Recently, the Business Times Online has published an article “Still a long way to go in substance over form?” which reported the excerpts from the discussion amongst the prominent market players and regulators at the Securities Commission-Business Times Roundtable on Corporate Governance. The discussion quickly captured my serious attention as it has drawn me closer to the thorny issues on corporate governance in Malaysia. I could not agree more but to add that most of the directors of public-listed companies (PLCs) in Malaysia have tried their level best to adhere to the “comply or explain” rule on corporate governance. However, such conformance to the corporate governance statement which is required under the Bursa’s Listing Requirements is of no useful purpose if the form is emphasized over the implementation of the substance.
Although efforts of the regulatory authorities in providing a “Corporate Governance Guide” and Malaysian Code on Corporate Governance to the directors are commendable, it is believed that most directors still have some long distance to travel before even reaching the desired full implementation of the corporate governance best practices. I do not wish to undermine the mental capabilities or professional skills that a director has, rather I would like to point out the importance for the proper establishment of corporate governance mechanisms in order to effectively carry out the best practices adopted. It remains a daunting task as the directors may have no or little time to meticulously craft out a comprehensive corporate governance mechanism or system due to their onerous responsibilities in managing and overseeing the operations and business activities of a corporation.
Most often than not, the duty to comprehend and comply is left with the company secretaries, compliance officers or legal executives who may have no power or authority to implement the corporate governance practices even if they wish to do so. Hence, the Corporate Governance Guide or the Malaysian Code on Corporate Governance would at most serve as letters carved on the stone unless the directors have the initiatives to transform the letters into real corporate actions for the best interest of the company.
To illustrate such box-ticking approach, the Malaysian Alliance of Corporate Directors’ deputy president Paul W. Chan. rightly raised the concern that:
“I sit on some of the boards as well, and when it comes to application, the board is usually advised by the company secretary on corporate governance issues. The company secretary will photocopy the guide and say this is what you should be doing. This are of course some guidelines, but I think the board may not be so sophisticated to device a mechanism of how to apply the guidelines.”