Adoption levels of corporate governance and sustainability best practices by PLCs remain positive

MALAYSIAN public-listed companies (PLCs) continue to take proactive steps to address sustainability risks and opportunities, according to Securities Commission Malaysia’s (SC) Corporate Governance (CG) Monitor 2022 report released today.

It noted that PLCs were progressively adopting the corporate governance best practices as recommended in the Malaysian Code on Corporate Governance (MCCG), including the new best practices introduced in the 2021 revision of the MCCG, particularly those relating to sustainability.

This includes ensuring that the board and senior management undergo regular training to stay abreast of sustainability issues relevant to the company, with 58% of the PLCs having either a dedicated committee or a role in senior management in charge of the strategic management of sustainability for the company.

SC chairman Datuk Seri Dr Awang Adek Hussin (picture) said he was pleased that PLCs continued to strengthen their CG best practices despite the challenging environment.

“Good governance remains the bedrock of business and is key to maintaining transparency and accountability,” he said.

“This ultimately fosters sustainability and helps companies realise long-term benefits including reducing risks, seizing growth opportunities, increasing shareholder value and meeting evolving stakeholders’ expectations,” he added.

Key findings from the CG Monitor include:

  • PLCs have set emissions reduction targets

The SC found that PLCs are setting and committing to emissions reduction targets including achieving carbon-neutrality by 2030 and net zero by 2050. 

This is based on the SC’s review of 50 PLCs that comprise, among others, large PLCs operating in the energy, plantation and transportation and logistics sectors. 

More than half of the PLCs are also disclosing emissions-related data even before the Bursa Malaysia Listing Requirements made the disclosure of such information mandatory. 

All PLCs are required to disclose emissions-related data in annual reports for the financial year ending Dec 31, 2024, and onwards. 

  • More women appointed as independent directors

The CG Monitor also reported that 34% of individuals appointed to boards of PLCs in 2022 were women, compared to 23% in 2021.

It noted that 80% of the women directors appointed were for the position of independent directors, allaying concerns that the mandatory rule of having at least one woman director on the board would lead to the appointment of related individuals such as family members.

  • Disclosure of senior management remuneration remains low

While overall adoption of the MCCG was encouraging and there were improvements in the quality of disclosures for some of the best practices, there were areas that could have been improved further.

In particular, the adoption of practices related to disclosure of senior management remuneration remained disappointingly low, with slight improvement in 2022.

Only 22% (2021: 21%) of PLCs disclosed senior management remuneration in bands of RM50,000 or by the exact amount.

Stakeholders, notably institutional investors, have continued to advocate for greater transparency and alignment between pay and performance, including the Institutional Investors Council Malaysia, as highlighted in its latest revision of the Malaysian Code for Institutional Investors. The SC said it would be undertaking a deeper review on this, along with Bursa Malaysia. — TMR