PETALING JAYA: Malaysian public-listed companies have showed progress in the adoption of the Malaysian Code on Corporate Governance (MCCG), according to the Securities Commission Malaysia’s Corporate Governance Monitor (CG Monitor) for 2024 released today.
The CG Monitor measures the adoption of MCCG best practices based on corporate governance reports issued by PLCs for financial years ending 2022 and 2023.
Encouragingly, 30 out of the 48 best practices recorded adoption levels of above 90%, highlighting the commitment of many PLCs to sound corporate governance.
The 2024 report, however, underscores three critical areas that require improvement – refreshing board composition, enhancing shareholder participation through physical/hybrid annual general meeting (AGM) and deeper integration of sustainability governance practices.
Emphasising the importance of corporate governance in driving resilient markets, SC chairman Datuk Mohammad Faiz Azmi said: “Corporate governance must evolve to meet new challenges and drive long-term resilience. Companies should align their governance with strategic priorities by integrating sustainability, enhancing stakeholder engagement, and renewing leadership to stay agile.”
As Malaysia strives towards a more inclusive and sustainable economy, he added, the SC will continue to support companies in adopting practices that deliver long-term value for both businesses and the wider community.
The report showed that only 18% of PLCs have adopted the nine-year tenure limit for Independent non-executive directors, highlighting the need for more proactive measures in refreshing board composition.
The retention of long-serving directors for up to 12 years through the two-tier voting process remains prevalent.
PLCs are encouraged to leverage the resources from the Institute of Corporate Directors Malaysia (ICDM), whose directors registry now lists 1,007 board-ready individuals. This offers PLCs a valuable pool of qualified candidates with fresh perspectives, ensuring boards remain dynamic and capable of addressing evolving governance challenges.
The CG Monitor 2024 also found that more than 50% of PLCs continued to conduct virtual or hybrid AGMs this year. However, as announced by the SC on Aug 1, all PLCs must conduct physical or hybrid AGMs starting March 1, 2025. This shift is expected to enhance shareholder engagement, enabling more meaningful participation and interaction at AGMs.
Notably, sustainability governance has seen a significant uplift, with more than 96% of PLCs now adopting practices that focus on board and management oversight of sustainability issues. These include clearer communication of sustainability strategies and targets, and ensuring boards remain informed about relevant sustainability developments.
There remain areas for improvement, such as incorporating sustainability into performance evaluations of boards and senior management and appointing a dedicated person to manage sustainability efforts strategically.
The recently launched National Sustainability Reporting Framework 2 will further strengthen these practices, while the PACE initiative will provide resources such as policy guidance and capacity-building programmes to help PLCs meet sustainability reporting requirements effectively.
This year’s CG Monitor features insights from Professor Mak Yuen Teen on Malaysia’s improving corporate governance landscape, as well as from the ICDM on the importance of improving disclosure of board and senior management remuneration.
