by PRIYA VASU / Pic by MUHD AMIN NAHARUL
The Securities Commission Malaysia’s (SC) updated Malaysian Code on Corporate Governance (MCCG), outlined concerns over appointment of active politicians on the board of listed companies.
In a statement released to today, the regulator said it also includes re-appointments of long-serving independent directors that remain a concern.
“As at 31 March 2021, 434 independent directors have tenures of more than 12 years, out of which 49 independent directors have served on the same board for more than 20 years.
“To encourage periodic refresh of board composition, the MCCG recommends that the two-tier voting process be implemented for re-appointment of independent directors with tenures of more than nine years.” noted SC.
The two-tier voting process which was first introduced in 2017, acts as a speed bump for boards and shareholders to carefully evaluate the decision to retain independent directors with tenures of more than 12 years and provide minority shareholders the opportunity to vote against such retention in the second tier voting process.
Following this review of the MCCG, Bursa Malaysia will introduce a 12-year tenure limit without further extension for independent directors in the Listing Requirements with targeted issuance in Q4, 2021.
Bursa will solicit feedback from listed issuers and industry before finalising the implementation timeline.
The MCCG 2021 takes effect today, and the first batch of companies to begin reporting on their adoption of these practices will be those with financial years ending 31 December 2021.
The two-tier voting process will be applicable for resolutions tabled at general meetings held on or after 2 January 2022.
“There is a strong need for good corporate governance and board leadership, especially as companies navigate the prolonged post pandemic recovery period.
The MCCG 2021 supports boards to build long-term resilience through the adoption and implementation of corporate governance policies and practices which will sustain listed companies in meeting challenges in a fast evolving business landscape,” said SC Chairman Datuk Syed Zaid Albar.
The MCCG 2021 also addresses the urgent need for companies to manage
Environmental, Social and Governance (ESG) risks and opportunities, with the introduction of new best practices that emphasise the need for collective action by boards and senior management.
The 2021 update focused on, among others, board policies and practices on the selection and nomination processes/criteria for directors, and further guidance for practices with low levels of adoption as reported in the SC’s annual Corporate Governance Monitor reports.