New governance code stresses board effectiveness

[hlk]

PETALING JAYA: The new Malaysian Code on Corporate Governance 2012 (MCCG 2012), which aims to strengthen the board effectiveness of listed firms, will supercede the Malaysian Code on Corporate Governance 2007.

The Securities Commission (SC) chairman Tan Sri Zarinah Anwar said in a press release that the MCCG 2012 together with the Corporate Governance Blueprint 2011 launched last July sought to embed a culture of good corporate governance, while addressing the key components of the corporate governance ecosystem to strengthen self and market discipline.

The MCCG 2012 will take effect on Dec 31, although listed companies will be encouraged to make an early transition to the principles and recommendations elaborated in the new code.

“Boards and shareholders must embrace the fact that good business is not just about achieving the desired financial bottom line by being competitive,” Zarinah said.

She said it was equally about creating shareholder value, which can only be sustained by well-informed strategic direction and engaged oversight, which stretch beyond short-term financial performance.

The MCCG 2012 is aimed at enhancing board effectiveness of listed companies through strengthening board composition, reinforcing the independence of directors and fostering commitment of directors.

“Good corporate governance cannot be achieved merely on the strength of regulations. Directors have a duty not just in setting strategic direction and overseeing the conduct of business in compliance with laws, they should also be effective stewards and guardians of the company in respect of ethical values, and ensuring an effective governance structure for the appropriate management of risks and level of internal controls,” Zarinah said.

The new code sets out eight broad principles and specifies the best practices of good corporate governance at a higher level than that expected by regulations, with each principle followed by a series of recommendations, which include the formalisation of a board charter, capping of the tenure of independent directors to nine years and the separation of chairman and chief executive officer roles.

Besides that, it also elaborates on the need for boards to recognise and manage risks and for companies to encourage shareholder participation, while greater emphasis would also be put on the role of the nominating committee in supporting and enhancing the capacity of directors to fulfil the demands of their role.