine its reputation. Good business ethics are essential for the long-term success of an organization. implementing an ethical program will foster a successful company culture and increase profitability. Developing a business ethics program takes time and effort,but doing so will do more than improve business, it will change lives.

"ethics" can be defined as the critical, structured examination of how we should behave,in particular, how we should constrain train the pursuit of self interest when our actions effect others.Business ethic is the study of proper business policies, business situation ,activities and decisions where issue of right and wrong are addressed.

When business people speak about “business ethics” they usually mean about things :-

(1) avoid breaking the criminal law in one’s work-related activity
(2) avoid action that may result in civil law suits against the company
(3) avoid actions that are bad for the company image.

Business ethic can be defined as the critical, structured examination of how people & institutions should behave in the world of commerce. in particular, it involves examining appropriate constrains on the pursuit of self-interest, or profits, when the actions of individuals or firm affects other

Business ethic is not law. it is ethic in the business life "structured examination of how people and institutions should behave in the world of commerce" but business ethics are often guided by law, while other times provide a basic framework that business may choose to follow in order to gain.

By oxymoron, that mean the bringing together of two apparently contradictory concepts like cheerful pessimist of deafening silence.

The main purpose of a business activity is to maximize profit. Many cases have been recorded till date on how ethics cannot be applied in business. Some of the famous cases on wrong conduct of business are the cases of Franklin Jurado guilty to money laundering and the cases of bribery in Malaysia.

In 1996, Franklin Jurado pleaded guilty to laundering $36 million on behalf of Colombian drug lord Jose Santacruz Londono. Using his economic smarts, Jurado moved the cocaine profits far and wide in an effort to make them seem like legitimate earnings.After being funneled through various European banks and companies, the funds would eventually make their way back to Santacruz Londono's businesses in Colombia. He was sentenced to seven-and-a-half years in jail.