CURRENT ISSUE ACT 4193

1. CURRENT ISSUEACT 4193 CORPORATE GOVERNANCE PRACTICES IN MALAYSIA Group 4

2. Group Members • NOORLIZA BT GHAZALI 116803 • CHE KU AZMI B CHE KU ABDULLAH 118856 • NUR HIDAYATI BT SAPAWI 119033 • NURAIN BT SAUD@MAHMUD 118223 • YIK LAI FEI 119626 • NURSHAHIDA HANIM BT ISHAK 116975

3. Objective • The corporate governance practice before and during crisis 1997/1998 • Corporate governance reform undertaken by related authorities • How the corporate governance practice protect the shareholders • Minority interest watchdog group

4. INTRODUCTION • Beginning from the event of East Asian economies collapsed in the second half of 1997. • The period placed a greater concern and recognition of Corporate Governance to the public and private sector in those countries. • The World Bank (1998) regarded the vulnerability in the banking sector was attributed to poor risk management and excessive lending. • The Malaysian Code on Corporate Governance.

5. Corporate Governance Practice by Malaysian Company (before the Asian Financial crisis 1997/1998) Malaysia legal systems were influenced mostly by the common law Malaysian economy, along with instability in the exchange rate and a marked decline in share prices, adversely affected the corporate sector retrenchment and downsizing of operations, and the closure of many firms Poor governance standards in both private and government-owned firms

6. Cont……….. • high growth of new corporate debt securities issuance • borrowings and equity issuance, appeared as the third important financing instrument • The economists developed assumption that the insufficiency and malfunctioning of corporate governance mechanisms. • reflected to the high concentration of corporate ownership on corporate groups and families

7. Cont……….. each listed company is required by BMB to appoint independent directors In 1993, all of the listed companies must form an audit committee Malaysian Securities Commission (SC) - lead to the significant changes in the Malaysian capital market. of 1995- SC shifting from a merit-based regulatory regime (MBR) to a disclosure-based regulatory regime (DBR)

8. Cont……….. • In 1996- Companies Commission developed the Code of Ethics specifically for Directors • The parliament then approved the FRA 1997 • The MASB became the sole statutory authority that issues, approves, and reviews the accounting standards • In March 1998 - high-level of Finance Committee on Corporate Governance (FCCG) was established

9. Corporate Governance Reform • Malaysian Code on Corporate Governance • establishment of Finance Committee on Corporate Governance in 1998 • focus on four areas including: board of directors, director’s remuneration, shareholders and accountability and audit

10. Capital Market Master Plan (CMP) • by the Securities Commission • to chart the direction of the Malaysian capital market for the next ten years • mandatory disclosure on the state of compliance with the Malaysian Code on Corporate Governance

11. Financial Sector Master Plan (FSMP) • launched in March 2001 by the Bank Negara Malaysia • developing a more resilient, competitive and dynamic financial systems that contributes to the economic growth and technology driven

12. Malaysian Institute of Corporate Governance • Established in March 1998 by the High Level Finance Committee on Corporate Governance. • To be a leading organization for enhancement of corporate governance development • To be a recognized organization for corporate governance issues • To establish linkages and networking with the leading corporate governance references and research organizations. • To complement the regulators

13. Institutional Development • Malaysian Institute of Corporate Governance (MICG) • Minority Shareholders Watchdog Group (MSWG).

14. Measure to Protect Minority Interest Concentrated ownership in firms outside the Unite States is a natural response to poor legal protection of minority shareholders from expropriation by managers (Shleifer and Vishny 1997). Concentrated ownership plays an important role in corporate governance, especially in countries with poor investor protection (Shleifer and Vishny 1986).

15. Concentrated Ownership • emerges as a rational substitute when protection of minority shareholders is poor • in the absence of legal institutions that protect minority shareholders and constrain majority owners, controlling shareholders who extract more than 85% of firm value as private benefits

16. MINORITY SHAREHOLDERS WATCHDOG GROUP MSWG • Established As non profit limited company • As at 2nd July 2002 • Sponsor by five Malaysian institutional investors • EPF, PNB, Lembaga Tabung Angkatan Tentera, Lembaga Tabung Haji and SOCSO

17. Mission and Vision • To be the premier service entity in enhancing shareholder activism and protecting minority interests. • To lead in the development of knowledgeable and delivering our services effectively, efficiently and economically.

18. Objective • Forum • Think-tank and resource centre • Develop and disseminate • Platform • Influence • Monitor • Initiate

19. CONCLUSION • Anglo-American model as a reference point in devising system of governance. • Poor governance standard arise in both private and government-owned firms were blamed in part of this crisis. • Related authorities had taken action to reform the corporate governance due to existing issue. • Concentrated ownership is actually bring a good thing which is it can protect minority interest. • With the existence of MSWG, MSWG will bring benefits to Mr. Crawford in protect him right.

20. THANK YOU