Sunday, 5 October 2014

ACGA: CG in Malaysia improving

I have written before about the highly regarded country reports by ACGA-CLSA:

The new report "CG Watch 2014" has been published, I have not yet read the full report, but this is what MSWG wrote about it in their weekly newsletter:

Malaysia is on the 4th position out of 10 in the ACGA-CLSA CG Watch 2014.  The Report mentioned that Malaysia was the only country that had consistently edged up in the score from 49% in 2007 to 58% in 2014. The improvements were largely through a mix of government-driven reforms in the corporate sector such as the implementation of CG Blueprint 2011, a state-grandfathered push to require domestic institutional investors to take up CG seriously through the Malaysia Code of Institutional Investors and the creation of one of the region’s better independent Audit Oversight Board (AOB). The Report also recognised the emergence of some aspect of culture emanating through the development of the Institutional Investors Code, and elements of voluntary poll voting with improved communications by PLCs.

The Report highlighted that the Asian region as a whole often gets caught up in politics making legislative changes tough and thus would depend upon strong government support which normally is not forthcoming.  Securities commissions are beginning to take enforcement seriously, but the disclosure of these efforts can be improved.  The Report also highlighted the conflicts of interest in the role of stock exchanges. Shareholder rights in the different markets were said to be weak, especially relating to takeover and major or related-party transactions.

The CG Watch 2014 reported that our country began promoting corporate social responsibility (CSR) well ahead of many other Asian markets, however, the implementation stopped at the aspect of CG financial reporting.

The Report had suggested that PLCs in Malaysia should disclose more details in the AGM agendas and should provide commentary on services covered by non- audit fees.

Lastly, the Report also highlighted several sure ways to be downgraded in the next rating. One; is the continuation of voting by show of hand at AGMs/EGMs and two; if the implementation of the Malaysian Code of Institutional Investors is weak.

While I do agree that in general CG seems to have improved over the last years, there is still the lingering fear that "corporate governance [is] lacking substance".

The real test would be the next recession, "Only when the tide goes out do you discover who's been swimming naked" (a quote from Warren Buffett).

In the meantime, I am looking forward to the detailed report regarding Malaysia and Singapore.

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