Among the initiatives outline are a mandatory 12-year tenure limit for independent directors and no appointment of serving politicians to boards
by NUR HANANI AZMAN / pic by TMR FILE
THE Securities Commission Malaysia (SC) will impose a mandatory 12-year tenure limit for independent directors and remains against the appointment of serving politicians to boards.
The regulator noted that 46% of listed companies on Bursa Malaysia have at least one long-serving independent director on the board (tenure of nine years or more), with 500 board positions held by the same independent director for more than 12 years, and out of this 89 directors have been in the post for more than two decades.
The SC yesterday released the Corporate Governance (CG) Strategic Priorities 2021-2023 to chart the growth path for the local capital market in the next five years and post-Covid-19.
Executive chairman Datuk Syed Zaid Albar (picture) said as global economies recover from the pandemic, it is critical to “build back better” capital markets and ensure long term economic scarring is minimised, while existing inequities and structural challenges in the economy do not worsen.
“These fault lines must be addressed to enable communities and social systems to get back on their feet, and businesses must play their role in the society as good corporate citizens with a purpose.
“The CG can be instrumental in defining the role of stakeholders within a business and to ensure that when decisions are made, the best interests of all stakeholders are considered,” he said when launching the CG Strategic Priorities 2021-2023 yesterday.
CG Strategic Priorities 2021-2023 comprise 11 initiatives that aim to promote agile and responsible boards; environmental, social and corporate governance (ESG), and governance fitness at boards; investor activism and stewardship.
It also aspires to deepen engagements with youth on CG and widening access to CG data.
The CG Strategic Priorities build on the SC’s previous plan for 2017-2020, where a 90% implementation score was achieved.
It is also an important component of the Capital Market Masterplan 3 which was launched in September 2021.
Strengthening governance and accountability of boards will continue to be SC’s priority, as Malaysia pursues the global goal of addressing climate challenges and building a more sustainable future.
According to Syed Zaid, investors are demanding companies demonstrate commitment coupled with measurable actions to address ESG risks and opportunities.
“This is driven in part by the global agitation to address the climate crisis, to build a brighter and more sustainable future.
“Thus, boards must approach ESG considerations as seriously as business risks and opportunities, to achieve long-term sustainable growth.
“To help build an ESG-ready board, SC will introduce a new onboarding programme for directors with specific focus on sustainability,” he added.
Listed companies are reminded that while it will be mandatory for boards to comprise at least one woman director, they should put in efforts to achieve the target of having 30% women directors to further harness the benefits of having a diverse board.
Currently, only 162 listed companies have at least 30% women on their board.
The SC also released the CG Monitor 2021 report yesterday to highlight progress made in the adoption of the 2017 edition of the Malaysian Code on Corporate Governance.
Adoption levels across the majority of the practices remained positive, with 24 out of the 36 best practices recording adoption levels of at least 90% versus 23 practices in 2019.
The lowest adoption level was for practices relating to the disclosure of senior management remuneration where only 5% of listed companies disclosed the detailed remuneration of their senior management.
“Transparency on pay is critical to promote alignment between pay and performance and for shareholders to evaluate if the incentive structure is driving the right behaviour,” said Syed Zaid.
The CG Monitor 2021 features three thematic essays, including SC’s audit oversight board report on the demographics of audit committees in terms of independence, diversity and competence.