CORPORATE GOVERNANCE IN MALAYSIA

CORPORATE GOVERNANCE IN MALAYSIA FOR VISION 2020: ISSUES AND EXPECTATIONS

En. Ramly bin Hj. Ali, Registrar of Companies, Malaysia

INTRODUCTION

Company law in Malaysia started in the late nineteenth century with the Companies Enactment 1897 at same time when the concept of carrying on business as a joint stock company was first introduced to the Malay States as a result of the influx of businessmen from both the east and the west who came into the country to carry on in the tin mining and the rubber plantation industries. As citizens of Malaysia, most of us here would be able to recall the country’s transformations from an agricultural economy juxtaposed with tin mining to one that is now vibrant, diversified and industrialized. Malaysia has taken the path of industrialisation from import substitution and labor intensive industries through to ever greater value, export oriented and capital and technology intensive industries. Malaysia had been exceedingly successful at attracting massive investment flows into the country and has in the last few years begun to be a capital exporting nation. The latter is particularly noteworthy because it no longer represents capital flights from the country but rather a conscious and coherent national drive to move itself into niches and positions that will ensure continued viability and vigour of our Malaysia enterprises.

Our beloved Prime Minister’s vision of a developed and industrialized Malaysia by the year 2020 has begun crystallising. We envisaged a national scenario of intensified infrastructural spending, of massive handing over of public enterprises and industries to the public through further privatisation projects. We see a development of a more extensive and deepened industrial base through continuing mega size investment as well as vertical and horizontal industrial integration, with small and medium scale industries playing critical roles. We envisioned an environment of innovation and change in the financial and services sectors as they move on to take the challenges that accompany national change. We would also see lifestyle and consumption pattern changes as Malaysian become ever more affluent. All of us should therefore try to understand the implications of national transformation a expected by Vision 2020 and be ready to tap into opportunities available for the benefit of all concern.

We must not however, in our haste to steer towards achieving the objectives of Vision 2020, forget to nurture the image of our corporations both locally and internationally through the proper observance and practice of a good corporate governance system which is a necessary feature for the growth of a healthy corporate and investment environment.

CORPORATE GOVERNANCE IN MALAYSIA

The issue of corporate governance has in recent years received more attention than it would ordinarily have in the light of series of corporate failure that gave rise to implications the affect not only those directly connected with the corporations concerned i.e.. the directors, shareholders and auditors of the corporations, but also those affected by its existence such as employees, customers, suppliers and the environment. This interest is further aggravated by occurrences of major corporate failures such as the collapse of the BCCI Bank, collapse of the Barings Empire, the Daiwa Bank debacle, the Maxwell affair and nearer to home the Perwaja episode which all have pointed to the lack of a proper corporate governance system as a major course Studies have shown that a majority of those corporate failure were predominantly dominated by one individual, occupying a position of trust, who apart from losing large amounts of money also committed illegal acts.

To a large extent, Malaysia’s economy depends on the drive and efficiency of its companies. Therefore the effectiveness with which their board of directors discharge their duties and responsibilities determines Malaysia’s competitive position. Company directors must be free to drive their companies forward, but they have to exercise that freedom within a framework of effective accountability. this is the essence of any system of good corporate governance. Corporate governance is the system by which companies are directed and controlled. Company directors are primarily responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and external auditors and to satisfy themselves that an appropriate governance structure is in place. The external auditors are responsible to provide shareholders with an external and objective check on the directors’ financial statements.

A proper and efficient system of corporate governance should be able regulate directors’ duties and restrain them from abusing their powers. It should be able to ensure that company directors act in the best interests of their companies as well as ensuring the observance and compliance with all laws, regulations and codes of conduct and best practices. In Malaysia, company directors are guided in the performance of their duties and responsibilities by a number of laws and regulation and non-legal requirements and codes of conducts. Principle among them is the Companies Act 1965, a law regulating companies which based originally on the U.K. Companies Act 1948 and the Australian Uniformed Companies Act 1961. The said Act had been amended twenty-six times since it was first implemented on 15 April 1966 to take into account developments in the corporate sector as well as to take into account the various comments and suggestions from the private and corporate sectors. The amendments have also taken into account abuses of company structures by company directors at the expense of the expense of the interests of minority shareholders. We have heard of properties injected into their companies by directors for exchange of share at valuation that is several times higher than the cost of the properties to them. We have also heard of directors who have acquired valuable properties from their companies at dirt cheap prices. Several new provisions had been introduced to deal with more transparency an actions by company directors especially those dealing with accounts and audits, disclosure of interests in contracts with the company by directors, disclosure of interests in contracts with the company by directors, disclosure of interest in shares by directors by directors and substantial shareholders, substantial property transactions by companies with their directors and insider trading. These new provisions are contained 132A, 132B, 132C. 132D, 132E and Division 3A of Part IV of the Companies Act 1965.

There are also new provisions introduced to prohibit transactions by directors and substantial shareholders which may joepardise the interest of the company such as those contained in sections 132G, 133 and 133A. The controversial section 132G was introduced at a time when many company directors and major shareholders of public listed companies were making quick bucks for themselves by injecting assets or shares which they recently acquired into their companies for exchanges of shares at valuation several times higher then the cost those assets or shares to them. This kind of assets or paper shuffling which are almost always executed at the expense of the minority shareholders and which diminish the earning per share of the company is prohibited by section 132G except those transactions which are exempted by subsection (6) of the section. The giving of loans by a company whose ordinary business is not that of giving of loans, represents a diversion of resources away from the core business of the company to money lending activities and may be used as a means to siphon money out of a company for personal benefit. Sections 133 and 133A prohibit the giving of loans to directors and persons (including corporations) who are connected to the directors. These prohibitions does not apply to exempt private company (i.e.. a company with less than twenty members and no corporations has any beneficial interest in the shoe of the company) and to the giving of loans in the circumstances exempted under those sections.

In addition to the Companies Act 1965, directors of public listed companies must also observe and comply with the Securities Commission Act 1993, the Securities Industry Act 1983, the Policies and Guidelines On Issue/Offer of Securities Commission (SC) and the Listing Requirements of the Kuala Lumpur Stock Exchange (KLSE). The guidelines of the SC sets out the requirements which have to be met before embarking a corporate proposal as well as the continuing obligating which all parties concerned must comply with once their proposals have been approved by the SC. The KLSE listing requirements, in addition to other matter, contained a requirement for every listed company to set up and audit committee as a sub-committee of the board of directors. The prime role of an audit committee is to provide an independent of a company’s financial reporting function. It involves both financial reporting to the shareholders and others as well as a company’s business ethics. the audit committee must comprise of not less than three members with a majority of them non-executive independent directors who are not related to the executive directors of the company or its related corporations and chaired by a non-executive director.

In Malaysia there are no qualification requirement imposed by law on who may be a company director. To any individual, it is easy to became a director, but to be a responsible one calls for a man of indisputable character, integrity and righteousness. Essentially, persons are appointed to boards of companies because of their ability, experience, influence, personal wealth or political, social or family position or reputation. Whit such a diversity of backgrounds and qualifications, it is therefore inevitable that in and about the affairs of their companies, some will act recklessly, some incompetently and some may be guilty of fraud or other acts of dishonesty. Of course a large majority of our companies are well served by their boards, and in those cases, the directors generally have a good understanding of the nature of the company-director relationship and of corporate image. This corporate image will appear differently depending upon the class of persons viewing it. Thus, to the investing public, a particular company may present images of financial stability, reliable reporting and an enviable dividend record. Another company may present to employees the image of a good employer. To the consumers, a particular company may present an image of sound merchandising and matchless customer service.

Directors are expected to hold attend meeting with reasonable regularity and to exercise some degree of care in the selection and supervision of the chief executive officer and other officers of their companies. They should also familiarise themselves with the provisions and requirements of the memorandum and article of association of their companies, the Companies Act 1965 and other laws and requirements relevant to the operations of their companies and observe them strictly. The business community and the investing public expect that directors of companies have a working knowledge of their powers, duties and responsibilities. Prominent persons should not safely lend their names and their names and advertising values to any company upon the understanding that they end not take any active part in the management and supervision as non-executive directors. They must bear in mind that their role as non-executive directors is rather important as tier presence at board meetings would serve as a check on the actions of the executive directors and they are also supposed to provide balanced and independent views on all proposals and policies deliberated at the meeting and to offer sound advice if things do not go the way it should. Their role can be said to be the highest moral obligations to minimize sharp practices and excesses which may arise from the emeanour of certain unscrupulous directors. They should seek for the removal of these unscrupulous directors if the need arises.

Company directors owe to their company duties of good faith, loyalty, skill and diligence. They are supposed to take an interest to inform themselves of the business, its policies, the manner in which it is syndicated, its products and advertising and the difficulties which might be encountered. There should not be any room for mere sleeping or inactive directors. As a directors, he is a member of the team whose collective responsibility is to direct the business of the company in the interest of all affected by its well being. As a member of that team, he would be falling far short of his duty if he considers that regular attendance at board meetings wall that was expected of him.

The Companies Act 1965 applies to all directors equally and generally a director is liable for the actions of his fellow directors. The fact that he has no executive responsibility within the company has no bearing on the question. Directors ore answerable to all offenses committed by the company and the fact that he is merely a sleeping director will not save him from his legal obligations. Pleading ignorance of the offending transaction or circumstances would not be an adequate defenses. He must ensure that he is regularly provided with sufficient financial and non-financial information about his company to satisfy himself that he is fulfilling his obligations. It is not enough for him to be honest and well meaning. There is more to it than that. He must be well informed and cultivate a constants awareness of the obligations expected of him by the Companies Act and other relevant laws and requirements. That is to say, he must observe and practice proper corporate governance.

THE COMPANY DIRECTOR’S CODE OF ETHICS

A number of steps has been taken in many jurisdiction to improve the system by which companies are controlled and governed. In the UK, the London Stock Exchange set up the Cadbury Committee to study the concern at the lack confidence in financial reporting and the value of audits following some well published failures of prominent companies. Among other matters, the Cadbury Committee recommended the adoption of a Code of Best Practice for all listed companies citing that had a code such as the one it recommended been in existence in the past, a number of recent examples of unexpected company failures and cases of fraud would have received attention earlier. Taking cue from the findings of the Cadbury Committee and with the aim of ensuring that the Malaysian corporate sector develops in a clean, ethical and healthy environment and after having consultation with the private and corporate sector, the Government through, the Registry of Companies, introduced The Company Director’s Code of Ethics on 8 April 1996. While the Code has no force of law, I with to remind all concerned that the Code was drafted on the basis that every director is required by section 132 of the Companies Act 1965 to at all times act honestly and use reasonable diligence in the discharge of his duties and moreover, a number of matters in the code are actually provisions in the Companies Act redrafted into the Code in non-legal and simple language which would be easily understood by all.

This Code of Ethics, among other matters, introduces ethical standards on practices by company directors based on the beliefs and values of a person and instill a spirit of social responsibility in tandem with the existing laws and regulations relating to management of a company. This Code of Ethics generally imposes more requirement for efficiency by company directors in view of the latest developments in the business and legal environments which are now more complex and sophisticated. This Code of Ethics in divided into three main parts, i.e.

• Corporate administration;

• Relations with shareholders, employees, creditors and customers;

• Environmental and social responsibilities.

Part 1 of this Code imposes a requirement for company directors to devote time and effort in the interest of their companies and not to use their position as a director for their own private interest. This part also requires every director to stay abreast with the development in the affairs of the community as well as the development in the relevant laws. In other words, it is expected for a director, at all times, to be aware of all the changes to the relevant laws made in tandem with the development in the corporate sector.

One very important point in this part is the call for every director to self-impose a limit on the number of directorship he holds in companies to a number in which he can best devote his time and effectiveness. There is no point for a person to hold directorships in many companies if he cannot devote his time effectively in the management of every company in which he is a director. It will be more sad to note if there are persons who hold the post of director in a company merely for the high remuneration without any serious and effective involvement in the management of that company.

Part 2 of this Code touches on the relationship between the directors and shareholders, employees, creditors and customers. This part essentially touches on the responsibilities of the directors towards their shareholders in spite of the fact that many of those responsibilities are clearly elucidated in the Companies Act 1965. This part of the Code also call upon directors to take an interest in the welfare of their employees as well as encourages directors to promise professionalism and raise the level of competency of the management and employees of their companies. The responsibility of the directors to ensure adequate safety for employees in their work places is also emphasised in this part of the Code.

The environmental and social responsibilities of company directors are covered by Part 3 of this Code. This part reminds company directors, especially those in companies which are not active and not carrying on business for a long period of time, not to neglect their companies. Directors of such companies are reminded that they should take specific actions such as to wind-up their companies or apply to have the names of their companies struck off the register. Those action are thought to be appropriate to show a true picture of the condition of out national economy as well as to provide an accurate indication when preparing statistics relating to the total number of companies existing in the country. An accurate statistics is very essential to investors, researches and decision makers for them to analyse or make decisions regarding the viability of certain investments or make forecasts relating to the future development of ours national economy. The scope of this part goes beyond the provisions of the Companies Act and tries to instill the spirit of social responsibility as it, among other matters, encourages companies which are successful t assist in community programs in line with the aspirations of the concept of "Caring Society" in Vision 2020. The call on company directors to be supportive of the efforts by the government to overcome inflation is also contained in this part. In the management of their businesses, directors should not only think of achieving maximum profits for their companies but should instead also think of the effects on the public at large. Usually more profits is derived from increases in the prices of goods or services produced or provided by accompany but at the same time such increases in prices give rise to inflationary effects on the public.

What the launching of this Code of Ethics, it will appear as though the ROC would adopt a two prong approach in its enforcement of corporate laws, i.e.

• Enforcement through various operations which has been carried out :

• By ensuring better understanding of their duties and responsibilities by all involved in the corporate sector company directors and secretaries

The aim is not only to enforce the laws by punishing the offenders but also by ensuring better understanding of their duties and responsibilities, so that directors would avoid committing offenses.

THE ROLE OF THE COMPANY SECRETARIES IN CORPORATE GOVERNANCE

Despite the complexities of company law, directors are expected to be aware of the legal consequences of their action and their duties to their companies and other affected parties such as the shareholders, prospective investors, customers, suppliers and creditors. Professional advice should always e sought when there is any doubt concerning a proposed course of action. In our Malaysia environment, many company directors are those who do not know exactly what their responsibilities are under the law. The basically are technocrats or simply people with good business acumen. Many of them still run their companies a though they are their own private businesses, not taking into cognizance that there are other people having interest in their companies. It is therefore in their best interest for them to seek advice and guidance from professionals.

The Companies Act 1965 recognizes the need for this and has introduced a requirement for every company to appoint a qualified company secretary. He or she must either be a member of a professional body which has been prescribed by the Minister or is one who holds a license issued by the Registrar of Companies. The company secretary has a key role to play in ensuring that all relevant laws, regulations and requirements are strictly followed and there is compliance with the correct procedures. It is in the best interest of the directors themselves to ensure that a suitably qualified person in appointed as company secretary to guide and advise them. The company secretary should be the first person the directors go to for advice and services in any of compliance. Sometimes, it is not the lack of good advice but rather the directors have their own views and choose to listen to only advice that enable a planned strategy to proceed.

The company secretary should not see himself or herself merely as being a person responsible for ensuring compliance with the statutory requirement such as keeping proper statutory books and following the correct procedures for convening general and board meeting but rather he or she should play the very important role as the "keeper of the company’s conscience". In playing this role, there is the need for the company secretary to have a wider perception of the company’s obligations to all shareholders and be steadfast in proffering advice and guidance to he board of directors. To further strengthen this role of the company secretary, there has been a proposal that the position of the company secretary should be safeguarded by a requirement in the law that any decision to dismiss the company secretary should only be carried out with the sanction of resolution of the company in general meeting which is approved by note less than three-fourth majority of members present and voting at the meeting by himself or by proxy. While this proposal merits deeper study, its effects on the continuing relationships between the directors and the company secretary, especially for the company secretary in the full-time employment, should be carefully considered. Practicing professional company secretaries would most certainly welcome this proposal.

In order to assist company secretaries in playing their role in enhancing the standard of corporate governance in the country, the Registry of Companies has on the 4th of July 1996 launched "The Company Secretary’s Code of Ethics". As with the code for company directors, this code was also drawn up with inputs from the private and corporate sectors, particularly within the tenets of morality, efficiency and administrative effectiveness and to uphold the spirit of social responsibilities and accountability in accordance with the laws regulations and requirements that govern a company secretary should be guide by the following codes :

• Strive for professional competency and at all times exhibit a high degree of skill and proficiency in the performance of the ditties of his office;

• At the times exercise the utmost good faith and act responsibly and honestly with reusable care and due diligence in the exercise of his powers and the discharge of the duties of his office;

• At all time strive to assist the company towards its proper objectives within the tenets of moral responsibility, effectiveness;

• Have a clear understanding of the aims and objectives of the company, and the powers and restrictions as provided in the Memorandum and Articles of association of the company;

• Be knowledgeable of law of meetings, meeting procedures, particular quorum requirements, voting procedures and proxy provisions and be responsible for the proper administration of meetings;

• Neither direct for his own advantage any business opportunity that the company is pursuing, nor may he use or disclose to any confidential information obtained by reason of his office for his own advantage or that of others;

• Adopt an objective and positive attitude and give full co-operation when dealing with governmental authorities and regulatory bodies;

• Disclose to the board of directors or and appropriate public office any information within his knowledge that he honestly believe suggests that a fraud is being or is likely to be practised by the company or by any of its directors or employees,

• Limit his secretaryship in companies to a number in which he can best and fully devote his time and effectiveness;

• Assist and advise the directors to ensure at all times that the company maintains an effective system of internal control for keeping proper registers and accounting records;

• Be impartial in his dealings with shareholders, directors and without fear or favour, use his best endeavour to ensure that the directors and the company comply with relevant legislation, contractual obligations and other relevant requirements;

• Be present in person or ensure in his absence he is so represence he is so represented at the company’s registered office on the days and at the hours the office is accessible to the public;

• Advise the board of directors that no policy is adopted by the company that will antagonise or offend any shareholders of the company;

• Be aware of all reporting and other requirements imposed by statute under which the company is incorporated; and

• Be present or represented at meeting and do not allow himself or his representative to be excluded or withdrawn from those meetings in a way that prejudices his professional responsibilities as secretary of the company.

THE ROLE OF INSTITUTIONAL AND LARGE

INVESTORS IN GOVERNANCE

Earlier on in the paper it was said that the role of shareholders in corporate governance is to appoint the directors, including the CEO, and the external auditors and ensuring that there is in place a proper system of corporate governance in their company. Through the medium of the general meeting, shareholders wield the ultimate power in a corporate entity. In reality, however, this power is usually exercised to further the interests of major shareholders who are also directors of the company. Whit so many thousand of individual shareholders in a company, none could cast a meaningful vote in the governance of their company. Shareholders who are dissatisfied usually end up selling the shares. The recent MUI-Pengkalen saga may show up as an example of a shareholder playing its roe in corporate governance by directors of his company. In that case, MUI, a major shareholder of Pengkalen initiated the convention of a general meeting to remove certain directors when it came to its notice that those directors intended to dispose a valuable asset of the company using its rights as a shareholders holding more than 10% of the issued capital of the company under section 144 & 145 of the Companies Act 1965. We, however do not have many shareholders with the calibre and capacity such as MUI to embark on a take-over offer to acquire more shares of the company to give it sufficient voting power to achieve its objective.

This trend may be fast changing with the emergence of more institutional and large investors. Institutional and large investor should think of themselves as owners and not just mere investors. They tend to hold rather then sell the shares of companies whose performance they do not like. At present less than 20% of the total market capitalisation of the Kuala Lumpur Stock Exchange are in the hands of institutional investors such EPF, PNB, unit trust schemes, mutual funds, pension funds and insurance companies. It is expected that this piece of the cake will grow larger and larger and may even reach 50% by the year 2020 as a result of the Malaysian Government’s effort to encourage savings among its population and growing awareness of its population to provide to provide for retirement, ill health and any unexpected calamities.

Such an enormous sums of investment, expected to reach more then a trillion Malaysia ringgit swing big weight. As shareholders assert the prerogatives of ownership, they necessarily clip the power of corporate management which may see them dethroning CEOs. In the US for instance, where institutional investors hold more then 50% of all the stocks of all corporations in the country, CEOs of many corporations on the FORTUNE 500 list have been dethroned through the concerted actions of institutional investors. If not dethroned, the CEO may be reduced to far less than imperial powers. When they join forces, institutional investors may not be able to garner enough vote to defeat the management, but their protest vote against any proposal may be sufficient to embarrass management and the directors an to embarrass them further the institutional investors may even publicise their criticisms. Company directors would have to remain awake at all times knowing that a spotlight is on them as never before, exposing directors to embarrassment or even law suits if they do not do their jobs within the proper system of corporate governance. And the operators of the brightest spotlight would be the institutional or large investors, constantly seeking and highlighting poor corporate performance, self dealings and other conflicts of interest situation and undue incentive.

Although the power of institutional investors to pressure, embarrass and dismiss the CEO or any of the directors is vast, they have actually no ability to improve the performance of the companies they own. They could not possibly inform themselves in death about the hundreds of companies in their portfolios. It is also doubtful that they can claim a seat on the board of directors since that might conflict with their fiduciary responsibility to their members, for example it may be difficult since that might conflict with their fiduciary responsibility to their members, for example it may be difficult for them to buy or sell shares in the company because they would be considered to be in possession of inside information. As a result, they are limited to a watching brief and to stir up a ruckus when trouble comes or they could get themselves appointed to a nomination committee, that the company set to appoint directors, to appoint a suitable candidate to look after their interests. Institutional and large investors should have frequent interactions with one another to discuss the standard of corporate governance by our directors as well as to discuss the nature of actions which can be taken against unrepentant directors. In order nor jeopardise their other services when action are taken against directors of companies, it may be worthwhile for institutional and large investors organise themselves into an association as have been done in the US.

OTHER ISSUES

Since 1966 when the Companies Act 1965 was first implemented, there has been a marked trend towards requiring the disclosure of more and more information form companies and placing more and more duties and responsibilities on directors and major shareholders of companies. Certain statutory requirements bear heavily upon small family companies. These include the holding of an annual general meeting, the keeping and filing of accounts, the necessity of an annual audit and various requirements to obtain prior approval of general meetings for certain transitions. In addition, rules relating to holding of meetings, the notice needed for resolutions, registration of resolutions and keeping of minutes are all inappropriate for small companies. Small family companies are required to hold meetings of dubious relevance recorded by detailed minutes which will be examined by no one, and they are obliged to file complex returns with the ROC. The ROC will embark on a study to investigate the question of whether the full panoply of these rules and requirements should apply to the small family companies where ownership and control of the business are in the same hands. Australia for instance, ha a separate class of companies for these small family companies i.e.. "proprietary company" and in South Africa, Small family companies are governed by a separate statute known as the "Close Corporations Act".

The other matter which needs looking into is the question of appointing directors and top mangers. It is very important to ensure that only persons of calibre should be appointed to position of responsibility especially in public listed companies. In this connection therefore a proper process should be established and in this light, the recommendation by the Cadbury Committee that there should be established a nomination committee for the appointment of directors and the CEO merits consideration. The nomination committee’s duty would be to carry out the selection process and make proposals to the Board. What may need to be stressed is that directors should be selected or appointed with the same impartiality and care as senior executives and that their appointment should be a matter for the consideration of the Board as a whole which will reinforce their independence and make it evident that they have been appointed based on merit and not through any form of patronage.

We are also particularly attracted to the part of the Cadbury Committee’s Report which made distinction between executive and non-executive directors. In real terms, this is quite practical as an essential quality which a non-executive director would bring to the Board’s deliberations is that of independence of judgment. This means that apart form their director’s fees and shareholdings, they should be independent of the management and free from any business or other relationships, they should be independent of the management and free from any business or other relationships which could materially interfere with the exercise of their independent judgment. This may mean that non-independent judgement. This may mean that non-executive directors should not remain too long on a board lest they lose something of their independent edge. There is merit in the Cadbury Committee’s Report that non-executive directors should be appointed for a specified of office only. Reappointment should no be automatic but a conscious decision by the board and the director concerned. This arrangement would enable companies to bring changes in the composition of their boards to maintain their vitality.

Another issue which have been brought to light is the call for the two top positions in accompany to be separated from one another. The combination of the two roles can never work successfully in a proper system of governance. If one look at a poorly performing company and ask the question, Who is running it?, the answer, Mr. CEO. And who is he accountable to? The answer, Mr. Chairman. And who is he?, the answer, Mr. CEO himself. A board is more likely to be autonomous and effective and there is none to the governance structure if the Chairman is an outside independent director. Companies, particularly those listed ones, should heed this call voluntarily rather than wait for the matter to be enacted in the Companies Act.

CONCLUSION

As we gear ourselves towards achieving the objectives of Vision 2020 we must not lose sight of the need to maintain a clean and healthy business and investment environment so that the flow of capital into our industries will not cease or slow down. The confidence of investors should not be derogated by poor governance by company directors. To maintain economic momentum, occasional reforms are imperative but it must be emphasise that stringent legislation and regulations are no substitute for proper corporate governance, sound management and high ethical and moral standards by directors and managers of our corporations. Directors and managers of our corporations must therefore live up to the expectations and display the highest professionalism in the conduct of their business.

Registry of Companies

Malaysia

September 1996