Corporate Governance: Theory and Some Insights into the Malaysian Practices

Abstract

The objective of this article is to explain what is Corporate Governance (CG) and together with some insights on the trends and development of corporate governance in Malaysia since the 1997-1998 financial crises. This article discusses briefly the various participants in CG, and focuses on CG mechanisms, ownership and control, and the agency problem, the board of directors, corporate transparency, ethics, and social responsibilities, investor relations and shareholder activism. The board of directors as the agent of the owners have been identified as the key mechanism in ensuring that sound CG is in place. In terms of Malaysian corporate practices, among others, the Malaysian Code of Corporate Governance was introduced in March 2001, giving particular attention in areas concerning board practices. Other key changes seen were the strengthening of accounting standards in 1997 via the establishment of the Malaysian Accounting Standards Board (MASB) under the Financial Reporting Act 1997 (FRA) as well as the enhancement of practice notes by Bursa Malaysia (BM). The regulatory authority also undertook a review of Securities Industry Act 1983, in particular, the Take-Over Code (TOC) via its amendment in 1999. ABSTRAK Objektif makalah ini ialah menerangkan maksud tadbir urus korporat ( CG ) dan bersama-sama dengan beberapa pandangan menerangkan mengenai tren dan perkembangan CG di Malaysia semenjak krisis kewangan 1997-1998. Makalah ini membincangkan secara ringkas pelbagai peserta CG , dan memberi tumpuan pada mekanisme CG , pemilikan dan kawalan, dan masalah agensi, lembaga pengarah, ketelusan korporat, etika, dan tanggungjawab sosial, hubungan pelabur dan aktivisme pemilik saham. Lembaga pengarah sebagai ejen pemilik telah dikenalpasti sebagai mekanisme utama mempastikan adanya CG yang kukuh. Antara lain, dalam konteks amalan korporat Malaysia, Kod Tadbir Urus Korporat (Code of Corporate Governance) telah diperkenalkan pada Mac 2001 dengan perhatian khusus diberikan kepada amalan lembaga. Perubahan utama lain termasuk pemantapan piawai perakaunan pada tahun 1997 melalui penubuhan Malaysian Accounting Standards Board ( MASB ), yang diletak di bawah Financial Reporting Act 1997 ( FRA ) dan peningkatan nota amalan (practice notes) oleh Bursa Malaysia ( BM ). Pihak berkuasa pengawal atur (regulatory authority ) juga telah meneliti semula Securities Industry Act 1983, khususnya Take-Over Code ( TOC ) dengan memindanya pada tahun 1999.

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