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Group members, Lee WeiMay 114831 Liew VuiBing 114900 Ng HakLoon 115735 Tan SiewPeng 116337

ACT 4193 Current Issues in Accounting and Auditing. Topic 1: Corporate Governance Practices in Malaysia. Group members, Lee WeiMay 114831 Liew VuiBing 114900 Ng HakLoon 115735 Tan SiewPeng 116337 Azwin bt. Nazarudin 117030 Maziah bt. Mohamed 117172.

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Group members, Lee WeiMay 114831 Liew VuiBing 114900 Ng HakLoon 115735 Tan SiewPeng 116337

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  1. ACT 4193 Current Issues in Accounting and Auditing Topic 1: Corporate Governance Practices in Malaysia Group members, Lee WeiMay 114831 Liew VuiBing 114900 Ng HakLoon 115735 Tan SiewPeng 116337 Azwin bt. Nazarudin 117030 Maziah bt. Mohamed 117172

  2. Corporate governance models Reform of Malaysian Corporate Governance Corporate culture and Power distance Corporate culture and power distance Minority Shareholders Watchdog Group Financial Crisis 1997/1998 Malaysian Institute of Corporate Governance Actions taken by the government and other parties Audit Committee and Board of Director Ownership concentration National Development Policy

  3. Introduction • Corporate governance models around • the world • - Western model • - Eastern model • Corporate culture • - Power distance

  4. Power distance • Power distance – Prof Geert Hofstede • “…the extent to which the less powerful • members of institutions and organizations • within a country expect and accept that power • is distributed unequally…” • Malaysia scores high in the PDI • Boss always right

  5. Financial Crisis 1997/1998 • Surfaced on 2 July 1997 • High credit growth • Exchange rate went down • 14 July 1997– RM2.57/Dollar • 7 Jan 1998 -- RM4.88/Dollar • Pegged at 3.80 to the dollar

  6. Actions taken by the government and other parties • Bank Negara fixed the ringgit at 3.8 to the dollar. • January 1998, created the National Economic Action Council (NEAC) - National Economic Recovery Plan - Corporate Debt Restructuring Committee (CDRC)

  7. Ownership concentration • Family control, individual, state • 90 per cent of the firms have a controlling shareholder • expropriating minority shareholders - major owners exercise their power to achieve their own objective

  8. Reform of Malaysian Corporate Governance • 1998 -Listing requirements strengthens rules on related party transactions • 1999 -Revamp of Malaysian Code on Takeovers and Mergers -Exchange Listing Requirements Mandate Quarterly Reporting • 2000 -Amendments to securities law to harmonize regime for regulation of prospectus -Malaysian Code on Corporate Governance introduced • 2001 -Major revamp of Exchange Listing Requirements

  9. Key Thrusts of Malaysia’s Reform Agenda • Fair treatment of all shareholders • Enhanced transparency • Accountability and independence of Board of Directors • Promotion of training and education

  10. MASB • established under the Financial Reporting Act 1997 (the Act) • as an independent authority • to develop and issue accounting and financial reporting standards in Malaysia. • Together with the Financial Reporting Foundation (FRF), make up the new framework for financial reporting in Malaysia.

  11. Minority Shareholders Watchdog Group (MSWG) • Established in August 2000 • As watchdog to monitor listed company • Key objectives: - become the think-tank and resource centre for minority shareholders - influence the decision-making processes in listed companies - to recommend action against the management of listed companies - continuously monitor listed companies

  12. MICG • established in March 1998 • founding members: Federation of Public Listed Companies (FPLC), Malaysian institute of Accountants (MIA), Malaysian Association of Certified Public Accountants (MICPA), Malaysian institute of Chartered Secretaries and Administrators (MAICSA), Malaysian Institute of Directors (MID) • Mission of MICG : -To facilitate Business and Corporate Governance Development in the country -To Improve Corporate Governance Best Practice -To fine tune Corporate Governance concept and practices suit the needs of our own nation

  13. Audit Committee and Board of Director • A standing committee of the board, which constituted to contribute effectiveness of corporate governance • Role of audit committee and board of director

  14. National Development Policy • NEP – before Asian financial crisis • After crisis – NDP (National Development Policy) • NDP & NERP (National Economic Recovery Plan) to revive back the market of Malaysia • NEP – give rise the event of ethnicity - Difference between aborigines and non-aborigines

  15. Conclusion • Advice for Mr. Danish • Investing in Malaysia before Asian financial crisis - High payback – economy booming - High risk due to lack of corporate governance and ownership concentration (family shareholdings) and companies operating on short terms loans - High expropriation of minority – scandals by the major shareholders

  16. Conclusion (cont’d) • Investing after the crisis - A more secured market – MCCG introduced by MICG to monitor the corporate governance - A further step to guaranteed the adoption of good corporate governance when NACRA uses corporate governance as one of its evaluation criteria - Establishment of MSWG to watch over the affairs of the minority shareholders - minority will be taken as a part of the decision ratifying mechanism

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