MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012
Legend:
QUESTION
ANSWER
1. Who is the Malaysian Code on Corporate Governance 2012
(“MCCG 2012”) targeted at?
The MCCG 2012 is specifically targeted at companies listed on Bursa
Malaysia. All companies are however encouraged to adopt the principles and
recommendations of MCCG 2012 and
make good corporate governance an integral part of their business dealings and
culture.
2. How do
listed companies comply with the MCCG
2012?
The MCCG 2012 advocates the adoption of standards that go beyond the
minimum prescribed by regulation. Observance of the MCCG 2012 by companies is voluntary. However, listed companies are
required to explain in their annual reports how they have complied with the
recommendations of MCCG 2012. Listed
companies should explain and justify the reasons for non-observance of any of
the recommendations.
3. When will
the MCCG 2012 be effective?
Listed companies with financial year
ending 31 December 2012 onwards will be required to report on MCCG 2012. For example, where a
company's financial year ends on 31 December 2012, disclosure will be required
in relation to the financial year 1 January 2012 - 31 December 2012 and should
be made in the annual report published in 2013. Where a company's financial
year begins on 1 July 2012, disclosure will be required in relation to the
financial year 1 July 2012 - 30 June 2013 and should be made in the annual
report published in 2013.
Listed companies are however encouraged
to make an early transition to the principles and recommendations elaborated in
the MCCG 2012.
4. What is the
rationale for revising the Malaysian
Code on Corporate Governance 2007 (2007 Code) and replacing it with the MCCG 2012?
The 2007 Code was revised after taking into account
changing market dynamics, international developments and the need to
continuously recalibrate and enhance the effectiveness of the corporate
governance framework. The MCCG 2012
is the first major deliverable of the Corporate Governance Blueprint 2011
(Blueprint) launched by the SC in July 2011 and seeks to implement most of the
recommendations in the Blueprint.
5. How is the structure
of the MCCG 2012 different from the
previous codes?
The MCCG
2012 adopts a new structure which provides for greater clarity, more
information to companies and allows for simpler reading. Essentially, each
principle in MCCG 2012 is followed by
recommendations and commentaries.
The principles encapsulate broad
concepts underpinning good corporate governance that companies should apply.
The recommendations are specific standards that contribute towards the
principles. Listed companies are expected to adopt these standards as part of
their governance structure and processes. Each recommendation is followed by a
commentary which seeks to explain and assist companies in understanding the
recommendation.
The MCCG 2012 has included some of the best practices from the 2007
Code. For ease of reference, a comparison is provided under Table 1 in the MCCG 2012.
6. 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 and
approval from the shareholders should be obtained on a yearly basis. The
cumulative period of nine years will begin from the time when a person is first
appointed as independent director of a company.
In addition, the positions of Chairman
and CEO should be held by different individuals. If the Chairman is not an
independent director, the board should comprise a majority of independent
directors.
Commitment
of directors
The board is required to set out
expectations on time commitment for its members and protocols for accepting new
directorships.
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.
Relationship
between company and shareholders
The board should encourage shareholder
participation at general meetings and voting on resolutions by way of poll.
7. Where can I
obtain a copy of the MCCG 2012?
The MCCG
2012 can be downloaded from here.
