ACT 4193 CORPORATE GOVERNANCE PRACTICE IN MALAYSIA

1. ACT 4193 CORPORATE GOVERNANCE PRACTICE IN MALAYSIA Presented by: Ahmad Rifaat Ashmad Bakar 117463 Wong Poh-E 126025 Tan Huay Yin 127969 Sow Mei Ying 115323 Keek Swee Por 114958 Suzana Sulaiman 117616

2. Corporate Governance • The way of how companies are directed and managed. • Encourages transparency and accountability in management.

3. Cultures differences • Understanding a country’s culture is critical nowadays. • It influences the corporate culture in one’s country. • Arguments had been done by Greert Hofstede on the cultures influence.

4. Hofstede’s Arguments….. • Power distance – unequal distribution of power, important of social class of an individual. • Uncertainty avoidance – attempt to avoid ambiguity, risk and indefiniteness of the future. • Individualism – believe they are masters of their own destiny. • Masculinity – degree to which acquisition of money and things and high quality of life. • Confucian dynamics – Orderly relationship, status, thrifty and sense of shame .

5. Corporate governance practice before Asian financial crisis 1997/ 1998

6. Ownership Concentration of Malaysian Listed Firms • single shareholder controls more than two-thirds of firms • the separation of management from ownership control is rare • about sixty percent of top management of the firms that are not widely held are associated with the family of the controlling shareholders • family control is extensive in more than half of East Asian corporations • in some countries, a significant share of corporate assets are controlled by a small number of families.

7. Corporate Governance PracticeBefore Crisis • merit-based regulatory regime • disclosure-based regulation (DBR) regime

8. Malaysia New Economic Policy (NEP) • 30% share of the economy for the Bumiputra • government owns major shares • economic inequality

9. Ownership concentration • Concentrated corporate ownership structure of companies has given family- based owners and their affiliated companies’ excessive power to pursue their own interests to the detriment of minority shareholders, creditors and other stakeholders. • The degree of ownership concentration in a company determines the distribution of power between its managers and shareholders. • The main possible impact: • Agency problem

10. Agency problem • Owner rules the roost and controls the decision-making process. • This problem arise when the management of public company pursues its own economic self interest instead of maximizing shareholder wealth • Managers may pursue their own economic agenda ahead of the shareholders.

11. Actions to Strengthen Malaysia Corporate Governance

12. Security Commission • SC is committed towards improving the quality of corporate governance amongst listed companies in Malaysia. • set and created several laws and guidelines in encouraging the corporate governance practice among the corporations: - Guidelines on CG for License Institutions. - Guidelines on the Internal Audit Function.

13. Take legal actions or issue reprimand to companies. • Continuously revised and reformed some of the guidelines that need to be amending

14. Corporate governance reforms Why corporate governance reforms? • failure and diminished public confidence in the integrity and quality of the financial reporting process. • lack of awareness of responsibilities among the directors of public listed companies.

15. In March 1999, the Finance Committee released its Report on Corporate Governance, which set out over 70 recommendations for improving corporate governance under three specific areas: - reforms of laws, regulations and rules - the Malaysian Code on CG. - training and education.

16. The SC has traditionally played a co-coordinating role in the development and implementation of the national corporate governance reform agenda: - high-level Finance Committee on CG. - the Implementation Project Team. - Member of Corporate Law Reform Committee. • The SC's commitment towards improving the quality of CG is reiterated in the Capital Market Masterplan.

17. MSWG • General - seeks to be of service to all minority shareholders • Mechanism for collective action - proxy voting on its members behalf • service-oriented and self-financing - capable of generating sufficient income • provides “tools” – (such as brokers, fund managers) - will help in exercise shareholder rights - perform institutional investor responsibilities

18. MSWG’s Mandates • inform the investing public • voice for minority shareholders • deliver the appropriate services and products - in return for entrance fees, subscriptions fees and user-charge fees

19. Objectives of MSWG’s • to become the forum on minority shareholders’ experiences in the context of the MCCG and the SC’s Disclosure Based Regime and the Capital Market Masterplan • to become the centre and focal point of knowledge • to develop and disseminate the educational information of CG • to become the platform to initiate collective shareholder activism • to influence the decision making process • to continuously monitor for breaches and non-compliance in CG practices • to initiate reports to regulatory authorities

20. CONCLUSION

21. Malaysia had learned from the history • Developing and improvement efforts of corporate governance • The Star, “Minister praises recognition of Malaysia's account standards transparency” • NACRA Awards • Therefore, Mr. Crawford is encourage to consider investing in Malaysia as he will have opportunities to make better investments with lesser corporate governance issues

22. Q & A Session