The way forward - a review of current policy initiatives taken by the Malaysian public sector to address corporate governance issues

Abstract

In the aftermath of the East Asia Economic Crisis which began in July 1997, the Malaysian government has taken various measures to uplift the standards of corporate governance; recognizing the crucial role that enhanced standard of corporate governance can play in boosting investor confidence in the market. In March 1998, a high level Committee was established by the Malaysian Ministry of Finance to examine a framework for corporate governance and to set best practices for the industry. At the same time, and in response to the global debate on corporate governance, the Kuala Lumpur Stock Exchange in conjunction with PricewaterhouseCoopers (PWC) initiated a survey on corporate governance practices of public listed companies and institutional groups. During the same period (March 1998), the Malaysian Institute of Corporate Governance comprising five professional bodies (the Federation of Public Listed Companies, the Malaysian Institute of Accountants, the Malaysian Association of the Institute of Chartered Secretaries and Administrators, the Malaysian Association of Certified Public Accountants and the Malaysian Institute of Directors) was established to draw up guidelines and code of ethics for the business community. The efforts of the Finance Committee have culminated in a report (termed the "Report of the Finance Committee") that sets out recommendations for the improvement of certain key aspects of regulation and the proposed Malaysian Code on Corporate Governance. The proposed code on Corporate governance aims to set out best practices on structures and processes that public listed companies may use in their operation towards achieving the optimal governance framework, and was published in February 1999. Subsequently, the Finance Committee on Corporate Governance issued the Malaysian Code on Corporate Governance in March 2000. However, the most comprehensive and ambitious set of corporate governance reforms which even caught the attel1tion of foreign scholars (e.g. Walker & Fox, 2002) is the Capital Market Master plan which was issued by the Malaysian Securities Commission in February 200l. This paper intends to critically examine the various measures taken by the Malaysian government to date to improve corporate governance practices. Attempts will be made to discuss the various reports issued since the onslaught of the East Asia economic crisis and determine its adequacy as well as its implications to the future state of corporate governance standards in the country.