MALAYSIAN CODE ON
CORPORATE GOVERNANCE(as at 28 April 2021)

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MALAYSIAN CODE ON
CORPORATE GOVERNANCE(as at 28 April 2021)

MALAYSIANCODE ON
CORPORATEGOVERNANCE

Securities Commission Malaysia
3 Persiaran Bukit Kiara
Bukit Kiara
50490 Kuala Lumpur
Tel: +603–6204 8000 Fax: +603–6201 5078

COPYRIGHT© 2021 Securities Commission Malaysia

All rights reserved. No part of this publication may be reproduced,
stored in or introduced into a retrieval system, or transmitted in any
form or by any means (graphical, electronic, mechanical, photocopying,recording, taping or otherwise), without the prior written permissionof the Securities Commission Malaysia.

Published on 28 April 2021.

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MALAYSIANCODE ON
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CONTENTWHY CORPORATE GOVERNANCE MATTERS

1

THE MALAYSIAN CODE ON CORPORATE GOVERNANCE

2COMPREHEND, APPLY AND REPORT

5STRUCTURE		

13

PRINCIPLE A

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Board Leadership and Effectiveness•••

Board Responsibilities
Board Composition
Remuneration

PRINCIPLE B

15
30
40
45

Effective Audit and Risk Management••

Audit Committee
Risk Management and Internal Control Framework

PRINCIPLE C

45
50
55

Integrity in Corporate Reporting andMeaningful Relationship with Stakeholders••

Engagement with Stakeholders
Conduct of General Meetings

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WHY CORPORATE GOVERNANCE MATTERS

1.1

Corporate governance is defined as the process and structure used to direct
and manage the business and affairs of the company towards promoting
business prosperity and corporate accountability with the ultimate objectiveof realising long-term shareholder value while taking into account theinterest of other stakeholders1.
Corporate governance provides a framework of control mechanisms that
support the company in achieving its goals, while preventing unwanted
conflicts. The pillars of corporate governance such as ethical behavior,accountability, transparency and sustainability are important to thegovernance of companies and stewardship of investors’ capital. Companies
that embrace these principles are more likely to produce long-term value
than those that are lacking in one or all.

1.2

1Proper corporate governance identifies the distribution of rights andresponsibilities among different participants in the company and outlines
among others the rules and procedures for decision-making, internal
control and risk management. Corporate governance is not only concernedwith shareholder interests but requires balancing the needs of otherstakeholders such as employees, customers, suppliers, society and thecommunities in which the companies conduct their business.

Corporate governance as defined in the High Level Finance Committee Report (1999).

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THE MALAYSIAN CODE ON

CORPORATE GOVERNANCE

2

2.1

The Malaysian Code on Corporate Governance (MCCG) introduced in 2000
has been a significant tool for corporate governance reform and has influenced
corporate governance practices of companies positively.

2.2

The MCCG reflects global principles and internationally recognised practicesof corporate governance which are above and beyond the minimum requiredby statute, regulations or those prescribed by Bursa Malaysia.

2.3

The MCCG permits a more constructive and flexible response to raise standardsof corporate governance. It recognises that there are aspects of corporate
governance where statutory regulation is necessary and others where selfregulation complemented by market regulation is more appropriate.

2.4

The MCCG was reviewed and updated in 2007, 2012, 2017 and 2021 toensure that it remains relevant and is aligned with globally recognised bestpractices and standards.

2.5

The 2017 edition of the MCCG, which supercedes the 2012 edition, took on
a new approach to promote greater internalisation of corporate governanceculture. Key features of the approach are listed in Diagram 1.

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Diagram 1

Key features of the MCCG
The
Comprehend,
Apply andReportapproach –
CARE

2.6

2.7

The shiftfrom comply
or explain
to apply or
explain analternative

Greater focus
and clarity on
the Intended
Outcomes foreach PracticeGuidance
to assistcompanies inapplying thePractices

Identify
exemplarypracticeswhich support
companies inmovingtowards greater
excellence– Step Ups

The 2021 update of the MCCG introduces best practices and guidance to–•improve board policies and processes including those related to director
selection, nomination and appointment;•

strengthen board oversight and the integration of sustainability
considerations in the strategy and operations of companies; and•encourage the adoption of the best practices, particularly those foundto have relatively lower levels of adoption, as highlighted in the SC’s
Corporate Governance Monitor report.

As listed companies are not a homogeneous group, it is necessary to provide
flexibility and proportionality in the application of certain best practices.
Certain practices are applicable only to Large Companies.
Large Companies are:•Companies on the FTSE Bursa Malaysia Top 100 Index; or•Companies with market capitalisation of RM2 billion and above,at the start of the companies’ financial year.

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Once a company is under the category of Large Companies, it will remain as
one for the entire financial year regardless of the change in its status during
the financial year.
These companies should continue applying the practices even if they fall outof the FTSE Bursa Malaysia Top 100 Index or their market capitalisation
decreases below the prescribed threshold. Other listed companies may consider
adopting the practices identified for Large Companies if they aspire to achieve
greater excellence in corporate governance.
2.8

4

While the MCCG is targeted at listed companies, non-listed entities including
state-owned enterprises, public companies, small and medium enterprises(SMEs) and capital market intermediaries are encouraged to embrace thiscode on corporate governance. Non-listed entities should consider applying
the practices in the MCCG to enhance their accountability, transparency andsustainability.

MALAYSIANCODE ON
CORPORATEGOVERNANCECOMPREHEND, APPLYAND REPORTWhy CARE?
3.1

Comprehend, Apply and Report or CARE encourages companies to clearly
identify the thought processes involved in practising good corporate
governance, including providing fair and meaningful explanation of how
the company has applied the practices.

COMPREHEND

Understand and internalise the spirit andintention behind the Principles and Practices
including its intended outcomes.

APPLY

Implement the practices in substance toachieve the intended outcomes of building
and supporting a strong corporate governanceculture throughout the company.

REPORT

Provide fair and meaningful disclosure on thecompany’s corporate governance practices.

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3.2

CARE aims to reinforce mutual trust between companies and theirstakeholders by promoting fair and meaningful disclosures that will be
relied upon by stakeholders to have effective engagements with thecompany. It also promotes a culture of openness and mutual respect that
benefits both the company and its stakeholders.

3.3

CARE will help generate greater interest in corporate governance bestpractices, facilitate assessments and stimulate conversations on corporate
governance. Collectively, these outcomes will raise the standard ofcorporate governance culture of the market overall.

MALAYSIANCODE ON
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4.1

4.1.1

Appreciating the spirit of MCCG requires a clear understanding of thefollowing:
4.1.1

The business case for embracing good corporate governance;
and

4.1.2

The principles of the MCCG and the intended outcomes of thepractices.

THE BUSINESS CASE FOR GOOD CORPORATE GOVERNANCE
Good corporate governance practices instill in companies the required
vision, processes and structures that ensure long-term sustainability. It isalso critical to support good corporate citizenship, which is a commitment
to ethical behaviour in business strategy, operations and culture. In today’s
globalised and interconnected world, investors, creditors and otherstakeholders are increasingly recognising that environmental, social andgovernance considerations are integral to the company’s performanceand long-term sustainability.
Boards should therefore understand and incorporate these dimensions
into their core decision-making processes to ensure that companies operate
successfully and sustain growth.
The board should understand that the key principles of corporate governancesuch as effective controls, corporate culture grounded on ethical behaviour
and transparency, can reduce risk, corruption and mismanagement.

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4.1.2

UNDERSTANDING THE PRINCIPLES OF MCCG AND DESIREDOUTCOMES
To facilitate understanding of the principles and practices, the MCCG
articulates the intended outcomes of each principle and its related practices.
Guidance is also provided to assist in the application of the practices.
The board and management should play their part by, among others:

4.2

2

8

•

Reading and understanding the MCCG, the Bursa Malaysia Corporate
Governance Guide, the CG Monitor report and other supporting
documents2;•

Seeking assistance if further guidance is required to understand the
MCCG;

•

Attending continuous professional development programmes to keep
abreast with corporate governance developments; and•Ensuring employees fully understand and appreciate the value of good
corporate governance processes and procedures through training,awareness programmes and robust communication.

To build an environment that facilitates the comprehension of the MCCG,
it is critical for stakeholders in the ecosystem, such as shareholders,
professional bodies, corporate advisers, corporate governance advocates,
media and the public, to appreciate the spirit and intention of the MCCG.

Corporate Disclosure Guide, Sustainability Reporting Guide, Statement on Risk Management andInternal Controls – Guidelines for Directors and Listed Issuers, and other related documents.

MALAYSIANCODE ON
CORPORATEGOVERNANCE‘Apply’5.1

Applying the principles and practices of the MCCG is not merely a matterof compliance in form with a set of rules. It is about meaningful applicationin substance of good corporate governance practices. This involves a mindset
and culture change, moving away from a box-ticking approach to corporate
governance.
Stakeholder confidence can only be strengthened if companies think
seriously about the reasons for their existence, how they deliver on their
purpose, and then explain, in their own words, how the company applies
the principle and practices of the MCCG. Such transparency and honesty
will support companies in building the trust of its stakeholders andpotential investors.

5.2

The MCCG adopts the ‘apply or explain an alternative’ approach topromote a more meaningful application of good corporate governancepractices.

5.3

Under this new approach, boards should apply the practices by taking into
account the environment that their companies operate in, size andcomplexity of the business, and the nature of risks and challenges faced.

5.4

Where applicable, a listed company should advocate the adoption of thebest practices in the MCCG by its subsidiaries, in order to promote a
holistic adoption of corporate governance practices and culture within thegroup (a listed company and its subsidiaries).

5.5

If the board finds that it is unable to implement any of the MCCG practices,
the board should apply a suitable alternative practice to meet the Intended
Outcome. For Large Companies, the board is also expected to disclosethe measures they have taken or intend to take to enable them to adopt
the MCCG practice(s), and the timeframe required.

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5.6

The Guidance in the MCCG explains how the practices may be applied toachieve the Intended Outcome. The board should do its best to adhere
to the Guidance when implementing the MCCG practices.

5.7

Companies are strongly encouraged to adopt the Step Up practice(s) andwhen they do, to disclose the application of these practices, to demonstrate
their commitment to higher standards of corporate governance. The Step
Up practices encourage companies to go further in achieving corporate
governance excellence. All listed companies, irrespective of size areencouraged to adopt these practices in particular Large Companies.

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6.1

Companies should view corporate governance disclosures as an opportunity
to demonstrate to stakeholders that they have holistic and effective
corporate governance arrangements. They should provide informative
disclosure on their application of the MCCG practices.

6.2

Shareholders and potential investors require access to regular, reliable,comparable and integrated information for them to assess the stewardshipof management, valuation of the company and the ownership structure.
Thus, good corporate governance disclosure can, in the long run, help
attract capital and maintain confidence in the capital market.

6.3

Companies must provide meaningful explanation on how it has appliedeach practice. Where there is a departure from a practice, the company
must–
•
•

provide an explanation for the departure; anddisclose the alternative practice it has adopted and how thealternative practice achieves the Intended Outcome.

In addition to the above, where Large Companies depart from a practice,they are also required to disclose–••

actions which they have taken or intend to take; andthe timeframe required.

for them to achieve application of the prescribed practice.
In doing the above, companies must carefully consider and be closely guided
by the Guidance.

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6.4

Large Companies that depart from any of the practices are required to
identify and disclose a reasonable timeframe for the adoption of thepractice(s). A short timeframe will signify the commitment and seriousnessof the board in adopting good corporate governance practices. A
timeframe of three years or less would be considered as reasonable.
Non-large companies with departures are also encouraged to adopt thepractices within three years or less.

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Boards should disclose the justification for the identified timeframe andactions that it has or will take to adopt the said practice. Shareholders
should also hold boards accountable to these commitments and seek
explanation if these commitments are not met.
6.5

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The standard for meaningful disclosure should not solely be what the board
or management considers meaningful but what stakeholders, including
shareholders consider informative and useful. Companies should carefully
consider whether the disclosures would enable stakeholders to evaluate
how the principles and practices of the MCCG have been applied.

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The structure of the MCCG is as follows:

Principles
The MCCG is based on three key principles of good corporate governance, which
are–
•
•
•

board leadership and effectiveness;
effective audit and risk management; andintegrity in corporate reporting and meaningful relationship with stakeholders.

Intended Outcome
The Intended Outcome provides companies with the line of sight on what they willachieve through the practices.

Practices
Practices are actions, procedures, or processes which companies are expected to adopt
to achieve the Intended Outcome.
The Practices in the MCCG were crafted, taking into consideration the existing
requirements in the law, Bursa Malaysia Listing Requirements, different sizes andcomplexities of Malaysian companies and global developments in corporate
governance best practices.

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The MCCG identifies practices for Large Companies in recognition of the size,
business complexities as well as capacity of these companies to adopt the practices.
While the practices were identified for Large Companies, mid-cap and small-cap
companies are also encouraged to adopt them.
The introduction of the Step Up practices is meant to encourage all companies togo a step further in strengthening the corporate governance practices. All listedcompanies should aspire to achieve excellence in corporate governance, and areencouraged to adopt the Step Up practices, particularly Large Companies.

Guidance
The Guidance that follows each Practice serves to assist companies in applying thePractice to achieve the Intended Outcome.

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PRINCIPLE A

BOARD LEADERSHIPAND EFFECTIVENESS
I.

Board Responsibilities

The board is collectively responsible for the long-term success of a company and thedelivery of sustainable value to its stakeholders. In discharging its fiduciary duties andleadership functions, it is imperative for the board to govern and set the strategic
direction of the company while exercising oversight on management. The board
plays a critical role in setting the appropriate tone at the top, providing thought
leadership and championing good governance and ethical practices throughout thecompany.
While the general roles and responsibilities of boards are well founded, the expectations
on directors have evolved significantly owing to changes in the corporate, economic
and social landscape. Directors are now expected to exercise greater vigilance andprofessional scepticism in understanding and shaping the strategic direction of thecompany.
Effective board leadership and oversight also require the integration of sustainability
considerations in corporate strategy, governance and decision-making, as sustainability
and its underlying environmental, social as well as governance (ESG) issues become
increasingly material to the ability of companies to create durable and sustainablevalue and maintain confidence of their stakeholders. For companies to be resilient,boards need to take a much more holistic view of the business coupled withproactive and effective measures to anticipate and address material ESG risks andopportunities.

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Companies with a well-articulated long-term strategy, and a clear plan on sustainability
including supporting the global transition to a net-zero economy, will distinguishthemselves by building the confidence of their stakeholders, for example, consumers,
investors, policymakers and regulators. However, boards and companies that are notprepared may see their businesses suffer, as these same stakeholders lose confidence
in the ability of the company to adapt to shifts and changes in the global landscape.

Intended Outcome
1.0

Every company is headed by a board, which assumes responsibility
for the company’s leadership and is collectively responsible formeeting the objectives and goals of the company.

Practice

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1.1

The board should set the company’s strategic aims, ensure that the necessary
resources are in place for the company to meet its objectives and review
management performance. The board should set the company’s values
and standards, and ensure that its obligations to its shareholders and otherstakeholders are understood and met.

1.2

A Chairman of the board who is responsible for instilling good corporate
governance practices, leadership and effectiveness of the board is appointed.

1.3

The positions of Chairman and Chief Executive Officer (CEO) are held bydifferent individuals.

1.4

The Chairman of the board should not be a member of the Audit Committee,
Nomination Committee or Remuneration Committee.

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1.5

The board is supported by a suitably qualified and competent company
secretary to provide sound governance advice, ensure adherence to rules andprocedures, and advocate adoption of corporate governance best practices.

1.6

Directors receive meeting materials, which are complete and accurate withina reasonable period prior to the meeting. Upon conclusion of the meeting,the minutes are circulated in a timely manner.

Guidance
G1.1 All directors should objectively discharge their duties and responsibilities at all
times as fiduciaries in the interests of the company. All directors must act withintegrity, lead by example, keep abreast of his responsibilities as a director andof the conduct, business activities and development of the company.
To enable the board to discharge its responsibilities in meeting the goals andobjectives of the company, the board should–•

together with senior management, promote good corporate governanceculture within the company which reinforces ethical, prudent andprofessional behaviour;•

review, challenge and decide on management’s proposals for thecompany, and monitor its implementation by management;•

ensure that the strategic plan of the company supports long-term value
creation and includes strategies on economic, environmental and social
considerations underpinning sustainability;•

supervise and assess management performance to determine whether
the business is being properly managed;•

ensure there is a sound framework for internal controls and risk
management;

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understand the principal risks of the company’s business and recognisethat business decisions involve the taking of appropriate risks;•

set the risk appetite within which the board expects management tooperate and ensure that there is an appropriate risk management
framework to identify, analyse, evaluate, manage and monitor significant
financial and non-financial risks;•

ensure that senior management has the necessary skills and experience,and there are measures in place to provide for the orderly succession ofboard and senior management;•

ensure that the company has in place procedures to enable effective
communication with stakeholders;•

ensure that all its directors are able to understand financial statements
and form a view on the information presented; and•ensure the integrity of the company’s financial and non-financial
reporting. Courts have held that it is the duty of every director to readthe financial statement of the company and carefully consider whether
what they disclose is consistent with the director’s own knowledge ofthe company’s affairs.

G1.2 Key responsibilities of the Chairman include–

18•

providing leadership for the board so that the board can perform its
responsibilities effectively;•

leading the board in the adoption and implementation of good
corporate governance practices in the company.

•

setting the board agenda and ensuring that directors receive complete
and accurate information in a timely manner;

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leading board meetings and discussions;•encouraging active participation and allowing dissenting views to be
freely expressed;•

managing the interface between board and management; and•ensuring appropriate steps are taken to provide effective communication
with stakeholders and that their views are communicated to the board
as a whole.

Where the CEO or executive directors form part of the board, the non-executive
directors are encouraged to meet among themselves at least annually to discuss
among others strategic, governance and operational issues.
The SC has also found prolonged vacancy in the position of Chairman in several
boards of listed companies, and for some, the chairperson of the board
meeting is appointed at each meeting and the role is assumed by different
directors. Such prolonged vacancy and inconsistency in the leadership of theboard is against the principles of good corporate governance. The Chairman
plays a critical role and one should be appointed to ensure there is accountabilityon the execution of the Chairman’s role and the role of the board.
G1.3 Separation of the positions of the Chairman and CEO promotes accountability
and facilitates the division of responsibilities between them. In this regard,
no one individual can influence the board’s discussions and decision-making.
The responsibilities of the Chairman should include leading the board in its
collective oversight of management, while the CEO focuses on the businessand day-to-day management of the company. This division should be clearly
defined in the board charter.
G1.4 Having the same person assume the positions of Chairman of the board, andChairman of the Audit Committee, Nomination Committee or Remuneration
Committee gives rise to the risk of self-review and may impair the objectivityof the Chairman and the board when deliberating on the observations and19

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recommendations put forth by the board committees. Thus, the Chairman of
the board should not be involved in these committees to ensure there is checkand balance as well as objective review by the board.
G1.5 The responsibility of the company secretary has evolved from merely advising on
administrative matters to advising boards on governance matters. The company
secretary through the Chairman, plays an important role in good governanceby helping the board and its committees function effectively and in accordancewith their terms of reference and best practices.
The roles and responsibilities of a company secretary include, but are notlimited to the following:

20•

Manage all board and committee meeting logistics, attend and record
minutes of all board and committee meetings and facilitate board
communications;•

Advise the board on its roles and responsibilities;•

Facilitate the orientation of new directors and assist in director training
and development;•

Advise the board on corporate disclosures and compliance with company
and securities regulations and listing requirements;•

Manage processes pertaining to the annual shareholder meeting;•Monitor corporate governance developments and assist the board inapplying corporate governance practices to meet the board’s needs
and stakeholders’ expectations; and•Serve as a focal point for stakeholders’ communication and engagementon corporate governance issues.

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A suitably qualified company secretary possesses the knowledge andexperience to carry out his functions. These may include knowledge incompany and securities law, finance, governance and other areas ofcompliance such as the listing requirements. The company secretary should
undertake continuous professional development.
G1.6 The Chairman should set the board meeting agenda, and ensure adequate
time is allocated for discussion of issues tabled to the board for deliberation.
Directors should receive information and materials required for the meetingat least five business days in advance of the board meeting. All directors
should ensure that the minutes of meetings accurately reflect the deliberations
and decisions of the board, including any dissenting views and if any director
had abstained from voting or deliberating on a particular matter.
The Chairman should also ensure that board committee meetings are not
combined with the main board meeting. It has come to the SC’s attention thatcertain companies have convened both the board meeting and the audit
committee meeting together and thereafter prepared the minutes separately
to give the impression that the meetings were held at different times.
Board committee meetings should be conducted separately from the board
meeting to enable objective and independent discussion during the meeting.
Particularly the Audit Committee under the Listing Requirements, must comprisenon-executive directors, majority of whom are independent. Further, to form
a quorum of an Audit Committee meeting, the majority of members present
must be independent directors. The latter requirement may not be met, if the
Audit Committee meeting is combined with the main board meeting, where
there may executive directors present.

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Intended Outcome
2.0

There is demarcation of responsibilities between the board, board
committees and management.
There is clarity in the authority of the board, its committees andindividual directors.

Practice
2.1

The board has a board charter which is periodically reviewed and publishedon the company’s website. The board charter clearly identifies–•

the respective roles and responsibilities of the board, board committees,
individual directors and management; and•issues and decisions reserved for the board.

GuidanceG2.1 In establishing a board charter, it is important for the board to set out the
key values, principles and ethos of the company, as policies and strategy
development are based on these considerations. The board charter should set
out among others the governance structure, authority and terms of referenceof the board, its committees and management.
While the board may appropriately delegate its authority to board committees
or management, it should not abdicate its responsibility and should at all
times exercise collective oversight of the board committees and management.
The board should not delegate matters to a committee or management toan extent that would significantly hinder or reduce the board’s ability todischarge its functions. Where the board delegates any of its responsibilities

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it is encouraged to disclose the delegation of authority. Regular review of thedivision of responsibilities should be conducted to ensure that the company isable to adapt to changing business circumstances.
For individual directors, the board charter should outline what is expected fromthem in terms of their commitment, roles and responsibilities as directors. The
charter also assists the board in the assessment of its own performance andthat of its individual directors.
Where the board appoints a Senior Independent Director (SID), the role of the
SID should also be explained in the board charter. This may include the SID
acting as–•••a sounding board for the Chairman;
an intermediary for other directors when necessary; andthe point of contact for shareholders and other stakeholders.

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Intended Outcome
3.0

The board is committed to promoting good business conduct andmaintaining a healthy corporate culture that engenders integrity,transparency and fairness.
The board, management, employees and other stakeholders areclear on what is considered acceptable behaviour and practice inthe company.

Practice
3.1

The board establishes a Code of Conduct and Ethics for the company, andtogether with management implements its policies and procedures, which
include managing conflicts of interest, preventing the abuse of power,
corruption, insider trading and money laundering.
The Code of Conduct and Ethics is published on the company’s website.

3.2

The board establishes, reviews and together with management implements
policies and procedures on whistleblowing3.

Guidance
3.1

3

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The board has the responsibility to set the tone and standards of the company
through the Code of Conduct and Ethics. The Code of Conduct and Ethics
should articulate acceptable practices and guide the behaviour of directors,
management and employees. The policies of the Code of Conduct and Ethics
should be integrated into company-wide management practices and beperiodically reviewed.
Listed issuers are required under the Listing Requirements to establish policies and procedures onwhistleblowing and anti-corruption.

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The Code of Conduct and Ethics should describe measures put in place to–
•
•
•
•
•

handle actual or potential conflict of interest;
prevent corrupt practices which include the offering and acceptance ofgifts and other form of benefits;
encourage the reporting of unlawful or unethical behaviour;
protect and ensure the proper use of the company’s assets; andensure compliance with laws, rules and regulations.

G3.2 The board should encourage employees to report genuine concerns in relation
to breach of a legal obligation (including negligence, criminal activity, breachof contract and breach of law), miscarriage of justice, danger to health andsafety or to the environment and the cover-up of any of these in the workplace.
The board should ensure that its whistleblowing policies set out avenues wherelegitimate concerns can be objectively investigated and addressed. Individuals
should be able to raise concerns about illegal, unethical or questionable
practices in confidence and without the risk of reprisal.

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Intended Outcome
4.0

The company addresses sustainability risks and opportunities in an
integrated and strategic manner to support its long-term strategy
and success.

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Practice
4.1

The board together with management takes responsibility for the governanceof sustainability in the company including setting the company’s sustainability
strategies, priorities and targets.

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The board takes into account sustainability considerations when exercising its
duties including among others the development and implementation ofcompany strategies, business plans, major plans of action and risk
management.
Strategic management of material sustainability matters should be driven by
senior management.

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4.2

The board ensures that the company’s sustainability strategies, priorities andtargets as well as performance against these targets are communicated to its
internal and external stakeholders.

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4.3

The board takes appropriate action to ensure they stay abreast with andunderstand the sustainability issues relevant to the company and its business,
including climate-related risks and opportunities.

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4.4

Performance evaluations of the board and senior management include a
review of the performance of the board and senior management in addressing
the company’s material sustainability risks and opportunities.

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Step Up
4.5

The board identifies a designated person within management, toprovide dedicated focus to manage sustainability strategically, including
the integration of sustainability considerations in the operations of thecompany.

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Guidance
G4.1 The board should proactively consider sustainability issues when it oversees
the planning, performance and long-term strategy of the company, to ensure
the company remains resilient, is able to deliver durable and sustainable value
as well as maintain the confidence of its stakeholders. The role of senior
management is also critical, in integrating sustainability considerations in the
day-to-day operations of the company and ensuring the effective
implementation of the company’s sustainability strategies and plans.
The board and management should continuously engage and consider theviews of its internal and external stakeholders to better understand andmanage the company’s sustainability risks and opportunities. Sustainability
is increasingly being recognised as a material issue to the decision-making
considerations of a company’s stakeholders. Many institutional investors
consider the integration of ESG factors in their investment decision-making
process as part of their fiduciary responsibility and several have committed tousing their votes to hold boards and senior management accountable for the
management and oversight of sustainability.
Stakeholder expectations are heightening across various sustainability issues
such as health and safety, data governance and privacy as well as climate action.

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The global commitment and acceleration of efforts to transition to a net zeroeconomy has also resulted in demand for greater action on the part ofcorporates. Thus, listed companies are also encouraged to evaluate theiroperations and set science based emissions reductions target to support
cleaner and sustainable growth.
G4.2 The company’s sustainability strategies, priorities as well as targets andperformance against these targets should be communicated to the internal andexternal stakeholders of the company. Employee awareness and understandingof the company’s approach to sustainability (‘what we do and why we do it’)will keep them engaged on sustainability issues and support actions onsustainability across the company.

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External stakeholders should also remain informed through the appropriate
means such as engagements and company disclosures. In preparing the latter,the board and senior management should consider, among others, theinformation which stakeholders require to assess the company’s sustainability
risks and opportunities, and ensure the information are disclosed, focusing on
substance and not merely form. This includes how close (or far) is the company
from achieving its targets, and actions the company has or will take to address
any gaps.
G4.3 The boards should have sufficient understanding and knowledge ofsustainability issues that are relevant to the company and its business, todischarge its role effectively. A measure of whether a board has the required
capacity and competency is its ability to tackle questions and deliberate on
sustainability, as well as evaluate the sustainability risks and opportunities,
and make informed decisions on the matter. To ensure the board is equipped
and ready to execute its role, the board should identify its professional
development needs concerning sustainability and ensure these are addressed.
The board should also consider whether a change in its composition or of its
skills matrix is required to strengthen board leadership and oversight ofsustainability issues.

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G4.4 As addressing material sustainability risks and opportunities is the responsibilityof the board and senior management, the performance evaluation of theboard and senior management should consider how well the board and senior
management have performed their respective roles. This may include, whereapplicable, progress against the achievement of sustainability targets. The
performance evaluation should be conducted to promote accountability andidentify issues that may require intervention by the board and/or senior
management. Outcomes from the evaluations and next steps should also beshared with the company’s shareholders.

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PRINCIPLE A

BOARD LEADERSHIPAND EFFECTIVENESS

II. Board Composition
Board composition influences the ability of the board to fulfil its oversight
responsibilities. An effective board should include the right group of people, with
an appropriate mix of skills, knowledge, experience and independent elements that
fit the company’s objectives and strategic goals. The right board composition will
ensure sufficient diversity and independence to avert ‘groupthink’ or ‘blind spots’in the decision-making process. It also enables the board to be better equipped torespond to challenges that may arise and deliver value.

Intended Outcome
5.0

Board decisions are made objectively in the best interests of thecompany taking into account diverse perspectives and insights.

Practice30

5.1

The Nomination Committee should ensure that the composition of the board
is refreshed periodically. The tenure of each director should be reviewed by
the Nomination Committee and annual re-election of a director should becontingent on satisfactory evaluation of the director’s performance andcontribution to the board.

5.2

At least half of the board comprises independent directors. For Large Companies,
the board comprises a majority independent directors.

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5.3

The tenure of an independent director does not exceed a term limit of nine
years. Upon completion of the nine years, an independent director may
continue to serve on the board as a non-independent director.
If the board intends to retain an independent director beyond nine years, it
should provide justification and seek annual shareholders’ approval through a
two-tier voting process.

Step Up
5.4

The board has a policy which limits the tenure of its independent directors
to nine years without further extension.

APPOINTMENT OF AN INDEPENDENT DIRECTOR
Year
1

Year
3

Year
6

Appointment and re-appointment
of independent directors asprovided in Bursa Malaysia’s Listing
Requirements

Year
9

Year
10

and
beyond...

Annual shareholders’ approvalthrough a two-tier voting
process
After serving for nine years,
an independent director may
continue to serve on the board
as a non-independent director.
If the board intends to retain
the independent director
beyond nine years, the board
should provide justificationand seek annual shareholders’approval through a two-tiervoting process.

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5.5

Appointment of board and senior management are based on objective
criteria, merit and with due regard for diversity in skills, experience, age, cultural
background and gender4.

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Directors appointed should be able to devote the required time to serve theboard effectively. The board should consider the existing board positions heldby a director, including on boards of non-listed companies. Any appointmentthat may cast doubt on the integrity and governance of the company should
be avoided.
5.6

In identifying candidates for appointment of directors, the board does not
solely rely on recommendations from existing directors, management or
major shareholders. The board utilises independent sources to identify suitably
qualified candidates.

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If the selection of candidates was based on recommendations made by existing
directors, management or major shareholders, the Nominating Committee
should explain why these source(s) suffice and other sources were not used.
5.7

4

5

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The board should ensure shareholders have the information they require to
make an informed decision on the appointment and reappointment of adirector5. This includes details of any interest, position or relationship thatmight influence, or reasonably be perceived to influence, in a material respect
their capacity to bring an independent judgement to bear on issues before
the board and to act in the best interests of the listed company as a whole.
The board should also provide a statement as to whether it supports theappointment or reappointment of the candidate and the reasons why.

Listed companies are required under the Listing Requirements to ensure that each of its directors
have the character, experience, integrity, competence and time to discharge their role effectively.
Listed companies are required under the Listing Requirements to provide a statement accompanying
notices of general meetings on details of individuals who are standing for election as directors. The
information includes the name, age, gender, working experience and any conflict of interest as well
as directorship in other companies.

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5.8

The Nominating Committee is chaired by an independent director or the
Senior Independent Director.

5.9

The board comprises at least 30% women directors.

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5.10 The board discloses in its annual report the company’s policy on gender
diversity for the board and senior management.

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Guidance
G5.1 In appointing or reappointing a board member, the board should consider
the current composition of the board and the tenure of each director on
the board. The SC’s review show that there are long serving independent
non-executive directors, including Chairmen who have been in the same
position for more than 40 years6. The board should review its compositionand evaluate the need to bring new skills and perspective to the boardroom.
G5.2 Board composition should support objective and independent deliberation,
review and decision-making. A board comprising a majority of independent
directors allows for more effective oversight of management.
G5.3 In considering independence, it is necessary to focus not only on whether adirector’s background and current activities qualify him or her as independent
but also whether the director can act independently of management.
Stakeholders are increasingly concerned about the potential negative impactthat directors’ long tenure may have on their independence. The long tenuresof independent directors and familiarity may erode the board’s objectivity.
Due to long or close relationship with board and management, an independent
director may be too sympathetic to their interests or too accepting of theirwork. There could also be occasions where an independent director may
become a ‘dependent’ director due to prolonged insular recruitment processes
and attractive remuneration packages and material benefits.
6

Source: SC. Data is as at 31 December 2020.

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Large Companies are not encouraged to retain an independent director fora period of more than nine years.
To justify retaining an independent director beyond the term limit of nine
years, the board should undertake a rigorous review to determine whetherthe ‘independence’ of the director has been impaired. Findings from thereview should be disclosed to the shareholders for them to make an informed
decision.

Two-tier Voting Process
For Practice 5.3, companies should use the two-tier voting process in seeking
annual shareholders’ approval to retain an independent director beyond nine
years.
Under the two-tier voting process, shareholders’ votes will be cast in thefollowing manner at the same shareholders meeting:••Tier 1: Only the Large Shareholder(s) of the company votes; andTier 2: Shareholders other than Large Shareholders votes.

For the purposes of Practice 5.3, Large Shareholder means a person who–
•
•
•
•

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is entitled to exercise, or control the exercise of, not less than 33% of
the voting shares in the company;
is the largest shareholder of voting shares in the company;
has the power to appoint or cause to be appointed a majority of thedirectors of the company; or
has the power to make or cause to be made, decisions in respect of thebusiness or administration of the company, and to give effect to suchdecisions or cause them to be given effect to.

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The decision for the above resolution is determined based on the vote of Tier
1 and a simple majority of Tier 2. If there is more than one Large Shareholder,a simple majority of votes determine the outcome of the Tier 1 vote.
The resolution is deemed successful if both Tier 1 and Tier 2 votes support theresolution.
However, the resolution is deemed to be defeated where the vote between the
two tiers differs or where Tier 1 voter(s) abstained from voting.

G5.5 There should be a formal, rigorous and transparent process for the appointment
of directors (including reappointments) and senior management. The candidate
selection process should be guided by clear criteria as required under the
Listing Requirement7 and guidance in this Code. In evaluating the ability ofa director to perform his role effectively, the board should consider among
others whether a director is ‘over stretched’ in terms of his commitments tothe board commitments, to meet the demands and expectations of the role.
The board must also be mindful of the recommended best practices in relation toboard appointments. In the case of State-owned Enterprises (SOE), the OECD
Guidelines on Corporate Governance of State Owned Enterprises recommendthat the SOE board composition should allow the exercise of objective andindependent judgment. All board members including public officials, should
be nominated based on qualifications and have equivalent legal responsibilities(Principle VII.C). Further, the Guidelines recommend that persons linked directlywith the executive powers such as heads of state, heads of government andministers, should not serve on boards as this would cast serious doubt on the
independence of their judgment. Additionally, a listed company is discouraged
from appointing an active politician8 as a director on its board.
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Under the Listing Requirements, the board, CEO and Chief Financial Officer (CFO) must possess thecharacter, experience, integrity, competence and time to effectively discharge their role effectively.
A person is considered politically active if he is a Member of Parliament, State Assemblyman or holds
a position at the Supreme Council, or division level in a political party.

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G5.6 The board should use a variety of approaches and sources to ensure that it isable to identify the most suitable candidates for board position. This may
include sourcing from a directors’ registry and open advertisements or the useof independent search firms.

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The company should disclose in its Corporate Governance Report (CG Report)
how candidates for board positions were sourced, including, whether suchcandidates were recommended by the existing directors, members of senior
management or major shareholders.
Individuals standing for election should also be transparent and make thenecessary declaration to the board and shareholders on any existing or
potential conflict of interest including whether they have a business, family orother special relationship within or outside of the company that could affectthe execution of their role as directors on the board.

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G5.7 The appointment and re-appointment of directors is a critical aspect ofcorporate governance, which has an impact on the leadership of companies.
As such, shareholders should have the information they require to makean informed decision on these appointments. The information should be
included in the notes accompanying the notice of the general meeting.

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G5.8 As chair of the Nominating Committee, the independent director or a Senior
Independent Director shall–

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lead the succession planning and appointment of directors, andoversee the development of a diverse pipeline for board andmanagement succession, including the future Chairman, Executive
Directors and CEO; and•lead the annual review of board effectiveness, ensuring that theperformance of each individual director and Chairman of the board
are independently assessed.

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G5.9

All boards should comprise at least 30% women directors. Numerous
studies have proven the business case for board diversity, in particular theparticipation of women on boards. If the composition of women on a board
is less than 30%, the board should disclose the action it has or will be taking
to achieve 30% or more and the timeframe to achieve this. A reasonable
timeframe is one that is three years or less.

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The board should also review the participation of women in senior
management to ensure there is a healthy talent pipeline.
G5.10 The participation of women in decision-making positions should not be
focused on board positions alone but should be broadened to include
members of senior management as the same benefits apply. Thus, theboard should establish gender diversity policies to support the participationof women on the board as well as senior management.
The SC’s review of corporate governance disclosures shows that gender
diversity policies and disclosures relating thereto remain poor and vague.
Boilerplate and generic statements are often used to describe the board’s
approach on diversity. Disclosing aspirational statements such as ‘achieving
a culture of inclusivity’, while worthwhile, are unlikely to be effective in
improving gender diversity unless they are supported by concrete action
numerical targets and a mechanism to track performance against thesetargets.

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Intended Outcome
6.0

Stakeholders are able to form an opinion on the overall effectivenessof the board and individual directors.

Practice
6.1

The board should undertake a formal and objective annual evaluation todetermine the effectiveness of the board, its committees and each individual
director. The board should disclose how the assessment was carried out its
outcome, actions taken and how it has or will influence board composition.

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For Large Companies, the board engages independent experts9 at least
every three years, to facilitate objective and candid board evaluations

Guidance
G6.1 An objective and well-managed board evaluation process can lead to
substantial improvement in board effectiveness, bringing significant benefits
to the company. There are many ways in which board evaluations can be
carried out such as through self-assessment, peer review, facilitated by thecompany secretary or an external facilitated independent board evaluation,with oversight of the entire process and methodology by the Nominating
Committee. Given that every board is different and their needs, roles, priorities
and capacities vary depending on the company’s size and stage in its life
cycle, a box-ticking approach to evaluation is ineffective and unacceptable.

938

Independence in this context means no connection with the company, directors or major
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Further board evaluations should not focus entirely on historical assessmentof directors’ performance but also include forward looking considerations,such as mapping current board competencies against those required, todrive the company’s future strategies. The board evaluation should also help
determine the upskilling or development needs of individual directors or theboard, collectively.
A board evaluation which is periodically facilitated by a professional, experienced
and independent party will lend greater objectivity to the assessment by
providing an unbiased perspective on a director’s performance and his ability
to contribute effectively to the board.
The annual assessment on individual directors should include an evaluation of
their:••••

Will and ability to critically challenge and ask the right questions;Character and integrity in dealing with potential conflict of interest
situations;
Commitment to serve the company, due diligence and integrity; andConfidence to stand up for a point of view.

In disclosing the evaluation carried out on effectiveness of the board, itscommittees and individual directors, the Nominating Committee should disclose
the following information in its CG Report:
•

•
•
•
•

How the evaluation was conducted, the criteria used such as theassessment of fit and properness, contribution and performance,
calibre and personality of directors;
Whether an independent expert was engaged, or was it internallyfacilitated;
Key strengths and/or weaknesses that were identified from the evaluation;
Steps or enhancements proposed to be undertaken to mitigate or address
the weaknesses identified; andimpact of the evaluation on board composition (if any).

Sparse and/or vague disclosures on the evaluation methodology and outcomesshould be avoided.

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PRINCIPLE A

BOARD LEADERSHIPAND EFFECTIVENESS

III. Remuneration
Directors’ remuneration, which is well structured, clearly linked to the strategic
objectives of a company, and which rewards contribution to the long-term successof the company is important in promoting business stability and growth. However,pay policies which do not appropriately link directors’ remuneration to company
strategy and performance can diminish shareholders’ returns, weaken corporate
governance and reduce public confidence in business.

Intended Outcome
7.0

The level and composition of remuneration of directors and senior
management take into account the company’s desire to attract andretain the right talent in the board and senior management to drive
the company’s long-term objectives.
Remuneration policies and decisions are made through a transparent
and independent process.

Practice
7.1

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The board has remuneration policies and procedures to determine theremuneration of directors and senior management, which takes into accountthe demands, complexities and performance of the company as well as skills
and experience required. The remuneration policies and practices should
appropriately reflect the different roles and responsibilities of non-executive

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directors, executive directors and senior management. The policies andprocedures are periodically reviewed and made available on the company’s
website.
7.2

The board has a Remuneration Committee to implement its remuneration
policies and procedures including reviewing and recommending mattersrelating to the remuneration of board and senior management.
The Remuneration Committee has written Terms of Reference which deals
with its authority and duties and these Terms are disclosed on the company’s
website.

Guidance
G7.1 Fair remuneration is critical to attract, retain and motivate directors and senior
management. The remuneration package should take into account thecomplexity of the company’s business and the individual’s responsibilities. In
addition, the remuneration should also be aligned with the business strategy
and long-term objectives of the company.

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In determining the appropriate level of remuneration for directors and senior
management, the board should also take into consideration the company’s
performance in managing material sustainability risks and opportunities.
The remuneration and incentives for independent directors should not conflictwith their obligation in bringing objectivity and independent judgment on
matters discussed.
G7.2 Establishing a Committee to assist the board in developing and administratinga fair and transparent procedure for setting policy on remuneration of
directors and senior management is important because this would ensurethat remuneration packages are determined on the basis of the directors’ and41

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senior management’s merit, qualification and competence, while having
regard to the company’s operating results, individual performance andcomparable market statistics.
The Committee should only consist of non-executive directors and a majorityof them must be independent directors, drawing advice from experts, if
necessary.
Executive directors should not be involved in discussions to decide on theirremuneration. Directors who are shareholders and controlling shareholders
with a nominee or connected director on the board should also abstain fromvoting on the resolution to approve directors’ fees at the general meeting.
For example, where an institutional investor is the controlling shareholder ofthe company and have a nominee director on the board, the institutional
investor should voluntarily abstain from voting on the resolution to approve
the remuneration of the director at the general meeting.
Listed companies are encouraged to table separate resolutions on the approvalof the fees of each non-executive director.

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Intended Outcome
8.0

Stakeholders are able to assess whether the remuneration of directors
and senior management commensurates with their individual
performance, taking into consideration the company’s performance.

Practice
8.1

There is detailed disclosure on named basis of the remuneration of individual
directors. The remuneration breakdown of individual directors includes fees,salary, bonus, benefits in-kind and other emoluments10.

8.2

The board discloses on a named basis the top five senior management’s
remuneration component including salary, bonus, benefits in-kind and other
emoluments in bands of RM50,000.

Step Up
8.3

10

Companies are encouraged to fully disclose the detailed remunerationof each member of senior management on a named basis.

Listed companies are required under the Listing Requirements to disclose annually the remunerationof all directors of the listed company (including the remuneration for services rendered to the listedcompany as a group) for the financial year on a named basis, stating the amount received or to bereceived from the listed company and on a group basis respectively. The disclosure must include theamount in each component of the remuneration (e.g. directors’ fees, salaries, percentages, bonuses,
commission, compensation for loss of office and benefits in kind based on an estimated money value)
for each director.

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Guidance
G8.1 The detailed disclosure allows shareholders to make an informed decision
when voting on the approval of directors’ remuneration and to consider theappropriate remuneration package taking into account the responsibilities ofthe directors.
G8.2 The disclosure of how the remuneration is measured allows stakeholders
to understand the link between senior management remuneration and thecompany’s performance. This will also enable stakeholders to determine
whether the remuneration is fair and able to attract and retain talent.

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PRINCIPLE B

EFFECTIVE AUDITAND RISK MANAGEMENTI.

Audit Committee

An effective Audit Committee can bring transparency, focus and independent judgment
needed to oversee the financial reporting process. However, the ultimate responsibility
for a company’s financial reporting process rests with the full board.
The Audit Committee plays a key role in a company’s governance structure. An
independent Audit Committee is better positioned to rigorously challenge and ask
probing questions on the company’s financial reporting process, internal controls,
risk management and governance.
The appropriate level of knowledge, skills, experience and commitment of its members
is critical to the Audit Committee’s ability to discharge its responsibilities effectively.
A strong understanding of financial reporting process complemented with a wide
range of diverse perspectives can significantly strengthen the quality of Audit
Committee deliberations.

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Intended Outcome
9.0

There is an effective and independent Audit Committee.
The board is able to objectively review the Audit Committee’sfindings and recommendations.
The company’s financial statement is a reliable source of information.

Practice
9.1

The Chairman of the Audit Committee is not the Chairman of the board.

9.2

The Audit Committee has a policy that requires a former partner of the external
audit firm of the listed company11 to observe a cooling-off period of at least
three years before being appointed as a member of the Audit Committee.

9.3

The Audit Committee has policies and procedures to assess the suitability,
objectivity and independence of the external auditor to safeguard the quality
and reliability of audited financial statements.

Step Up
9.4

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The Audit Committee should comprise solely of independent directors.

This applies to all former partners of the audit firm and/or the affiliate firm (including those providing
advisory services, tax consulting etc.)

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9.5

Collectively, the Audit Committee should possess a wide range of necessary
skills to discharge its duties. All members should be financially literate,competent and are able to understand matters under the purview of the
Audit Committee including the financial reporting process.
All members of the Audit Committee should undertake continuous professional
development to keep themselves abreast of relevant developments inaccounting and auditing standards, practices and rules.

Guidance
G9.1 The Chairman of the Audit Committee is responsible for ensuring the overall
effectiveness and independence of the Committee. Having the positions ofChairman of the board and Chairman of the Audit Committee assumed by
the same person may impair objectivity of the board’s review of the Audit
Committee’s findings and recommendations.
The Chairman of the Audit Committee together with other members of the
Audit Committee should ensure among others that–•

the Audit Committee is fully informed about significant matters related tothe company’s audit and its financial statements and addresses thesematters;•

the Audit Committee appropriately communicates its insights, views andconcerns about relevant transactions and events to internal and external
auditors;•

Audit Committee’s concerns on matters that may have an effect on thefinancial or audit of the company are communicated to the external
auditor; and•there is co-ordination between internal and external auditors.

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G9.2 The cooling off period safeguards the independence of the audit by avoiding
the potential threats which may arise when a former partner of the external
audit firm is in a position to exert significant influence over the audit andpreparation of the company’s financial statements.
G9.3 In assessing the suitability, objectivity and independence of the external
auditor the Audit Committee establishes policies and procedures that address
among others:

12

48

•

The criteria to guide decisions on the appointment and re-appointmentof the external auditor. The criteria should include an assessment of thecompetence, audit quality and resource capacity of the external auditor
in relation to the audit. The assessment should also consider information
presented in the Annual Transparency Report of the audit firm. If theaudit firm is not required to issue an Annual Transparency Report12, theAudit Committee is encouraged to engage the audit firm on matters
typically covered in an Annual Transparency Report including the audit
firm’s governance and leadership structure as well as measures
undertaken by the firm to uphold audit quality and manage risks;•

The appropriateness of audit fees to support a quality audit;•

Requirement for non-audit services to be approved by the Audit
Committee before they are rendered by the external auditor and its
affiliates while taking into account the nature and extent of the nonaudit services and the appropriateness of the level of fees. The Audit
Committee should avoid situations where the audit firm inadvertently
assumes the responsibilities of management in the course ofproviding non-audit services. Such a situation may be a breach of the
independence requirements on the part of the audit firm; andAudit firms registered with the Audit Oversight Board (AOB) with more than 50 public interest entity(PIE) audit clients; and total market capitalisation of the audit firm’s PIE clients above RM10 billion at
the end of the calendar year for two consecutive years are required to issue an Annual Transparency
Report. For other AOB-registered audit firms that do not meet the above criteria, they are encouraged
to issue an Annual Transparency Report.

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Requirement to obtain written assurance from the external auditor
confirming that they are, and have been, independent throughout the
conduct of the audit engagement in accordance with the terms of all
relevant professional and regulatory requirements; and•The conduct of an annual evaluation on the performance of theexternal auditor and undertaking follow-up measures, where required.

G9.5 The Audit Committee members are expected to be financially literate andhave sufficient understanding of the company’s business. This would enable
them to continuously apply a critical and probing view on the company’s
financial reporting process, transactions and other financial information, andeffectively challenge management’s assertions on the company’s financials.
The Audit Committee should demonstrate an appropriate level of vigilanceand scepticism towards, among others, detection of any financial anomalies
or irregularities in the financial statements.
Where there are significant matters requiring judgement, the Audit Committee
should ask probing questions to ascertain whether the financial statements
are consistent with operational and other information known.
The Audit Committee should review and provide advice on whether thefinancial statements taken as a whole provide a true and fair view of thecompany’s financial position and performance.

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PRINCIPLE B

EFFECTIVE AUDITAND RISK MANAGEMENT

II. Risk Management and Internal Control
Framework
Proper risk management and internal control are important aspects of a company’s
governance, management and operations. Risk management focuses on identifying
threats and opportunities while internal control helps counter threats and takes
advantage of opportunities. Proper risk management and internal control assist
companies in making informed decisions about the level of risk that they want totake and implement the necessary controls to effectively pursue their objectives.
Successful companies integrate effective governance structures and processes withperformance-focused risk management and internal control at every level of thecompany and across all operations.
The board of directors is responsible for the company’s risk management and internal
control systems. It should set appropriate policies on internal control and seek
assurance that the systems are functioning effectively. The board must also ensurethat the system of internal control manages risks and forms part of its corporate
culture.

Intended Outcome
10.0

Companies make informed decisions about the level of risk they wantto take and implement necessary controls to pursue their objectives.
The board is provided with reasonable assurance that adverse impact
arising from a foreseeable future event or situation on the company’s
objectives is mitigated and managed.

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Practice
10.1

The board should establish an effective risk management and internal
control framework.13

10.2

The board should disclose the features of its risk management and internal
control framework, and the adequacy and effectiveness of this framework.

Step Up
10.3

The board establishes a Risk Management Committee, which comprises
a majority of independent directors, to oversee the company’s risk
management framework and policies.

Guidance
G10.1 The board should determine the company’s level of risk tolerance andactively identify, assess and monitor key business risks to safeguard
shareholders’ investments and the company’s assets. Internal controls areimportant for risk management and the board should be committed to
articulating, implementing and reviewing the company’s internal control
framework.

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See also Guidance 1.1.

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G10.2 The board should, in its disclosure, include a discussion on how key risk areas
such as finance, operations, regulatory compliance, reputation, cyber security
and sustainability were evaluated and the controls in place to mitigate or
manage those risks. In addition, it should state if the risk management
framework adopted by the company is based on an internationally recognised
risk management framework.
The board should also disclose whether it has conducted an annual review
and periodic testing of the company’s internal control and risk management
framework. This should include any insights it has gained from the review andany changes made to its internal control and risk management framework
arising from the review. Where information is commercially sensitive andmay give rise to competitive risk, disclosure in general terms is acceptable.

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Intended Outcome
11.0

Companies have an effective governance, risk management andinternal control framework and stakeholders are able to assess theeffectiveness of such a framework.

Practice
11.1

The Audit Committee should ensure that the internal audit function iseffective and able to function independently.

11.2

The board should disclose–••••

whether internal audit personnel are free from any relationships orconflicts of interest, which could impair their objectivity and independence;
the number of resources in the internal audit department;
name and qualification of the person responsible for internal audit;
andwhether the internal audit function is carried out in accordance with arecognised framework.

Guidance
G11.1 An internal audit function helps a company to accomplish its goals bybringing an objective and disciplined approach to evaluate and improve theeffectiveness of risk management, internal control, anti-corruption, whistleblowing and governance processes. This function serves as an importantsource of advice for the Audit Committee and the board concerning areasof weaknesses or deficiencies in internal processes to facilitate appropriate
remedial measures by the company.

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Internal audit should be carried out objectively and is independent from the
management of the company and the functions which it audits. Thus, theperson responsible for the internal audit reports must directly to the Audit
Committee.
The Audit Committee should also decide on among others the–••••appointment and removal;
scope of work;
performance evaluation; andbudget;for the internal audit function.
In developing the scope of the internal audit function, the Audit Committee
should satisfy itself that–•the person responsible for internal audit has relevant experience, sufficient
standing and authority to enable him to discharge his functions effectively;•internal audit has sufficient resources and is able to access information
to enable it to carry out its role effectively; and•the personnel assigned to undertake internal audit have the necessarycompetency, experience and resources to carry out the function
effectively.

Internal auditors should continuously keep abreast with developments inthe profession, relevant industry and regulations to ensure they are able toperform their role effectively including undertaking root-cause analysis toprovide strategic advice and suggest meaningful business improvements.

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PRINCIPLE C

INTEGRITY IN CORPORATEREPORTING AND MEANINGFULRELATIONSHIP WITH
STAKEHOLDERSI.

Engagement with Stakeholders

Ongoing engagement and communication with stakeholders build trust andunderstanding between the company and its stakeholders. It provides stakeholders
a better appreciation of the company’s objectives and the quality of its management.
This in turn will assist stakeholders in evaluating the company and facilitateshareholders to determine how their votes should be exercised. From the company’s
perspective, it provides an avenue for invaluable feedback that can be used tounderstand stakeholders’ expectations and develop business strategies.

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Intended Outcome
12.0 There is continuous communication between the company andstakeholders to facilitate mutual understanding of each other’s
objectives and expectations.
Stakeholders are able to make informed decisions with respect tothe business of the company, its policies on governance, theenvironment and social responsibility.

Practice
12.1

The board ensures there is effective, transparent and regular communication
with its stakeholders.

12.2

Large companies are encouraged to adopt integrated reporting based on a
globally recognised framework.

Guidance
G12.1		Dialogue with stakeholders is a necessary and beneficial process as it enables
companies to understand and address stakeholders’ concerns when making
decisions.
The board should undertake active engagements with the relevant stakeholders
for example employees, shareholders, potential investors, and consumers togain a better understanding of the expectations and concerns (if any) of thesestakeholders and the company’s impact on them.

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Communication with stakeholders can be achieved through various means,including–••••establishing an investor relations function;
conducting engagement forums;
organising investor, analyst and media briefings; anduse of electronic means (website, social media, mobile applications etc).

Companies should also establish channels for stakeholders to provide theirviews and feedback including complaints. The communication channel
should be available at all times and companies should acknowledge andaddress stakeholders’ views, feedback or complaints appropriately.
G12.2 An integrated report is the main report from which all other detailed
information flows, such as annual financial statements, governance andsustainability reports. It is a concise communication about how a company’s
strategy, performance, governance and prospects lead to value creation. An
integrated report improves the quality of information available to investors
and promotes greater transparency and accountability on the part of thecompany.
The preparation of this report requires integrated thinking of the relationshipbetween its various operating and functional units, thus breaking downinternal silos and reducing duplication.

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PRINCIPLE C

INTEGRITY IN CORPORATEREPORTING AND MEANINGFULRELATIONSHIP WITH STAKEHOLDERS

II. Conduct of General Meetings
General meetings are important platforms for directors and senior management toengage shareholders to facilitate greater understanding of the company’s business,governance and performance. General meetings enable and support shareholders in
exercising their ownership rights and expressing their views to the board and senior
management on any areas of concerns.
Shareholders should exercise their rights to ask questions, provide views and vote at
general meetings. The company should also leverage technology to facilitate greater
shareholder’s participation and enhance the proceedings of general meetings.

Intended Outcome
13.0 Shareholders are able to participate, engage the board and senior
management effectively and make informed voting decisions at
general meetings.

Practice

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13.1

Notice for an Annual General Meeting should be given to the shareholders atleast 28 days prior to the meeting.

13.2

All directors attend general meetings. The Chair of the Audit, Nominating, Risk
Management and other committees provide meaningful response to questions
addressed to them.

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13.3

Listed companies should leverage technology to facilitate–••

Updated28/4/2021

voting including voting in absentia14; andremote shareholders’ participation at general meetings.

Listed companies should also take the necessary steps to ensure good cyber
hygiene practices are in place including data privacy and security to prevent
cyber threats.
13.4

The Chairman of the board should ensure that general meetings support
meaningful engagement between the board, senior management andshareholders. The engagement should be interactive and include robust
discussion on among others the company’s financial and non-financial
performance as well as the company’s long-term strategies. Shareholders
should also be provided with sufficient opportunity to pose questions during
the general meeting and all the questions should receive a meaningful
response.

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13.5

The board must ensure that the conduct of a virtual general meeting (fully
virtual or hybrid) support meaningful engagement between the board,
senior management and shareholders. This includes having in place the required
infrastructure and tools to support among others, a smooth broadcast of
the general meeting and interactive participation by shareholders. Questions
posed by shareholders should be made visible to all meeting participants
during the meeting itself.

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13.6

Minutes of the general meeting should be circulated to shareholders nolater than 30 business days after the general meeting.

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Shareholders exercising their voting rights without being physically present at the general meeting.

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Guidance
G13.1 The board should ensure that shareholders are given sufficient notice andtime to consider the resolutions that will be discussed and decided at theGeneral Meeting. The notice should provide further explanation beyond theminimum content stipulated in the Listing Requirements for the resolution
proposed to enable shareholders to make an informed decision when
exercising their voting rights. The notice should include details of theresolutions proposed along with any background information and reportsor recommendations that are relevant.
G13.2 Presence of all directors will provide opportunity for shareholders toeffectively engage each director. Having the chair of board committees
present facilitates these conversations and allows shareholders to raisequestions and concerns directly to those responsible.
G13.3 The board should take proactive measures to ensure that shareholders areable to participate at general meetings effectively. In facilitating greater
shareholder participation, it is important for the company to consider leveraging
technology to facilitate electronic voting and remote shareholder
participation.

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Companies that utilise electronic voting stand to gain from–
•
•
•
•
•

more accurate and transparent voting results;
shorter turnaround time for declaration of results;
making voting more accessible even for the disabled;
reduce administrative cost and paper work; andremove the need for physical ballot papers.

G13.4 A general meeting is an important platform for interaction between a company
and its shareholders. The board, particularly the Chairman should ensure thatshareholders have the opportunity to participate in these meetings effectively;
including having access to information they require to participate indiscussions and cast informed votes. Sufficient opportunity should be provided
for shareholders to pose questions during the general meeting and the
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enable all meeting participants to stay informed. The board should alsoestablish a channel where shareholders can continue to share feedback andquestions outside of the general meeting and receive the appropriate
response. If time does not permit for further discussions during the general
meeting, the board should leverage such channel to communicate with theshareholders.
G13.5 The board and the Chairman should ensure that the conduct of a virtual
general meeting supports meaningful engagement between the board, senior
management and shareholders. The required preparation and measures
should be taken to ensure a seamless experience for shareholders, withthose participating remotely (online) feeling as much as possible like they arein a physical meeting – a one-way monologue by the board should be
avoided. Thus, it is important to provide the opportunity for shareholders tohave real-time interaction with the board and senior management, including
responses to any questions or remarks posed.

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G13.6 Listed companies should circulate to shareholders the complete minutes of
the general meeting detailing the meeting proceedings including issues orconcerns raised by shareholders and responses by the company15 no later
than 30 business days after the completion of the general meeting.

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15

Listed companies are required by the Listing Requirements to publish a summary of the key matters
discussed at the annual general meeting, as soon as practicable after the conclusion of the annual
general meeting.

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