Governance for Malaysian Companies

Malaysian Code on Corporate Governance 2012 (‘MCCG 2012’) is specifically directed at companies listed on Bursa Malaysia. All companies are encouraged to adopt the principles and recommendations of MCGG 2012 and make good corporate governance an integral part of their business dealings and culture.

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

Composition of the board 
The board should establish a Nominating Committee, chaired by a senior independent director, to oversee the selection and assessment of directors.

The Nominating Committee is responsible for the development of a set of criteria, including policies formalizing its approach to board diversity.

Independence of independent directors
Independent directors can be appointed for no longer than a cumulative period of nine years. After nine years, such directors can be re-designated as non-independent directors or, in exceptional circumstances, a director can continue as an independent director subject to obtaining shareholder approval.

Separation of the roles of Chairman and CEO
The position of Chairman and CEO should be held by different individuals and the chairman must be a non-executive board member. If the Chairman is not an independent director, the board should comprise a majority of independent directors.

The Chief Executive Officer of the company (‘CEO’), may or may not be a member of the board. The responsibilities of the Chairman include leading the board oversight of management, while the CEO will focus on the business day-to-day management of the company. The division of responsibilities 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 chairman and CEO roles, must state the reasons and justification in the 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 a new directorship. Such notification should include an indication of time commitment expected of the new appointment. The Nominating Committee should take cognizance of such new appointment in its annual assessment of directors.

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