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A COMPARISON OF THE DEVELOPMENT OF CORPORATE

GOVERNANCE IN MALAYSIA VERSUS SINGAPORE AND HONG


KONG.

The Malaysian Code on Corporate Governance covers three parts, which are 1.0 -The
Principles of Corporate Governance and Best Practices in Corporate Governance and 2.0 Principles and Best Practices for Other Corporate Participants.
1.0

PRINCIPLES OF CORPORATE GOVERNANCE


The principle of Corporate Governance consists of four parts, which are the first one
is Directors, second is Directors Remuneration, third is Shareholders and last but not
least, Accountability and Audit.
1.1

DIRECTORS
Based on corporate governance of Malaysia, Directors consist of The Board,
Board Balance, Supply of Information, Appointments to the Board and Reelection.
As for The Boards, every listed company should be headed by an
effective board which should lead and control the company and establish clear
functions. Meanwhile on Board Balance, the board include a balance of
executive directors and non-executives directors, where in making decision,
no individual or small group of individual can be, dominate. The board should
be supplied in a timely fashion with information in a form and of a quality
appropriate to enable it to discharge its duties, is the part in supplying of
information. Besides that, there should be formal and transparent procedures
for the appointment of new directors to the board. Last but not least, all

directors should be required to submit themselves for re-election at regular


intervals and at least every three years.
Malaysia implied that to establish the clear roles and responsibilities,
The Board together with the Chief Executive Officer (CEO) should develop
the descriptions for their respective functions and should be clearly set out and
understood. Every performance, long-term targets met by the CEO, the board
should develop and agree. Besides, regular review on the division of
responsibilities should be conducted to ensure that the needs are consistently
met.
Looking for the corporate governance of Singapore, the board roles are to
highlight on four main points. The first role is to provide entrepreneurial
leadership, set strategic aims, and ensure that the necessary financial and
human resources are in place for the company to meet its objectives. Second
role is to establish a framework of prudent and effective controls which
enables risk to be assessed and managed. The board also need to review on
management performance and last but not least, to set the companys values
and standards, and ensure that obligations to shareholders and others are
understood and met.

Furthermore, any decisions are to be made by all directors and The


Board should meet regularly, as well as warranted by particular circumstances,

as deemed appropriate by the board members. An article of Association is to


be amended and to provide for telephonic and video conference meetings. The
number of board and board committee meetings held in the year, as well as the
attendance of every board member at these meetings, should be disclosed in
the companys annual report.
Other than that, upon appointment of the director, companies should
provide a formal letter to the director, setting out the directors duties and
obligations. When the director had his first appointed to the board, he should
receive appropriate training. This should include an orientation program to
ensure that incoming directors are familiar with the companys business and
governance practices. It is equally important that directors should receive
further relevant training, particularly on relevant new laws, regulations and
changing commercial risks, from time to time.

As for corporate governance in Hong Kong, The Board should meet regularly
and board meetings should be held at least four times a year. All directors are
given opportunity to include matters in the agenda for regular board meetings.
The most important is, all directors have given an opportunity to attend the
board meeting and notice of at least 14 days should be given. The minutes of
board meetings should be kept by a duly appointed secretary, and can be open
for inspection at any reasonable time on reasonable notice by any director also
should record in sufficient details.
Other than that, if a substantial shareholder or a director has a conflict
of interest in a matter to be considered by the board which the board has
determines to be material; the matter should be dealt with by a physical board

meeting rather than a written resolution. Last but not least, an issuer should
arrange appropriate insurance cover in respect of legal action against its
directors.
1.2

DIRECTORS REMUNERATION
Based on corporate governance of Malaysia, the remunerations consist of the
level and make up of remuneration, the procedure of remuneration and also
the disclosure of remuneration.
The level and make-up of remuneration should be sufficient to attract
and retain the directors needed to run the company successfully. The
component parts of remuneration should be structured so as to link rewards to
corporate and individual performance, in the case of executive directors.
Meanwhile in the case of non-executive directors, the level of remuneration
should reflect the experience and level of responsibilities undertaken by the
particular non-executive concerned.
Procedure explains that the companies should establish a formal and
transparent procedure for developing policy on executive remuneration and for
fixing the remuneration package of individual directors. Meanwhile the
disclosure of remuneration explains the companys annual report should
contain details of the remuneration of each director.
As for Corporate Governance in Singapore, in the remuneration matters, the
procedure for developing remuneration policies, there should be a formal and
transparent procedure. First, The Board should set up a Remuneration
Committee (RC) comprising entirely of non-executive directors, the majority
of whom, including the Chairman and must be independent.

Secondly, the RC will recommend to the Board a framework of


remuneration, and the specific remuneration packages for each directors and
the CEO. It should be submitted for endorsement by the entire Board. Besides,
the RC should cover all aspects of remuneration, including but not limited to
directors fees, salaries, allowances, bonuses, options and benefits in kind.
The level and mix of remuneration explains that the performancerelated elements of remuneration should be designed to align interest of
executive directors with those of shareholders and link rewards to corporate
and individual performance. Besides, there should be a fixed appointment
period for all executive directors. It should not be excessively long or with
onerous removal clauses. The RC should review what compensation
commitments the directors contract of service. The most important is, the
long-term incentives schemes are generally encouraged. The cost and benefits
of long-term incentives schemes should be carefully evaluated. All directors
are encouraged to hold their shares beyond the vesting period, subject to the
need to finance any costs of acquisition and associated tax liability.
Disclosure on remuneration explain that each company should provide
clear disclosure of its remuneration policy, level and mix of remuneration and
the procedure for setting remuneration in the companys annual report. Report
should be done on the remuneration at least the top 5 key executives. This
report should set out the names of directors and earning remuneration which
falls within bands of $250,000. For transparency, the report should disclose the
same details of remuneration of employees who are immediate family
members of a director or the CEO, and whose remuneration exceeds $150,000
during the year.

Corporate Governance in Hong Kong explains that the issuer should disclose
its directors remuneration policy and other remuneration related matters. The
procedure for setting policy should be formal and transparent. The RC should
consult the chairman about their remuneration proposals for other executives
directors. Other than that, the remuneration committees terms of reference
should include as minimum, to make recommendations to the board on the
issuers policy and structure for all directors and on the establishment of a
formal and transparent procedure for developing remuneration policy.
Besides, the RC should consider salaries paid by comparable
companies, time commitment and responsibilities and employment conditions.
The RC also has to review and approve compensation payable to executive
directors and senior management for ay loss or termination of office or
appointment to ensure it is consistent with contractual terms.
The RC also should review and approve compensation arrangements
relating to dismissal or removal of directors for misconduct to ensure that they
are consistent with contractual term, as well as to ensure that there is no
director or any of his associates is involved in deciding his own remuneration.
1.3

SHAREHOLDERS
Based on corporate governance of Malaysia, the shareholders consist of the
dialogue between companies and investors ad also The Annual General
Meeting.
The Corporate Governance in Malaysia explain the dialogue between
companies and investors is companies and institutional shareholders should
each be ready, where practicable to enter into a dialogue based on the mutual
understanding of objectives.

In Malaysia, The Board should facilitate the exercise of ownership


rights by shareholders. Apart from that, The Board should promote effective
communication and proactive engagements with shareholders because direct
engagements with shareholders provides a better appreciation of the
companys objectives, quality of its management and challenges, while also
making the company aware of the expectations and concerns of its
shareholders. Besides, The Boards should encourage poll voting in order to
put substantive resolutions to vote by poll and make an announcement of the
detailed results showing the number of votes cast for and against each
resolution.
Meanwhile in The Annual General Meeting, it explains the companies
should use the AGM to communicate with private investors and encourage
their participation. Thus, The Board should take reasonable steps to encourage
shareholder participation at general meetings. General meetings are an
important avenue through which shareholders can exercise their rights. The
Board also should take active steps to encourage shareholder participation at
general meetings such as serving notices for meetings earlier than the
minimum notice period.
Besides, the board should direct the company to disclose all relevant
information to shareholders to enable them to exercise their rights. The Board
also can demonstrate their commitment to shareholders by ensuring that the
company publishes these measures on its corporate websites.
The Corporate Governance of Singapore highlight the points that companies
should engage in regular, effective and fair communication with shareholders.
The companies should regularly convey pertinent information, gather views or
inputs and address shareholders concerns. In disclosing information,

companies should be as descriptive, detailed and forthcoming possible and


avoid boilerplate disclosures. Besides, companies should disclose information
on a timely basis, where there is inadvertent disclosure made to a selected
group, companies should make the same disclosure publicly to all others as
soon as practicable.
The other point is companies should encourage greater shareholder
participation at AGMs and allow shareholders the opportunity to communicate
their views on various matters affecting the company. The shareholders have
the opportunity to participate effectively and to vote in AGMs. There should
be allowed to vote in person or in absentia as Articles of Association allow for
absentia voting methods such as by mail, email, fax, etc. Besides, there should
be separate resolutions at general meetings on each substantially separate
issue. The chairpersons of the Audit, Nomination and Remuneration
committees should be present and available to address questions at general
meetings.
As for the Corporate Governance of Hong Kong, The Board should be
responsible for maintaining on-going dialogue with shareholders and in
particular, use annual general meetings or other general meetings to
communicate with them and encourage their participation.
Apart from that, for each substantially separate issue at a general
meeting, a separate resolution should be proposed by the chairman of that
meeting. Besides, the issuer should arrange for the notice to shareholders to be
sent for annual general meetings at least 20 clear business days before the
meeting and to be sent at least 10 clear business days for all other general

meetings. The board also should establish a shareholders communication


policy and review it on a regular basis to ensure its effectiveness.
Other than that, the chairman of the board should attend the annual
general meeting. He should also invite the chairmen of the audit,
remuneration, nomination and any other committees to attend. In their
absence, he should invite another member of the committee or failing this his
duly appointed delegate, to attend. These persons should be available to
answer questions at the annual general meeting. The chairman of the
independent board committee should also be available to answer questions to
approve a connected transaction or any other transaction that requires
independent shareholders approval
1.4

ACCOUNTABILITY AND AUDIT


The Corporate Governance of Malaysia highlights three main points under the
accountability and audit. First, Financial Reporting where, the board should
present a balanced and understandable assessment on the companys position
and prospects. Second, Internal Control where, the board should maintain a
sound system of internal control to safeguards shareholders investments and
the companys assets. Third point is Relationship with Auditors where, the
board should establish formal and transparent arrangements for maintaining an
appropriate relationship with the companys auditors.
The board should ensure that financial statements are a reliable source
of information. Apart of that, the Audit Committee should ensure financial
statements comply with applicable financial reporting standards. It must be a
reliable source of financial information.
Besides that, the Audit Committee should have policies and procedures
to assess the suitability and independence of external auditors. The audit

committee should review and monitor the suitability and independence of


external auditors. The independence of external auditors can be impaired by
the provision of non-audit services to the company. The Audit Committee
should therefore establish policies governing the circumstances under which
contracts for the provision of non-audit services can be entered into
procedures that must be followed by the external auditors.
The Singapore codes of Corporate Governance explain that The Board should
present a balanced and understandable assessment of the companys
performance, position and prospects. Apart from that, The Boards
responsibility to provide a balanced and understandable assessment of the
companys performance, position and prospects extends to interim and other
price sensitive public reports, and reports to regulators
Furthermore, The Management should provide all members of the
Board

with management

accounts

which

present a

balanced

and

understandable assessment of the companys performance, position and


prospects on a monthly basis.
Meanwhile for the Audit Committee highlight that The Board should
establish an Audit Committee (AC) with written terms of reference which
clearly set out its authority and duties.
Thus, The Audit Committee should comprise at least three directors, all
non-executive, the majority of whom, including the Chairman, should be
independent. Moreover, The Board should ensure that the members of the
Audit Committee are appropriately qualified to discharge their responsibilities.
At least two members should have accounting or related financial management

expertise or experience, as the Board interprets such qualification in its


business judgement.
Besides, The Audit Committee should have explicit authority to
investigate any matter within its terms of reference, full access to and cooperation by Management and full discretion to invite any director or
executive officer to attend its meetings, and reasonable resources to enable it
to discharge its functions properly.
The Audit Committee should meet with the external auditors, and with
the internal Auditors, without the presence of the company are Management,
and should review the independent of the external auditors annually. The Audit
Committee should review arrangements by which staff of the company may, in
confidence, raise concerns about possible improprieties in matters of financial
reporting or other matters. The Audit Committees objective should be to
ensure that arrangements are in place for the independent investigation of such
matters and for appropriate follow up action. The Board should disclose the
names of the members of the Audit Committee and details of the Committees
activities in the companys annual report.

As for the Corporate Governance of Hong Kong, The board should present a
balanced,

clear

and

comprehensible

assessment

of

the

companys

performance, position and prospects. Apart from that, the Management should
provide sufficient explanation and information to the board to enable it to
make an informed assessment of financial and other information put before it
for approval.

Besides, The directors should include in the separate statement


containing a discussion and analysis of the groups performance in the annual
report, an explanation of the basis on which the issuer generates or preserves
value over the longer term and the strategy for delivering the issuers
objectives.
Moreover, the board should present a balanced, clear and
understandable assessment in annual and interim reports and other financial
disclosures required by the Listing Rules. It should also do so for reports to
regulators and information disclosed under statutory requirements.
Meanwhile in Audit Committee, the Principle state that the board
should establish formal and transparent arrangements to consider how it will
apply financial reporting and internal control principles and maintain an
appropriate relationship with the issuers auditors. The audit committee
established under the Listing Rules should have clear terms of reference.

Thus, Full minutes of audit committee meetings should be kept by a


duly appointed secretary of the meeting draft and final versions of minutes of
the meetings should be sent to all committee members for their comment and
records, within a reasonable time after the meeting. Besides, the audit
committee should make available its terms of reference, explaining its role and
the authority delegated to it by the board by including them on the Exchanges
website and the issuers website.

2.0

PRINCIPLES AND

BEST PRACTICES

FOR

OTHER

CORPORATE

PARTICIPANTS
The Corporate Governance of Malaysia highlights four main points. There are
shareholder voting, dialogue between companies and investors, evaluation of
governance disclosures and last but not least, external auditors.
2.1

Shareholder Voting
Institutional shareholders have a responsibility to make considered use of their
votes. Apart from that, the board should encourage poll voting. The board is
encouraged to put substantive resolutions to vote by poll and make an
announcement of the detailed results showing the number of votes cast for and
against each resolution. Companies are encouraged to employ electronic
means for poll voting. Thus, the chairman should inform shareholders of their
right to demand a poll vote at the commencement of general meeting.

2.2

Dialogue between Companies and Investors


Institutional investors should encourage direct contact with companies,
including constructive communication with both senior management and
board members about performance, corporate governance, and other matters
affecting shareholders interest. Apart from that, the board should promote

effective communication and practice engagements with shareholders. Direct


engagements with shareholders provides a better appreciation of the
companys objectives, quality of its management and challenges, while also
making the company aware of the expectations and concerns of its
shareholders. This will assists shareholders in evaluating the company and
facilitate the considered use of their votes.
Besides, the board members and senior management are encouraged to
have constructive engagements with shareholders about performance,
corporate governance and other matters affecting shareholders interest.
2.3

Evaluation of Governance Disclosures


When evaluating companies governance arrangements, particularly those
relating to board structure and composition, institutional investors and their
advisers should give due weight to all relevant factors drawn to their attention.
Thus, in Malaysia apply that every company should establish corporate
disclosure policies and procedures to ensure comprehensive, accurate and
timely disclosures.
What to highlight is the board should ensure the company has
appropriate corporate disclosure policies and procedures, which the board
should have internal corporate disclosure policies and procedures which are
practical and include feedback from management. These policies and
procedures should ensure compliance with the disclosure requirements as set
out in the Bursa Malaysia Listing Requirements. Thus, board practice should
be apply and guided.

2.4

External Auditors

The external auditors should independently report to shareholders in


accordance with statutory and professional requirements and independently
assure the board on the discharge of its responsibilities under principles DI and
DII of Part I in accordance with professional guidance.
Apart of that, the Audit Committee should have policies and
procedures to assess the suitability and independence of external auditors.
Thus, the Audit Committee should review and monitor the suitability and
independence of external auditors. The independence of non-audit services to
the company and should establish policies governing the circumstances under
which contracts for the provision of non-audit services can be entered into
procedures that must be followed by the external auditors. This principle apply
under uphold integrity in financial reporting.
As for The Corporate Governance of Singapore and the best practice for other
corporate participates, The Singapore Exchange Listing Rules require listed
companies to describe in the annual reports their corporate governance practices with
specific reference to the principles of the Code, as well as disclose and explain any
deviation from any guideline of the Code. Companies are also encouraged to make a
positive confirmation at the start of the corporate governance section of the annual
report that they have adhered to the principles and guidelines of the Code, or specify
each area of non-compliance. Many of these guidelines are recommendations for
companies to disclose their corporate governance arrangements.
Apart from that, the specific principles and guidelines in the Code for
disclosure are set out for ease of reference and there are seventeen points need to be
highlights.
First, Delegation of authority, by the Board to any Board Committee, to make
decisions on certain board matters. Second, The number of board and board

committee meetings held in the year, as well as the attendance of every board member
at these meetings. The type of material transactions that require board approval under
the internal guidelines is the third point. Fourth, where the company considers a
director to be independent in spite of the existence of a relationship as stated in the
Code that would otherwise deem him as non-independent, the nature of the directors
relationship and the reason for considering him as independent should be disclosed.
The fifth and sixth point is the relationship between the Chairman and CEO
where they are related to each other and Composition of nominating committee.
Process for the selection and appointment of new directors to the board is the seventh
point. Eight, any key information regarding directors, which directors are executive,
non-executive or considered by the nominating committee to be independent and nine
point is, process for assessing the effectiveness of the Board as a whole and the
contribution of each individual director to the effectiveness of the Board. Tenth, Clear
disclosure of its remuneration policy, level and mix of remuneration, procedure for
setting remuneration and link between remuneration paid to directors and key
executives and performance.
Meanwhile eleven points highlight the composition of remuneration
committee. Twelve points is about the names and remuneration of each director. The
disclosure of remuneration should be in bands of S$250,000. There will be a
breakdown (in percentage terms) of each directors remuneration earned through
base/fixed salary, variable or performance-related income/bonuses, benefits in kind,
and stock options granted and other long-term incentives.
Besides that, the names and remuneration of at least the top 5 key executives
(who are not also directors) listed in thirteen points. The disclosure should be in bands
of S$250,000 and include a breakdown of remuneration. Fourteen point is where the

remuneration of employees who are immediate family members of a director or the


CEO, and whose remuneration exceed S$150,000 during the year. The disclosure
should be made in bands of $250,000 and include a breakdown of remuneration and
fifteen point is about details of employee share schemes Guideline.
Sixteen points explains that the composition of audit committee and details of
the committees activities and last point, the seventeen point is the adequacy of
internal controls, including financial, operational and compliance controls, and risk
management systems.

The Corporate Governance of Hong Kong and the best practice for other corporate
participates explains on three main points where, the first point is about a narrative
statement explaining how the issuer has applied the principles in the Code, enabling
its shareholders to evaluate how the principles have been applied. Second point is
about a statement as to whether the issuer meets the code provisions. If an issuer has
adopted its own code that exceeds the code provisions, it may draw attention to this
fact in its annual report and last point is for any deviation from the code provisions,
details of the deviation during the financial year.
Under the accountability and audit parts, the principle explain the best practice
that an issuer should announce and publish quarterly financial results within 45 days
after the end of the relevant quarter. These should disclose sufficient information to
enable shareholders to assess the issuers performance, financial position and
prospects. Besides, an issuers quarterly financial results should be prepared using the
accounting policies of its half-year and annual accounts.

Other than that, once an issuer announces quarterly financial results, it should
continue to do so for each of the first 3 and 9 months periods of subsequent financial
years, where it decides not to continuously announce and publish its financial results
for a particular quarter, it should announce the reasons for this decision.