MALAYSIAN CODE ON CORPORATE
GOVERNANCE (Revised 2007)
Securities C !!issi " 3 Persiaran Bukit Kiara Bukit Kiara 50490 Kuala Lumpur Malaysia Tel: 036204 8000 Fa : 03620! !8!8 """#s$#$%m#my
&%pyri'(t ) *e$urities &%mmissi%n+ 200,
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CONTENTS
Pa'e PRE#ACE INTROD$CTION PART % PRINCIPLES O# CORPORATE GOVERNANCE PART 2 (EST PRACTICES IN CORPORATE GOVERNANCE PART ) PRINCIPLES AND (EST PRACTICES #OR OT+ER CORPORATE PARTICIPANTS i % &
'
%*
PRE#ACE
T(e Malaysian Code on Corporate Governance -&%.e/+ 0irst issue. in Mar$( 2000+ marke. a si'ni0i$ant milest%ne in $%rp%rate '%1ernan$e re0%rm in Malaysia# 2t $%.i0ie. t(e prin$iples an. 3est pra$ti$es %0 '%%. '%1ernan$e an. .es$ri3e. %ptimal $%rp%rate '%1ernan$e stru$tures an. internal pr%$esses# *in$e t(e release %0 t(e &%.e+ t(e Malaysian $%rp%rate s$ene (as ma.e si'ni0i$ant stri.es in $%rp%rate '%1ernan$e stan.ar.s# T(e man.at%ry rep%rtin' %0 $%mplian$e "it( t(e &%.e (as ena3le. s(are(%l.ers an. t(e pu3li$ t% assess an. .etermine t(e stan.ar.s %0 $%rp%rate '%1ernan$e 3y liste. $%mpanies#
4(ile si'ni0i$ant impr%1ement (as 3een a$(ie1e.+ it is n%" timely t% re1ie" t(e &%.e t% 0urt(er stren't(en $%rp%rate '%1ernan$e pra$ti$es in line "it( .e1el%pments in t(e .%mesti$ an. internati%nal $apital markets# 2n t(is respe$t+ t(e Prime Minister+ 5at%6 *eri 73.ulla( 7(ma. Ba.a"i (a. ann%un$e. in t(e Bu.'et 2008 spee$( t(at 8t(e &%.e is 3ein' re1ie"e. t% impr%1e t(e 9uality %0 t(e 3%ar. %0 pu3li$ liste. $%mpanies -PL&s/ 3y puttin' in pla$e t(e $riteria 0%r 9uali0i$ati%n %0 .ire$t%rs an. stren't(enin' t(e au.it $%mmittee+ as "ell as t(e internal au.it 0un$ti%n %0 t(e PL&s:# T% ensure t(e e00e$ti1eness %0 t(e au.it $%mmittee %0 PL&s+ e e$uti1e .ire$t%rs "ill n% l%n'er 3e all%"e. t% 3e$%me mem3ers %0 t(e au.it $%mmittee# 2n a..iti%n+ t(e internal au.it 0un$ti%n "ill 3e man.ate. 0%r all PL&s+ an. t(e 3%ar. %0 .ire$t%rs "ill 3e resp%nsi3le 0%r ensurin' t(e a.(eren$e t% t(e s$%pe %0 internal au.it 0un$ti%ns:#;
T(e Malaysian Code on Corporate Governance as re1ise. in 200, represents t(e $%ntinue. $%lla3%rati1e e00%rts 3et"een <%1ernment an. t(e in.ustry# T(e *e$urities &%mmissi%n -*&/ "%ul. like t% t(ank t(e &%mpanies &%mmissi%n %0 Malaysia+ Bursa Malaysia Ber(a.+ Bank =e'ara Malaysia+ t(e Bar &%un$il+ t(e Fe.erati%n %0 Pu3li$ Liste. &%mpanies+ t(e Malaysian 2nstitute %0 &%rp%rate <%1ernan$e+ t(e Min%rity *(are(%l.ers 4at$(.%' <r%up+ t(e Malaysian 7$$%untin' *tan.ar.s B%ar.+ t(e Malaysian 2nstitute %0 7$$%untants+ t(e Malaysian 2nstitute %0 &erti0ie. Pu3li$ 7$$%untants+ T(e 2nstitute %0 2nternal 7u.it%rs Malaysia+ t(e Malaysian 2nstitute %0 &(artere. *e$retaries an. 7$$%untants an. t(e Malaysian 2n1estment Bankin' 7ss%$iati%n 0%r t(eir in1alua3le 0ee.3a$k an. $%mments#
T,e Revised C de - .e/ A!e"d!e"ts
Key amen.ments t% t(e &%.e are aime. at stren't(enin' t(e 3%ar. %0 .ire$t%rs an. au.it $%mmittees+ an. ensurin' t(at t(e 3%ar. %0 .ire$t%rs an. au.it $%mmittees .is$(ar'e t(eir r%les an. resp%nsi3ilities e00e$ti1ely#
T(e amen.ments spell %ut t(e eli'i3ility $riteria 0%r app%intment %0 .ire$t%rs an. t(e r%le %0 t(e n%minatin' $%mmittee# >n au.it $%mmittees+ t(e amen.ments spell %ut t(e eli'i3ility $riteria 0%r app%intment as an au.it $%mmittee mem3er+ t(e $%mp%siti%n %0 au.it $%mmittees+ t(e 0re9uen$y %0 meetin's an. t(e nee. 0%r $%ntinu%us trainin'# 2n a..iti%n+ internal au.it 0un$ti%ns are n%" re9uire. in all PL&s an. t(e rep%rtin' line 0%r internal au.it%rs $lari0ie.# F%r ease %0 re0eren$e+ ela3%rati%n %0 t(e amen.ments -3% e./ are pr%1i.e. in Part 2 %0 t(e &%.e#
?e1ise. as at ! >$t%3er 200,# i
INTROD$CTION
INTROD$CTION
%0 T+E SIGNI#ICANCE O# A CODE ON CORPORATE GOVERNANCE #OR MALAYSIA
!#! T(e Malaysian Code on Corporate Governance -&%.e/ "as .e1el%pe. 3y t(e 4%rkin' <r%up %n Best Pra$ti$es in &%rp%rate <%1ernan$e -@PK!/ an. su3se9uently appr%1e. 3y t(e Ai'( Le1el Finan$e &%mmittee %n &%rp%rate <%1ernan$e# @PK! "as $(aire. 3y t(e &(airman %0 t(e Fe.erati%n %0 Pu3li$ Liste. &%mpanies# T(e mem3ers %0 @PK! $%mprise. a mi %0 pri1ate an. pu3li$ se$t%r parti$ipati%n# T(e &%.e "as prin$ipally an initiati1e %0 t(e pri1ate se$t%r# T(e nee. 0%r a &%.e "as inspire. in part 3y a .esire 0%r t(e pri1ate se$t%r t% initiate an. lea. a re1ie" an. t% esta3lis( re0%rms %0 stan.ar.s %0 $%rp%rate '%1ernan$e at a mi$r% le1el# T(is "as 3ase. %n t(e 3elie0 t(at in s%me aspe$ts+ sel0B re'ulati%n "as pre0era3le an. t(e stan.ar.s .e1el%pe. 3y t(%se in1%l1e. "%ul. 3e m%re a$$epta3le an. t(us m%re en.urin'#
T(e &%.e essentially aims t% set %ut prin$iples an. 3est pra$ti$es %n stru$tures an. pr%$esses t(at $%mpanies may use in t(eir %perati%ns t%"ar.s a$(ie1in' t(e %ptimal '%1ernan$e 0rame"%rk# T(ese stru$tures an. pr%$esses e ist at a mi$r%Ble1el "(i$( in$lu.e issues su$( as t(e $%mp%siti%n %0 t(e 3%ar.+ pr%$e.ures 0%r re$ruitin' ne" .ire$t%rs+ remunerati%n %0 .ire$t%rs+ t(e use %0 3%ar. $%mmittees+ t(eir man.ates an. t(eir a$ti1ities#
!#2
!#3
!#4
T(e si'ni0i$an$e %0 t(e &%.e is t(at it all%"s 0%r a m%re $%nstru$ti1e an. 0le i3le resp%nse t% raise stan.ar.s in $%rp%rate '%1ernan$e as %pp%se. t% t(e m%re 3la$k an. "(ite resp%nse en'en.ere. 3y statute %r re'ulati%n# 2t is in re$%'niti%n %0 t(e 0a$t t(at t(ere are aspe$ts %0 $%rp%rate '%1ernan$e "(ere statut%ry re'ulati%n is ne$essary an. %t(ers "(ere sel0Bre'ulati%n+ $%mplemente. 3y market re'ulati%n is m%re appr%priate#
T(e nee. 0%r a $%.e als% results 0r%m e$%n%mi$ 0%r$es an. t(e nee. t% rein1ent t(e $%rp%rate enterprise+ s% as t% e00i$iently meet emer'in' 'l%3al $%mpetiti%n# T(e "%rl.6s e$%n%mies are ten.in' t%"ar.s market %rientati%n# 2n marketB%riente. e$%n%mies+ $%mpanies are less pr%te$te. 3y tra.iti%nal an. pres$ripti1e le'al rules an. re'ulati%ns# Malaysia is n% e $epti%n an. t(e s(i0t t% a 0ullB.is$l%sure re'ime+ alrea.y un.er"ay in Malaysia+ is su$( an e ample# Aen$e+ t(ere is a nee. 0%r $%mpanies t% 3e m%re e00i$ient an. "ell mana'e. t(an e1er 3e0%re t% meet e istin' an. anti$ipate. "%rl.B"i.e $%mpetiti%n# T(e r%le %0 .ire$t%rs t(en in$reases in imp%rtan$e# T(e r%le %0 t(e 3%ar. in (irin' t(e ri'(t mana'ement+ $%mpensatin'+ m%nit%rin'+ repla$in' an. plannin' t(e su$$essi%n %0 seni%r mana'ement is $ru$ial+ as mana'ement un.ertakes t(e key resp%nsi3ility 0%r t(e enterprise6s e00i$ien$y an. $%mpetiti1eness# T(e r%le %0 t(e &%.e is t% 'ui.e 3%ar.s 3y $lari0yin' t(eir resp%nsi3ilities an. pr%1i.in' pres$ripti%ns+ t(ere3y stren't(enin' t(e $%ntr%l e er$ise. 3y 3%ar.s %1er t(eir $%mpanies#
!#5
!#6
*tan.ar.s .e1el%pe. 0%r Malaysia must measure up t% internati%nal t(inkin' %n t(is su3Ce$t# T(ere0%re+ in .e1el%pin' t(e &%.e+ $are0ul $%nsi.erati%n (as 3een 'i1en t% .e1el%pments in %t(er Curis.i$ti%ns#
20
T+E APPROAC+ $NDER T+E MALAYSIAN CODE ON CORPORATE GOVERNANCE
2#! T(ere are t(ree 3r%a. appr%a$(es t% t(e issue %0 $%rp%rate '%1ernan$e un.ertaken 3y Curis.i$ti%ns ar%un. t(e "%rl. 7 pres$ripti1e appr%a$( "(ere t(e stan.ar. %0 $%rp%rate '%1ernan$e is set 3y spe$i0yin' .esira3le pra$ti$es $%uple. "it( a re9uirement t% .is$l%se $%mplian$e "it( t(em#
7 n%nBpres$ripti1e appr%a$( T(is appr%a$( re9uires $%rp%rate '%1ernan$e pra$ti$es in a $%mpany t% 3e .is$l%se.# T(e emp(asis (ere is %n t(e .is$l%sure %0 a$tual $%rp%rate '%1ernan$e pra$ti$es# T(e t(inkin' 3e(in. t(is appr%a$( is t(at ea$( $%mpany6s $%rp%rate '%1ernan$e nee.s are .i00erent an. .ire$t%rs %0 $%mpanies s(%ul. a..ress t(ese nee.s#
T(e (y3ri. appr%a$( T(is in1%l1es t(e use %0 3r%a. prin$iples "(i$( are applie. 0le i3ly t% t(e 1aryin' $ir$umstan$es %0 in.i1i.ual $%mpanies#
2#2
T(e &%.e .ra"s 0r%m t(e Dnite. Kin'.%m6s -DK/ e perien$e set %ut in t(e Aampel ?ep%rt# T(is in1%l1e. t(e use %0 3est pra$ti$e pres$ripti%ns t%'et(er "it( a rule re9uirin' .is$l%sure %0 t(e e tent t% "(i$( liste. $%mpanies (a1e $%mplie. "it( t(e pres$ripti%ns an. "(ere t(ey (a1e n%t+ t(e reas%ns "(y# 2t is n%t pr%p%se. t(at $%mpanies s(%ul. 3e re9uire. t% $%mply stri$tly "it( t(e pres$ripti%ns .e1el%pe.# Ea$( $%mpany s(%ul. (a1e t(e 0le i3ility t% .e1el%p its %"n appr%a$( t% $%rp%rate '%1ernan$e# 7n. "(ile t(e pres$ripti%ns esta3lis( a s%un. appr%a$( t% $%rp%rate '%1ernan$e+ $%mpanies may .e1el%p alternati1es t(at may 3e Cust as s%un.# =e1ert(eless t(e pres$ripti%ns set t(e stan.ar. t(at $%mpanies must measure up t%# *u$( a rule als% ensures t(at t(e in1estment $%mmunity re$ei1es an e planati%n 0%r t(e $%mpany6s appr%a$( t% '%1ernan$e s% t(at it is in a p%siti%n t% supp%rt t(e appr%a$( %r "%rk t% in0luen$e $(an'e#
2n a..iti%n+ $%mpanies must 3e en$%ura'e. t% $%ns$i%usly a..ress t(eir '%1ernan$e nee.s# 2n t(is respe$t+ $%mpanies must a1%i. $%mplian$e "it( 0%rm %r 83% ti$kin'; an. instea.+ s(%ul. 0%$us t(eir e00%rts %n e er$isin' t(eir Cu.'ement %n t(e $%rp%rate '%1ernan$e pra$ti$es 3est suite. 0%r t(eir $%mpanies# &%mpanies are t(ere0%re re9uire. t% in$lu.e in t(e annual rep%rt a narrati1e a$$%unt %0 (%" t(ey (a. apply t(e 3r%a. prin$iples set %ut in t(e &%.e# A%"e1er+ t(e 0%rm an. $%ntent %0 t(e statements are n%t pres$ri3e.# T(is aims t% se$ure su00i$ient .is$l%sure s% t(at in1est%rs an. %t(ers $an assess t(e $%mpany6s per0%rman$e an. '%1ernan$e pra$ti$es+ an. $an resp%n. in an in0%rme. "ay#
2#3
2#4
)0
T+E RECOMMENDATIONS
T(e &%.e sets %ut t(ree 0%rms %0 re$%mmen.ati%ns: Pri"ci12es Part ! sets %ut 3r%a. prin$iples %0 '%%. $%rp%rate '%1ernan$e 0%r Malaysia# T(e %3Ce$ti1e %0 t(e prin$iples is t% all%" $%mpanies 0le i3ility in applyin' t(e prin$iples a$$%r.in' t% t(e 1aryin' $ir$umstan$es %0 in.i1i.ual $%mpanies# &%mpanies "ill 3e re9uire. 3y t(e Listing Requirements of Bursa Malaysia t% in$lu.e in t(eir narrati1e statements+ (a1e applie. t(e rele1ant prin$iples in t(e annual rep%rt# T(is is t% se$ure su00i$ient .is$l%sure s% t(at in1est%rs an. %t(ers $an assess $%mpanies6 per0%rman$e an. '%1ernan$e pra$ti$es+ an. resp%n. in an in0%rme. "ay# (est 1r3ctices i" c r1 r3te 4 ver"3"ce Part 2 sets %ut 3est pra$ti$es 0%r $%mpanies# 2t i.enti0ies a set %0 'ui.elines %r pra$ti$es inten.e. t% assist $%mpanies in .esi'nin' t(eir appr%a$( t% $%rp%rate '%1ernan$e# 4(ile $%mplian$e "it( 3est pra$ti$es is 1%luntary+ $%mpanies are re9uire. as a pr%1isi%n %0 t(e Listing Requirements of Bursa Malaysia t% state in t(eir annual rep%rts+ t(e e tent t% "(i$( t(ey (a1e $%mplie. "it( t(e 3est pra$ti$es set %ut in Part 2 an. e plain t(e $ir$umstan$es Custi0yin' .eparture 0r%m su$( 3est pra$ti$es# E5, rt3ti "s t t,er 13rtici13"ts
Part 3 is n%t a..resse. t% liste. $%mpanies 3ut t% in1est%rs an. au.it%rs t% en(an$e t(eir r%le in $%rp%rate '%1ernan$e# T(ese prin$iples are 1%luntary#
60
COMPLIANCE
4#! Para'rap( !5#26 %0 t(e Listing Requirements of Bursa Malaysia re9uires all liste. $%mpanies t% state in t(eir annual rep%rts: (%" t(ey (a1e applie. t(e prin$iples set %ut in Part !F t(e e tent t% "(i$( t(ey (a1e $%mplie. "it( t(e 3est pra$ti$es set %ut in Part 2F i.enti0y an. 'i1e reas%ns 0%r areas %0 n%nB$%mplian$eF an. "(ere appli$a3le+ state t(e alternati1e pra$ti$e-s/ a.%pte.#
4#2
2n Parts ! an. 2+ 3%ar.s are n%t re9uire. t% $%mment %n e1ery item %0 t(e re1ise. &%.e "(i$( t(ey (a1e $%mplie. "it(+ 3ut t% .is$l%se ea$( area %0 n%nB$%mplian$e#
S3"cti "s 7 r " "8disc2 sure 4#3 4(ere a $%mpany 0ails t% .is$l%se t(e matters in its annual rep%rt+ set %ut in para 4#! a3%1e+ Bursa Malaysia $an take a$ti%n a'ainst t(e $%mpany %r its .ire$t%rs as set %ut in t(e Listing Requirements of Bursa Malaysia#
P3rt %
PRINCIPLES O# CORPORATE GOVERNANCE
P3rt %
PRINCIPLES O# CORPORATE GOVERNANCE
A
I
DIRECTORS
T,e ( 3rd E1ery liste. $%mpany s(%ul. 3e (ea.e. 3y an e00e$ti1e 3%ar. "(i$( s(%ul. lea. an. $%ntr%l t(e $%mpany# ( 3rd (323"ce T(e 3%ar. s(%ul. in$lu.e a 3alan$e %0 e e$uti1e .ire$t%rs an. n%nBe e$uti1e .ire$t%rs -in$lu.in' in.epen.ent n%nBe e$uti1es/ su$( t(at n% in.i1i.ual %r small 'r%up %0 in.i1i.uals $an .%minate t(e 3%ar.6s .e$isi%n makin'# Su112/ 7 I"7 r!3ti " T(e 3%ar. s(%ul. 3e supplie. in a timely 0as(i%n "it( in0%rmati%n in a 0%rm an. %0 a 9uality appr%priate t% ena3le it t% .is$(ar'e its .uties# A11 i"t!e"ts t t,e ( 3rd
T(ere s(%ul. 3e a 0%rmal an. transparent pr%$e.ure 0%r t(e app%intment %0 ne" .ire$t%rs
II
III
IV
t% t(e 3%ar.# V Re8e2ecti " 7ll .ire$t%rs s(%ul. 3e re9uire. t% su3mit t(emsel1es 0%r reBele$ti%n at re'ular inter1als an. at least e1ery t(ree years#
(
I
DIRECTORS9 REM$NERATION
T,e Leve2 3"d M3:e8u1 7 Re!u"er3ti " Le1els %0 remunerati%n s(%ul. 3e su00i$ient t% attra$t an. retain t(e .ire$t%rs nee.e. t% run t(e $%mpany su$$ess0ully# T(e $%mp%nent parts %0 remunerati%n s(%ul. 3e stru$ture. s% as t% link re"ar.s t% $%rp%rate an. in.i1i.ual per0%rman$e+ in t(e $ase %0 e e$uti1e .ire$t%rs# 2n t(e $ase %0 n%nBe e$uti1e .ire$t%rs+ t(e le1el %0 remunerati%n s(%ul. re0le$t t(e e perien$e an. le1el %0 resp%nsi3ilities un.ertaken 3y t(e parti$ular n%nBe e$uti1e $%n$erne.# Pr cedure &%mpanies s(%ul. esta3lis( a 0%rmal an. transparent pr%$e.ure 0%r .e1el%pin' p%li$y %n e e$uti1e remunerati%n an. 0%r 0i in' t(e remunerati%n pa$ka'es %0 in.i1i.ual .ire$t%rs# Disc2 sure
T(e $%mpany6s annual rep%rt s(%ul. $%ntain .etails %0 t(e remunerati%n %0 ea$( .ire$t%r#
II
III
C
I
S+ARE+OLDERS
Di32 4ue (et;ee" C !13"ies 3"d I"vest rs
&%mpanies an. instituti%nal s(are(%l.ers s(%ul. ea$( 3e rea.y+ "(ere pra$ti$a3le+ t% enter int% a .ial%'ue 3ase. %n t(e mutual un.erstan.in' %0 %3Ce$ti1es#
II
T,e AGM &%mpanies s(%ul. use t(e 7<M t% $%mmuni$ate "it( pri1ate in1est%rs an. en$%ura'e t(eir parti$ipati%n#
D
I
ACCO$NTA(ILITY AND A$DIT
#i"3"ci32 Re1 rti"4 T(e 3%ar. s(%ul. present a 3alan$e. an. un.erstan.a3le assessment %n t(e $%mpany6s p%siti%n an. pr%spe$ts# I"ter"32 C "tr 2 T(e 3%ar. s(%ul. maintain a s%un. system %0 internal $%ntr%l t% sa0e'uar. s(are(%l.ers6 in1estment an. t(e $%mpany6s assets# Re23ti "s,i1 ;it, Audit rs T(e 3%ar. s(%ul. esta3lis( 0%rmal an. transparent arran'ements 0%r maintainin' an appr%priate relati%ns(ip "it( t(e $%mpany6s au.it%rs#
II
III
P3rt 2
(EST PRACTICES IN CORPORATE GOVERNANCE
P3rt 2
(EST PRACTICES IN CORPORATE GOVERNANCE
AA T+E (OARD O# DIRECTORS
I Pri"ci132 Res1 "si<i2ities 7 t,e ( 3rd T(e 3%ar. s(%ul. e pli$itly assume t(e 0%ll%"in' si spe$i0i$ resp%nsi3ilities+ "(i$( 0a$ilitate t(e .is$(ar'e %0 t(e 3%ar.6s ste"ar.s(ip resp%nsi3ilities: ?e1ie"in' an. a.%ptin' a strate'i$ plan 0%r t(e $%mpanyF >1erseein' t(e $%n.u$t %0 t(e $%mpany6s 3usiness t% e1aluate "(et(er t(e 3usiness is 3ein' pr%perly mana'e.F 2.enti0yin' prin$ipal risks an. ensurin' t(e implementati%n %0 appr%priate systems t% mana'e t(ese risksF *u$$essi%n plannin'+ in$lu.in' app%intin'+ trainin'+ 0i in' t(e $%mpensati%n %0 an. "(ere appr%priate+ repla$in' seni%r mana'ementF 5e1el%pin' an. implementin' an in1est%r relati%ns pr%'ramme %r s(are(%l.er $%mmuni$ati%ns p%li$y 0%r t(e $%mpanyF an.
?e1ie"in' t(e a.e9ua$y an. t(e inte'rity %0 t(e $%mpany6s internal $%ntr%l systems an. mana'ement in0%rmati%n systems+ in$lu.in' systems 0%r $%mplian$e "it( appli$a3le la"s+ re'ulati%ns+ rules+ .ire$ti1es an. 'ui.elines#
Constituting an effective board
II C,3ir!3" 3"d C,ie7 E5ecutive O77icer T(ere s(%ul. 3e a $learly a$$epte. .i1isi%n %0 resp%nsi3ilities at t(e (ea. %0 t(e $%mpany "(i$( "ill ensure a 3alan$e %0 p%"er an. aut(%rity+ su$( t(at n% %ne in.i1i.ual (as un0ettere. p%"ers %0 .e$isi%n# 4(ere t(e r%les are $%m3ine. t(ere s(%ul. 3e a str%n' in.epen.ent element %n t(e 3%ar.# 7 .e$isi%n t% $%m3ine t(e r%les %0 $(airman an. $(ie0 e e$uti1e %00i$er s(%ul. 3e pu3li$ly e plaine.# ( 3rd (323"ce =%nBe e$uti1e .ire$t%rs s(%ul. 3e pers%ns %0 $ali3re+ $re.i3ility an. (a1e t(e ne$essary skill an. e perien$e t% 3rin' an in.epen.ent Cu.'ement t% 3ear %n t(e issues %0 strate'y+ per0%rman$e an. res%ur$es+ in$lu.in' key app%intments an. stan.ar.s %0 $%n.u$t# T% 3e e00e$ti1e+ in.epen.ent n%nBe e$uti1e .ire$t%rs s(%ul. make up at least %neBt(ir. %0 t(e 3%ar. mem3ers(ip#
III
!0
Size of non-executive participation
IV 2n $ir$umstan$es "(ere a $%mpany (as a si'ni0i$ant s(are(%l.er+ in a..iti%n t% t(e re9uirement t(at %neBt(ir. %0 t(e 3%ar. s(%ul. $%mprise in.epen.ent n%nB e e$uti1e .ire$t%rs+ t(e 3%ar. s(%ul. in$lu.e a num3er %0 .ire$t%rs "(i$( 0airly re0le$ts t(e in1estment in t(e $%mpany 3y s(are(%l.ers %t(er t(an t(e si'ni0i$ant s(are(%l.er# F%r t(is purp%se+ 8si'ni0i$ant s(are(%l.er; is .e0ine. as a s(are(%l.er "it( t(e a3ility t% e er$ise a maC%rity %0 1%tes 0%r t(e ele$ti%n %0 .ire$t%rs# 2n $ir$umstan$es "(ere a s(are(%l.er (%l.s less t(an t(e maC%rity 3ut is still t(e lar'est s(are(%l.er+ t(e 3%ar. "ill (a1e t% e er$ise Cu.'ement in .eterminin' t(e appr%priate num3er %0 .ire$t%rs "(i$( "ill 0airly re0le$t t(e interest %0 t(e remainin' s(are(%l.ers# T(e 3%ar. s(%ul. .is$l%se %n an annual 3asis "(et(er %neBt(ir. %0 t(e 3%ar. is in.epen.ent+ an. in $ir$umstan$es "(ere t(e $%mpany (as a si'ni0i$ant s(are(%l.er+ "(et(er it satis0ies t(e re9uirement t% 0airly re0le$t+ t(r%u'( 3%ar. representati%n+ t(e in1estment %0 t(e min%rity s(are(%l.ers in t(e $%mpany# T(e 3%ar. s(%ul. .is$l%se its analysis %0 t(e appli$ati%n %0 t(e 3est pra$ti$es set %ut a3%1e t% t(e $ir$umstan$es %0 t(e 3%ar.# 4(et(er %r n%t t(e r%le %0 $(airman an. $(ie0 e e$uti1e %00i$er are $%m3ine.+ t(e 3%ar. s(%ul. i.enti0y a seni%r in.epen.ent n%nBe e$uti1e .ire$t%r in t(e annual rep%rt t% "(%m $%n$erns may 3e $%n1eye.# A11 i"t!e"ts t t,e ( 3rd T(e 3%ar. %0 e1ery $%mpany s(%ul. app%int a $%mmittee %0 .ire$t%rs $%mp%se. e $lusi1ely %0 n%nBe e$uti1e .ire$t%rs+ a maC%rity %0 "(%m are in.epen.ent+ "it( t(e resp%nsi3ility 0%r pr%p%sin' ne" n%minees t% t(e 3%ar. an. 0%r assessin' .ire$t%rs %n an %n'%in' 3asis# T(e a$tual .e$isi%n as t% "(% s(%ul. 3e n%minate. s(%ul. 3e t(e resp%nsi3ility %0 t(e 0ull 3%ar. a0ter $%nsi.erin' t(e re$%mmen.ati%ns %0 su$( a $%mmittee# T(e n%minatin' $%mmittee s(%ul. re$%mmen. t% t(e 3%ar.+ $an.i.ates 0%r all .ire$t%rs(ips t% 3e 0ille. 3y t(e s(are(%l.ers %r t(e 3%ar.# 2n makin' its re$%mmen.ati%ns+ t(e n%minatin' $%mmittee s(%ul. $%nsi.er t(e $an.i.ates6 skills+ kn%"le.'e+ e pertise an. e perien$eF pr%0essi%nalismF inte'rityF an. in t(e $ase %0 $an.i.ates 0%r t(e p%siti%n %0 in.epen.ent n%nBe e$uti1e .ire$t%rs+ t(e n%minatin' $%mmittee s(%ul. als% e1aluate t(e $an.i.ates6 a3ility t% .is$(ar'e su$( resp%nsi3ilitiesH0un$ti%ns as e pe$te. 0r%m in.epen.ent n%nBe e$uti1e .ire$t%rsF
$%nsi.er+ in makin' its re$%mmen.ati%ns+ $an.i.ates 0%r .ire$t%rs(ips pr%p%se. 3y t(e $(ie0 e e$uti1e %00i$er an.+ "it(in t(e 3%un.s %0 pra$ti$a3ility+ 3y any %t(er seni%r e e$uti1e %r any .ire$t%r %r s(are(%l.erF an. !!
[Amended
1/10/ 00!"
VI
VII
VIII
re$%mmen. t% t(e 3%ar.+ .ire$t%rs t% 0ill t(e seats %n 3%ar. $%mmittees# #$e revised Code provides greater clarity on t$e aspects %$ic$ a nominating committee s$ould consider %$en recommending candidates for directors$ips& I= T(e 3%ar.+ t(r%u'( t(e n%minatin' $%mmittee+ s(%ul. annually re1ie" its re9uire. mi %0 skills an. e perien$e an. %t(er 9ualities+ in$lu.in' $%re $%mpeten$ies "(i$( n%nBe e$uti1e .ire$t%rs s(%ul. 3rin' t% t(e 3%ar.# T(is s(%ul. 3e .is$l%se. in t(e annual rep%rt#
T(e 3%ar. s(%ul. implement a pr%$ess+ t% 3e $arrie. %ut 3y t(e n%minatin' $%mmittee annually+ 0%r assessin' t(e e00e$ti1eness %0 t(e 3%ar. as a "(%le+ t(e $%mmittees %0 t(e 3%ar.+ an. 0%r assessin' t(e $%ntri3uti%n %0 ea$( in.i1i.ual .ire$t%r+ in$lu.in'
in.epen.ent n%nBe e$uti1e .ire$t%rs+ as "ell as t(e $(ie0 e e$uti1e %00i$er# 7ll assessments an. e1aluati%ns $arrie. %ut 3y t(e n%minatin' $%mmittee in t(e .is$(ar'e %0 all its 0un$ti%ns s(%ul. 3e pr%perly .%$umente.# #$e revised Code places importance on t$e process carried out 'y t$e nominating committee in evaluating mem'ers of t$e 'oard( including t$e independent non)e*ecutive directors and c$ief e*ecutive officer& A nominating committee s$ould also ensure t$at its assessments and evaluations are properly documented& =I B%ar.s s(%ul. 3e entitle. t% t(e ser1i$es %0 a $%mpany se$retary "(% must ensure t(at all app%intments are pr%perly ma.e+ t(at all ne$essary in0%rmati%n is %3taine. 0r%m .ire$t%rs+ 3%t( 0%r t(e $%mpany6s %"n re$%r.s an. 0%r t(e purp%ses %0 meetin' statut%ry %3li'ati%ns+ as "ell as %3li'ati%ns arisin' 0r%m t(e Listing Requirements of Bursa Malaysia %r %t(er re'ulat%ry re9uirements# Si>e 7 ( 3rds E1ery 3%ar. s(%ul. e amine its siJe+ "it( a 1ie" t% .eterminin' t(e impa$t %0 t(e num3er up%n its e00e$ti1eness# Direct rs9 Tr3i"i"4 7s an inte'ral element %0 t(e pr%$ess %0 app%intin' ne" .ire$t%rs+ ea$( $%mpany s(%ul. pr%1i.e an %rientati%n an. e.u$ati%n pr%'ramme 0%r ne" re$ruits t% t(e 3%ar.#
[Amended
1/10/ 00!"
[Amended 1/10/ 00!"
=II
=III
Board structures and procedures
=IV T(e 3%ar. s(%ul. meet re'ularly+ "it( .ue n%ti$e %0 issues t% 3e .is$usse.# T(e 3%ar. s(%ul. re$%r. its .eli3erati%ns+ in terms %0 t(e issues .is$usse.+ an. t(e $%n$lusi%ns in .is$(ar'in' its .uties an. resp%nsi3ilities# T(e 3%ar. s(%ul. .is$l%se t(e num3er %0 3%ar. meetin's (el. a year an. t(e .etails %0 atten.an$e %0 ea$( in.i1i.ual .ire$t%r in respe$t %0 meetin's (el.#
[Amended 1/10/ 00!"
!2
#$e revised Code requires t$e 'oard to properly record not only decisions made 'ut also all t$e issues discussed in arriving at t$e decisions& #$is serves to provide a $istorical record and insig$t into t$ose decisions&
=V
T(e 3%ar. s(%ul. (a1e a 0%rmal s$(e.ule %0 matters spe$i0i$ally reser1e. t% it 0%r .e$isi%n t% ensure t(at t(e .ire$ti%n an. $%ntr%l %0 t(e $%mpany is 0irmly in its (an.s#
Relationship of the board to management
=VI T(e 3%ar.+ t%'et(er "it( t(e $(ie0 e e$uti1e %00i$er+ s(%ul. .e1el%p p%siti%n .es$ripti%ns 0%r t(e 3%ar. an. 0%r t(e $(ie0 e e$uti1e %00i$er+ in1%l1in' .e0initi%n %0 t(e limits t% mana'ement6s resp%nsi3ilities# 2n a..iti%n+ t(e 3%ar. s(%ul. appr%1e %r .e1el%p+ "it( t(e $(ie0 e e$uti1e %00i$er+ t(e $%rp%rate %3Ce$ti1es 0%r "(i$( t(e $(ie0 e e$uti1e %00i$er is resp%nsi3le t% meet#
=VII ?u32it/ 7 I"7 r!3ti " T(e 3%ar. s(%ul. re$ei1e in0%rmati%n t(at is n%t Cust (ist%ri$al %r 3%tt%m line an. 0inan$ial %riente.+ 3ut in0%rmati%n t(at '%es 3ey%n. assessin' t(e 9uantitati1e per0%rman$e %0 t(e enterprise+ an. l%%ks at %t(er per0%rman$e 0a$t%rs+ su$( as $ust%mer satis0a$ti%n+ pr%.u$t an. ser1i$e 9uality+ market s(are+ market rea$ti%n+ en1ir%nmental per0%rman$e an. s% %n+ "(en .ealin' "it( any item %n t(e a'en.a# =VIII T(e $(airman %0 t(e 3%ar. s(%ul. un.ertake primary resp%nsi3ility 0%r %r'anisin' in0%rmati%n ne$essary 0%r t(e 3%ar. t% .eal "it( t(e a'en.a an. 0%r pr%1i.in' t(is in0%rmati%n t% .ire$t%rs %n a timely 3asis# 20 t(e $(airman is als% t(e $(ie0 e e$uti1e %00i$er+ t(e 3%ar. s(%ul. als% (a1e in pla$e a pr%$e.ure t% ensure t(at its a'en.a items are pla$e. %n t(e a'en.a an. 0%r pr%1i.in' t(is in0%rmati%n t% .ire$t%rs# =I= Access t I"7 r!3ti " 5ire$t%rs s(%ul. (a1e a$$ess t% all in0%rmati%n "it(in a $%mpany "(et(er as a 0ull 3%ar. %r in t(eir in.i1i.ual $apa$ity+ in 0urt(eran$e %0 t(eir .uties# Access t Advice T(ere s(%ul. 3e an a'ree. pr%$e.ure 0%r .ire$t%rs+ "(et(er as a 0ull 3%ar. %r in t(eir in.i1i.ual $apa$ity+ in 0urt(eran$e %0 t(eir .uties+ t% take in.epen.ent pr%0essi%nal a.1i$e at t(e $%mpany6s e pense+ i0 ne$essary#
7ll .ire$t%rs s(%ul. (a1e a$$ess t% t(e a.1i$e an. ser1i$es %0 t(e $%mpany se$retary#
5ire$t%rs s(%ul. app%int as se$retary+ s%me%ne "(% is $apa3le %0 $arryin' %ut t(e .uties t% "(i$( t(e p%st entails+ an. (is rem%1al s(%ul. 3e a matter 0%r t(e 3%ar. as a "(%le# T(e 3%ar. s(%ul. re$%'nise t(at t(e $(airman is entitle. t% t(e str%n' an. p%siti1e supp%rt %0 t(e $%mpany se$retary in ensurin' t(e e00e$ti1e 0un$ti%nin' %0 t(e 3%ar.#
==
==I
==II
!3
==III $se 7 ( 3rd C !!ittees 4(ere t(e 3%ar. app%ints a $%mmittee+ it s(%ul. spell %ut t(e aut(%rity %0 t(e $%mmittee an.+ in parti$ular+ "(et(er t(e $%mmittee (as t(e aut(%rity t% a$t %n 3e(al0 %0 t(e 3%ar. %r Cust t(e aut(%rity t% e amine a parti$ular issue an. rep%rt 3a$k t% t(e 3%ar. "it( a re$%mmen.ati%n# ==IV Re!u"er3ti " C !!ittees B%ar.s s(%ul. app%int remunerati%n $%mmittees+ $%nsistin' "(%lly %r mainly %0 n%nBe e$uti1e .ire$t%rs+ t% re$%mmen. t% t(e 3%ar. t(e remunerati%n %0 t(e e e$uti1e .ire$t%rs in all its 0%rms+ .ra"in' 0r%m %utsi.e a.1i$e as ne$essary# E e$uti1e .ire$t%rs s(%ul. play n% part in .e$isi%ns %n t(eir %"n remunerati%n# Mem3ers(ip %0 t(e remunerati%n $%mmittee s(%ul. appear in t(e .ire$t%rs6 rep%rt# T(e .eterminati%n %0 remunerati%n pa$ka'es %0 n%nBe e$uti1e .ire$t%rs+ in$lu.in' n%nBe e$uti1e $(airmen+ s(%ul. 3e a matter 0%r t(e 3%ar. as a "(%le# T(e in.i1i.uals $%n$erne. s(%ul. a3stain 0r%m .is$ussin' t(eir %"n remunerati%n#
(( ACCO$NTA(ILITY AND A$DIT
The audit committee
2 T(e 3%ar. s(%ul. esta3lis( an au.it $%mmittee $%mprisin' at least t(ree mem3ers+ a maC%rity %0 "(%m are in.epen.ent# 7ll mem3ers %0 t(e au.it $%mmittee s(%ul. 3e n%nBe e$uti1e .ire$t%rs# T(e 3%ar. s(%ul. pr%1i.e t(e au.it $%mmittee "it( "ritten terms %0 re0eren$e "(i$( .eal $learly "it( its aut(%rity an. .uties# 7ll mem3ers %0 t(e au.it $%mmittee s(%ul. 3e 0inan$ially literate an. at least %ne s(%ul. 3e a mem3er %0 an a$$%untin' ass%$iati%n %r 3%.y# #$e revised Code strives to strengt$en t$e role of audit committees 'y requiring t$e committees to comprise fully of non)e*ecutive directors& +n addition( all its mem'ers s$ould 'e a'le to read( analyse and interpret financial statements so t$at t$ey %ill 'e a'le to effectively disc$arge t$eir functions& 22 T(e .uties %0 t(e au.it $%mmittee s(%ul. in$lu.e t(e 0%ll%"in': -i/ -ii/ T% $%nsi.er t(e app%intment %0 t(e e ternal au.it%r+ t(e au.it 0ee an. any 9uesti%n %0 resi'nati%n %r .ismissalF T% .is$uss "it( t(e e ternal au.it%r 3e0%re t(e au.it $%mmen$es+ t(e nature an. s$%pe %0 t(e au.it+ an. ensure $%B%r.inati%n "(ere m%re t(an %ne au.it 0irm is in1%l1e.F T% re1ie" t(e 9uarterly an. yearBen. 0inan$ial statements %0 t(e 3%ar.+ 0%$usin' parti$ularly %n
[Amended
1/10/ 00!"
[Amended
1/10/ 00!"
-iii/
!4
-i1/
any $(an'e in a$$%untin' p%li$ies an. pra$ti$esF si'ni0i$ant a.Custments arisin' 0r%m t(e au.itF t(e '%in' $%n$ern assumpti%nF an. $%mplian$e "it( a$$%untin' stan.ar.s an. %t(er le'al re9uirements#
T% .is$uss pr%3lems an. reser1ati%ns arisin' 0r%m t(e interim an. 0inal au.its+ an. any matter t(e au.it%r may "is( t% .is$uss -in t(e a3sen$e %0 mana'ement "(ere ne$essary/F
T% re1ie" t(e e ternal au.it%r6s mana'ement letter an. mana'ement6s resp%nseF
-1/
-1i/
T% .% t(e 0%ll%"in'+ in relati%n t% t(e internal au.it 0un$ti%n
re1ie" t(e a.e9ua$y %0 t(e s$%pe+ 0un$ti%ns an. res%ur$es %0 t(e internal au.it 0un$ti%n+ an. t(at it (as t(e ne$essary aut(%rity t% $arry %ut its "%rkF
[Amended
1/10/ 00!"
re1ie" t(e internal au.it pr%'ramme an. results %0 t(e internal au.it pr%$ess an.+ "(ere ne$essary+ ensure t(at appr%priate a$ti%ns are taken %n t(e re$%mmen.ati%ns %0 t(e internal au.it 0un$ti%nF re1ie" any appraisal %r assessment %0 t(e per0%rman$e %0 mem3ers %0 t(e internal au.it 0un$ti%nF appr%1e any app%intment %r terminati%n %0 seni%r sta00 mem3ers %0 t(e internal au.it 0un$ti%nF an. take $%'nisan$e %0 resi'nati%ns %0 internal au.it sta00 mem3ers an. pr%1i.e t(e resi'nin' sta00 mem3er an %pp%rtunity t% su3mit (is reas%ns 0%r resi'nin'#
-1ii/
T% $%nsi.er any relate.Bparty transa$ti%ns t(at may arise "it(in t(e $%mpany %r 'r%upF T% $%nsi.er t(e maC%r 0in.in's %0 internal in1esti'ati%ns an. mana'ement6s resp%nseF an. T% $%nsi.er %t(er t%pi$s as .e0ine. 3y t(e 3%ar.#
-1iii/
-i /
222
T(e 0inan$e .ire$t%r+ t(e (ea. %0 internal au.it an. a representati1e %0 t(e e ternal au.it%rs s(%ul. n%rmally atten. meetin's# >t(er 3%ar. mem3ers may atten. meetin's up%n t(e in1itati%n %0 t(e au.it $%mmittee# A%"e1er+ t(e $%mmittee s(%ul. meet "it( t(e e ternal au.it%rs "it(%ut e e$uti1e 3%ar. mem3ers present at least t"i$e a year#
[Amended
1/10/ 00!"
!5
#$e revised Code increases t$e frequency of meetings 'et%een t$e audit committee and t$e e*ternal auditor %it$out t$e e*ecutive 'oard mem'ers present& #$is encourages a greater e*c$ange of free and $onest vie%s and opinions 'et%een 'ot$ parties& IV T(e au.it $%mmittee s(%ul. (a1e e pli$it aut(%rity t% in1esti'ate any matter "it(in its terms %0 re0eren$e+ t(e res%ur$es t% .% s%+ an. 0ull a$$ess t% in0%rmati%n# T(e $%mmittee s(%ul. 3e a3le t% %3tain e ternal pr%0essi%nal a.1i$e an. t% in1ite %utsi.ers "it( rele1ant e perien$e t% atten.+ i0 ne$essary#
T(e au.it $%mmittee s(%ul. meet re'ularly+ "it( .ue n%ti$e %0 issues t% 3e .is$usse.+ an. s(%ul. re$%r. its $%n$lusi%ns in .is$(ar'in' its .uties an. resp%nsi3ilities#
T(e $(airman %0 t(e au.it $%mmittee s(%ul. en'a'e %n a $%ntinu%us 3asis "it( seni%r mana'ement+ su$( as t(e $(airman+ t(e $(ie0 e e$uti1e %00i$er+ t(e 0inan$e .ire$t%r+ t(e (ea. %0 internal au.it an. t(e e ternal au.it%rs in %r.er t% 3e kept in0%rme. %0 matters a00e$tin' t(e $%mpany# #$e revised Code places greater emp$asis on continuous engagement 'et%een t$e c$airman of t$e audit committee and senior management of t$e company( as %ell as t$e e*ternal auditors& #$roug$ t$e engagements( relevant issues affecting t$e company can 'e 'roug$t to t$e attention of t$e audit committee in a timely manner& VI T(e 3%ar. s(%ul. .is$l%se in an in0%rmati1e "ay+ .etails %0 t(e a$ti1ities %0 au.it $%mmittees+ t(e num3er %0 au.it meetin's (el. in a year+ .etails %0 atten.an$e %0 ea$( .ire$t%r in respe$t %0 meetin's+ an. t(e .etails %0 rele1ant trainin' atten.e. 3y ea$( .ire$t%r# T(e 3%ar. s(%ul. esta3lis( an internal au.it 0un$ti%n an. i.enti0y a (ea. %0 internal au.it "(% rep%rts .ire$tly t% t(e au.it $%mmittee# T(e (ea. %0 internal au.it "ill 3e resp%nsi3le 0%r t(e re'ular re1ie" an.H%r appraisal %0 t(e e00e$ti1eness %0 t(e risk mana'ement+ internal $%ntr%l+ an. '%1ernan$e pr%$esses "it(in t(e $%mpany# #$e revised Code recognises t$e importance of t$e internal audit function 'y requiring all companies to $ave an internal audit function& +n order to preserve t$e independence of t$e internal audit function( t$e $ead of internal audit s$ould report directly to t$e audit committee&
VIII T(e internal au.it 0un$ti%n s(%ul. 3e in.epen.ent %0 t(e a$ti1ities t(ey au.it an. s(%ul. 3e per0%rme. "it( impartiality+ pr%0i$ien$y an. .ue pr%0essi%nal $are# T(e 3%ar. %r t(e au.it $%mmittee s(%ul. .etermine t(e remit %0 t(e internal au.it 0un$ti%n#
[Amended
1/10/ 00!"
[Amended
1/10/ 00!"
VII
[Amended
1/10/ 00!"
!6
CC S+ARE+OLDERS
The relationship between the board and shareholders
2 T(e 3%ar.s s(%ul. maintain an e00e$ti1e $%mmuni$ati%ns p%li$y t(at ena3les 3%t( t(e 3%ar. an. mana'ement t% $%mmuni$ate e00e$ti1ely "it( its s(are(%l.ers+ stake(%l.ers an. t(e pu3li$# T(is p%li$y must e00e$ti1ely interpret t(e %perati%ns %0 t(e $%mpany t% t(e s(are(%l.ers an. must a$$%mm%.ate 0ee.3a$k 0r%m s(are(%l.ers+ "(i$( s(%ul. 3e 0a$t%re. int% t(e $%mpany6s 3usiness .e$isi%ns#
!,
P3rt ) PRINCIPLES AND (EST PRACTICES #OR OT+ER CORPORATE PARTICIPANTS
P3rt )
PRINCIPLES AND (EST PRACTICES #OR OT+ER CORPORATE PARTICIPANTS
I II S,3re, 2der V ti"4
2nstituti%nal s(are(%l.ers (a1e a resp%nsi3ility t% make $%nsi.ere. use %0 t(eir 1%tes#
Di32 4ue <et;ee" C !13"ies 3"d I"vest rs
2nstituti%nal in1est%rs s(%ul. en$%ura'e .ire$t $%nta$t "it( $%mpanies+ in$lu.in' $%nstru$ti1e $%mmuni$ati%n "it( 3%t( seni%r mana'ement an. 3%ar. mem3ers a3%ut per0%rman$e+ $%rp%rate '%1ernan$e+ an. %t(er matters a00e$tin' s(are(%l.ers6 interest#
III
Ev32u3ti " 7 G ver"3"ce Disc2 sures 4(en e1aluatin' $%mpanies6 '%1ernan$e arran'ements+ parti$ularly t(%se relatin' t% 3%ar. stru$ture an. $%mp%siti%n+ instituti%nal in1est%rs an. t(eir a.1isers s(%ul. 'i1e .ue "ei'(t t% all rele1ant 0a$t%rs .ra"n t% t(eir attenti%n# E5ter"32 Audit rs
T(e e ternal au.it%rs s(%ul. in.epen.ently rep%rt t% s(are(%l.ers in a$$%r.an$e "it( statut%ry an. pr%0essi%nal re9uirements an. in.epen.ently assure t(e 3%ar. %n t(e .is$(ar'e %0 its resp%nsi3ilities un.er prin$iples 52 an. 522 %0 Part 2 in a$$%r.an$e "it(
IV
pr%0essi%nal 'ui.an$e#
!9
