More than 180 Malaysian listed firms lack compliance

(The Star) – The survey also reveals that 15% of the firms surveyed had the same individual holding both the chairman and CEO positions while in another 28% of the companies both the chairman and CEO were related.

More than 40% of 450 listed companies surveyed by Bursa Malaysia did not meet satisfactory corporate governance standards.

Among the weaknesses were that companies did not comply with having “real independent” directors on their boards, the audit committee’s report not having enough information and the post of chairman and chief executive being held by the same person.

Bursa Malaysia chief regulatory officer Selvarany Rasiah said many companies lacked strong justifications in re-appointing directors who had served for more than nine years and some were even silent on the matter with the view that it was not crucial to enhance corporate governance standards.

“The justifications provided were not strong and companies need to give out more information than the “usual” reasons,”

“Generally, the reasons given are that the directors have been with the company for several years and know the business of the company quite well and remains independent,” she told reporters during a briefing yesterday.

Based on the corporate governance standards, directors who serve more than nine years on the board are no longer considered “independent”. But many companies tend to keep the directors even though it is not a good corporate governance practise.

Selvarany also said that a small number of listed issuers were silent on their policy involving the tenure of independent directors. “The companies may have an impression that the issue of limiting the tenure of independent directors need not be addressed until it arises,” she said.

Bursa rated each of the 450 listed issuers who participated in the survey that was based on six broad principles of corporate governance and provided them with their individual scores with the best companies attaining scores closer to 100%.

The findings showed that the average achieved by large cap issuers was 72% while the medium-sized companies and small-cap companies scored 66.18% and 62.18% each. Large capitalised companies are categorised as having more than RM1bil in market capitalisation while small cap are those carrying less than RM500mil in value. The medium-sized companies are those with market capitalisation of between RM500mil and RM1bil.

Based on the review of 450 companies, 256 achieved a score above 60% and 194 scored below 60%. Only three companies achieved more than 90%.

Selvarany said Bursa considered companies with more than 60% score as having satisfactory corporate governance standards. The regulator will be conducting focus group sessions for listed issuers with poor disclosure standards.

The survey also reveals that 15% of the firms surveyed had the same individual holding both the chairman and CEO positions while in another 28% of the companies both the chairman and CEO were related,

Bursa in its report stressed that different individuals should hold the positions of chairman and CEO, and the chairman must be a non-executive member of the board.

“We strongly recommend that such listed issuers should at least ensure that there is a strong element of independence in the board by refreshing it with new independent directors,” it said.

In most instances, appointments of new directors were unclear and did not reveal the process involved.

Bursa added that companies needed to provide more information as to how candidates were assessed and the final number of candidates proposed to the board for approval. “It will go a long way to inform shareholders of the robustness of the listed issuer’s board nomination process,” it said.

On the issue of whistle-blowing, Selvarany said Bursa wanted companies to provide the policy that they have in place. “What we want to see is how is it actually being implemented. Are there incidences pursuant to the whistleblowing policy? These are some of the information that we want to see in their annual report,” she said.