Question

One of the recommendations of good governance proposed in the Malaysian Code on Corporate Governance (MCCG 2017) is to have ongoing engagement and communication with stakeholders because it builds trust and understanding between the company and its stakeholders. Based on the recommendation, suggest and illustrate the best practices and guidance of effective engagement and communication to achieve good governance.

(2000 words)

Answer 1

Corporate Governance is defined as the process and structure used to manage and govern the business and affairs of the company. It is directed towards promoting business prosperity and corporate accountability with the only objective of realizing long term shareholder value while taking into consideration the interest of other shareholders.

Corporate Governance provides a control mechanism framework that aids the company in achieving its objectives and preventing unwanted conflicts.

THE MALAYSIAN CODE ON CORPORATE GOVERNANCE

The Malaysian Code on Corporate Governance (MCCG) was introduced in 2000. It has been considered a significant tool for corporate governance reforms and has positively influenced the corporate governance practices of companies. The MCCG reflects global and internationally recognized corporate governance practices and principles which are above and beyond the minimum required by statute, regulations or those prescribed by Bursa Malaysia.

The MCCG was evaluated in 2007 and 2012 to make sure that it remains relevant and is aligned with globally recognized practices and standards.

KEY FEATURES OF NEW APPROACH

• The comprehend, apply and report approach- Care
• the shift from complying or explain to apply or explain an alternative
• Greater focus and clarity on the Intended Outcomes for each practice
• Guidance to assist companies in applying the Practices
• Identify exemplary practices which support companies in moving towards greater excellence- Step Ups

PRACTICES AND GUIDANCE TO ACHIEVE GOOD GOVERNANCE

Good governance identifies the distribution of rights and responsibilities among different stakeholders in the company. Good governance also outlines among other participants the rules and procedures for decision-making, internal control, and risk management.

1) Rule of law - Good governance requires fair and just legal frameworks that are implemented by an impartial regulatory body for the protection of stakeholders.

2) Transparency- It means that information should be provided easily and in an understandable form, should be freely and directly available to those who will be affected by governance policies and practices.

3) Responsiveness-  Good governance demand that organizations and their processes are arranged to serve the best interest of stakeholders within a reasonable time frame.

4) Effectiveness and Efficiency-  The process implemented by the company to produce desired results meet the requirements of its stakeholders while making the best use of its resources.

5) Accountability- Accountability is a major principle of good governance. An organization is accountable to those who will be affected by its actions or decisions as well as applicable rules of law.

6) Risk Management- The likelihood that the organization meets its goals can increase by implementing an appropriate risk and internal control supervision system.

7) Culture and Ethics-  The Board of Directors sets the tone for ethical and responsible decision making throughout the organization.

8) Audit- Organization should have an effective and independent internal audit system that has the confidence and cooperation of both the Board and the management.