Introduction

Corporate governance includes all the relationships and behaviours either the
external or internal to a corporation. In March 2000, the Malaysia code on
corporate governance 2000 (MCCG 2000) was introduced. The issue of the code
represented the notice toward the importance of the corporate governance reform
in Malaysia. The MCCG 2000 had clearly defined the principles and best practices
of corporate governance. The corporate governance model was continuously
enhanced over the years on behalf of protecting the investors interest. By this, the
roles and responsibilities of the board of directors and audit committees were
amended in the revised of MCCG 2007. Yet, the MCCG 2012 substituted for the
MCCG 2007 with arranging the board principles, standards recommendations for
the companies, and some commentaries, which showed that the views of
stakeholders were concerned in the MCCG 2012. So, we can see that the
government is ensuring the excellence in corporate governance framework for
supporting the growth of the Malaysia capital market.
The significance of code on corporate governance for Malaysia
I. JPK1 is an institute where the best practice in corporate governance and the
chairman was directed by the chairman of the federal of Public Listed
Companies. The JKP1 included of both private and public sector. The Malaysian
Code was established by the Working Group on the practices under the JKP1 and
permitted by the High Level Finance Committee on Corporate Governance.
II.

The Code was mainly for the private sector. The demand of the code is to be led
by the private sectors to reform a standard of corporate governance at micro
level. The basically is based from some aspect and self-regulation to establish a
good will between the private and public sector.

III.

An optimal governance framework is allowed to progress their self-regulation

and the company operation as the code set off a basic recommendation on the
best practice. The framework consist within basic which include issues such as
the remuneration, voting for a directors, remuneration, composition of the
board, the use of board committees, their activities and their mandates.

IV.

The implication of the Code is to make the structure more rational and flexible
toward the code of conduct in order to increase the standard of the corporate
governance according to the best pracctice. As a fact of recognition, self
regulation, complemented by market and statutory regulation are more
encouraged.

V.

VI.

The vital factor that impacted the purpose of the code is economic forces. As a
step to reform a corporate enterprise and enable to survive in global
competition. A board need to be considered the key reponsibilities such as
compensating and monitoring in order to reform competitiveness. In addition,
the role of the Code is to ensure boards by separating their responsibilities and
according to the prescription provided and reinforce the operation of the board.
Malaysia must fullfills some issues in order to fit in our company culturals and
rules where meet with the subject matter of international board and their
rational. Thus, careful consideration plays an improtant part in building a
rational jurisdiction.

The approach under the Malaysian code on corporate governance

In fact, the jurisdictions of the world recognize that there are three broad
approaches to the principles of corporate governance, which are prescriptive, nonprescriptive, and hybrid approach. Firstly, a prescriptive approach is the standard
set by specifying desirable practices coupled with a requirement to disclose
compliance with them. Secondly, the practice needs to be disclosed is under nonprescriptive approach. Companys corporate governance needs are different and
directors of companies should address these needs. Lastly, the using of broad
principles and applying flexibly to the varying circumstance of the companies is
related to the hybrid approach.
Each company has their flexibilities to establish their own corporate governance, at
least involve the use of the best practice that involved in prescription. In addition,
company should avoid compliances with forms of box ticking and focus their
judgement on corporate governance and practices fit in the companies. Company
needs to include in the annual report state that a narrative account of how they
had to apply the broad principles set out in the code. The purpose for fully disclose
so that investor can assess the company performance and governance practices.
Comparison of Malaysian Code Corporate Governance 2000, Revised
2007, 2012.
A. Principles of corporate governance
MCCG 2000, 2007
MCCG 2012
I. The
Board
The
board
should Under principle 1:
effectively controls and command the Recommendation 1.2: The board should
company
show clear roles and responsibilities in
allocating its fiduciary and leadership
function.

but this AA 1
combines with A
under
the
Recommendation
MCCG 2000, 2007
II. Board Balance Encompassing of
Executive
directors
and
Nonexecutive directors Reason: No
individual can control over the
boards decision making.
MCCG 2000, 2007
III. Supply of Information Information
must be the most recent to be
supplied to the board Reason: Can be
appropriately
discharge
the
respective duties

(MCCG 2000, 2007)

1 (MCCG 2000, 2007)
principle
1
of
1.2 (MCCG2012).

MCCG 2012
Under principle 1:
Recommendation 1.5: The board should
have procedures to allow its members
get information and advice
Recommendation 1.6: The board should
ascertain it is supported appropriately
qualified
and
capable
company
secretary.

MCCG 2000,2007
IV. Appointments to the Board

MCCG 2000,2007

MCCG 2012, but A III, AA 19, 20, 21 and

22 of
1, recommendation 1.5, 1.6 respectively
of MCCG 2012. Under rec.no 1.6, MCCG
2012 highlights that the role of company
secretaries should be enhanced through
clarifying their role and look into
eligibility requirements required to
upgrade the skills and professional
standards for secretaries of listed
companies.
MCCG 2012
Principle 2: Strengthen Composition
Recommendation 2.1: The board should
form a Nominating Committee which
should exclusively constitute nonexecutive directors, majorly must be
independent.

V. Re-election Reelection is organized at

regular intervals and at least every 3
years for all directors
B. Directors Remuneration
MCCG 2000, 2007
I. Purpose: To attract and retain the
capable directors so the company
can be operated successfully. Results:
Level of remuneration should be
sufficient and component part of
remuneration should be structured
which directly according to corporate
and
individual
performance
for
instance executive directors.
For non-executive directors, they are
rewarded based on their experience
and responsibilities which have been
undertaken.

MCCG 2012
Principle 2: Strengthen composition
Recommendation 2.3: The board should
form
transparent
and
formal
remuneration policies and procedures to
retain and attract directors.
*B I, II, III and AA 24 of MCCG 2007 are
grouped under MCCG 2012 to enhance
corporate
governance
which
strengthens on the remuneration board.

II. Procedure
Procedure should be formal and
transparent for forming policy on
executive remuneration and for
stipulating
the
remuneration
packages of individual directors.
III. Disclosure Companys annual report
should
include
details
of
the
remuneration of every director.
C. Shareholders
MCCG 2000, 2007
I. Dialogue
between
Companies
Investors
Companies
and
shareholders should be well-prepared
for having a dialogue based on the
mutual understanding of objectives.
MCCG 2000, 2007
MCCG 2012
II. The AGM Purpose: To converse with Principle 8: Strengthen relationship
private investors and simultaneously between company and shareholders.

encourage their participation.

Recommendation 8.3 : The board should

enhance efficient communication and
proactive
engagements
with
shareholders
*Part 1:C I, Part 2: CC I and Part 3: II of
MCCG 2007 are grouped under principle
8, rec.no 8.3 of MCCG 2012 to enhance
the previous corporate governance by
re-highlighting
the
importance
of
fostering
relationship
between
shareholders and company in new
revised MCCG 2012 to suit the current
demand.

D. Accountability and Audit

I. Financial Reporting A balanced and
comprehensible assessment of the
companys prospects and position.
II. Internal Control Purpose: To protect MCCG 2012
shareholders
investment
and Principle 6: Recognize and manage risks
companys assets
Recommendation 6.1: The board should
form a sound framework to handle risks
Recommendation 6.2: The board ought
to build an internal audit function which
can directly tender reports to the Audit
Committee.
*D II, BB 7, and BB 8 of MCCG 2007 are
grouped under principle 6, Rec.no 6.1
and 6.2 of MCCG 2012 to enhance the
previous code corporate governance by
requiring the board builds a sound
internal controls to mitigate the risks
and re-emphasize that auditors.
III. Relationship with the Auditors The
board maintains an appropriate
relationship with the auditors by
establishing formal and transparent
arrangements.

[Title is blur, cant view]

AA The board of directors
Principal responsibilities of the Board
MCCG 2000, 2007
MCCG 2012
1. The six main responsibilities of the Under principle 1:
Board :
Recommendation 1.2 The board should
A strategic plan is reviewed and show clear roles and responsibilities in
adopted for the company
allocating its fiduciary and leadership
The conduct of the companys function.
business is business is being wellmanaged.
Commentary:
Principal risks are identified and The board should:
simultaneously launch of suitable
Watching & Managing the conduct
systems to handle those risks.
/ performance of the companys
Succession planning such as
business
appointing, training, fixing the
Recognizing principal risks and
compensation and replacing the
ensuring the launching of suitable
senior management are adopted.
internal controls and mitigation
Investor relations programme or
measures
policy is developed.
Succession
planning
of
an
The companys internal control
effective
shareholder
systems
and
management
communications policy for the
information system are reviewed
company
to ensure the adequacy and
Reviewing the sufficiency and the
integrity
integrity of the internal controls
system company
2012, but this AA 1 (MCCG 2000, 2007)
combines with A 1 (MCCG 2000, 2007)
under
the
principle
1
of
Recommendation 1.2 (MCCG2012).
Constituting an efficient board
MCCG 2000, 2007
MCCG 2012
2. Ensure a balance of authority and Principle 3: Reinforce Independence
power, the division of duties at the Recommendation 3.4: Chairman and

head of the company must be clear.

Besides this, there should be vivid
independent element on the board
where the roles of the chairman and
Chief Executives are combined and
this decision should be publicly
explained.

CEOs positions should be held by

different individuals and the chairman
must be a non- executive member of the
board.
Commentary:
By enhancing the accountability
and facilitates division of duties
between separation of the position
of them.
The chairman should involve
him/herself in leading the board in
the oversight of management.
Whereas the CEO highlights on the
company. o This division should be
explicitly defined in the board
charter.
*AA 2 of MCCG 2000, 2007 is grouped
under principle 3, rec. no 3.4 of MCCG
2012 to enhance the previous corporate
governance
by
mandating
the
separation position of chairman nonexecutive member of the board.

3. Board Balance
Non-executive directors should be capable, credible and have the needed skill
and experience so can independently judge the strategy, performance and
resources. The non-executive directors need to be constituted at least 1/3 of the
membership of the board.
Size of non-executive participation
4. The company should comprise 1/3 of independent directors and significant
shareholders. Each significant shareholder has the right to exercise a majority of
votes during the elections of directors.
5. The board has to determine the appropriate number of directors which rightly
reflects the investment in the company by the residual holders of the shares.
6. The board should reveal an annual basis whether1/3 of the board is
independent, or the significant shareholder satisfies the condition to reflect
board representation, the investment of the minority shareholders in company.
The application of the best practices should be disclosed by the board.

7. The board has the obligatory to identify a senior independent non-executive

director of a board in the annual report.
8. Appointment to the Board A committee of directors that comprises of nonexecutive directors should be appointed by the Board. The committee has the
responsibility for proposing new nominees for the board and for accessing the
director on a basis. The nominating committee should:
[MISSING]
17. Quality of Information Historical or bottom line, financial orientated
information, quantitative performance of the enterprise, customer satisfaction,
market share, market reaction etc which information should be received to the
Board.
18. The chair of the board should undertake the primary responsibility to hold
information necessary for the board to deal with the agenda and to provide this
information to directors on a basis. If the CEO is also the chair, the board should
ensure its agenda items are placed on the agenda and to provide information to
directors.
19. Access to Information MCCG 2000,
2007 All information should be
accessed by the directors within a
company whether in their individual
capacity or a full board.
20. Access to Advice There should be
an accepted procedure for directors
whether as a full board or in their
individual capacity, in developing of
their
responsibilities
to
take
independent professional advice if
necessary.
21. Access to the advice and services
of the company should have on all
directors.

MCCG 2012
Principle 1
Recommendation 1.5 All information
should be accessed by the directors
within a company. Management should
punctually provide precise and fullcompleted information to the board so
the board can effectively discharge its
duties. Occasions may occur when the
board has to find financial, governance,
legal / expert advice in the course of
their duties. When if necessary, the
board should consult advisers to seek
independent professional advice. The
board should seek advice at the
companys expense based on an
acceptable procedure.

22. Secretary should be appointed by

directors so can competently carry Principle 1
out the duties. The board should
identify that the chairman is entitled

[MISSING]

to the support of the company

secretary
in
ensuring
the
effectiveness function of the board.

[TOO MANY MISSING STARTED FROM HERE,

SO I SKIP]
Conclusion In conclusion, we can say that corporate governance is very important
to ensure the adequate and appropriate system of internal in the corporation. With
setting the suitable corporate governance, there will no single individual should
have too much power that may lack the happening of unbalance power,
mismanagement, misuse of the companys asset and corruption in the company.
The Malaysia Code on Corporate Governance targets for the companies that listed
on Bursa Malaysia. All the listed companies must adopt the principles and
recommendations of MCCG and, at the same time they also need to comply with
the rules that set up by Bursa Malaysia. But, if they do not comply with the rules,
they should explain the reasons why they do so. The amendments of the Malaysia
Code on Corporate Governance from 2000, 2007 to 2012 have indicated the needs
of having the effectiveness of the corporate governance framework. The latest
MCCG (2012) do clearly gives the information and it is much simpler to read by
stating recommendations and commentaries of each principle in MCCG 20112.
Therefore, with the strong and good corporate governance, these encourage
transparency and accountability of the company to its business environment. In
other words, a good corporate governance will promote the company a positive
image either to its inside or outside people, which is corporate social responsibility
while maintaining the business sustainability.