Saturday, May 17, 2008

Corporate Governance Leadership

Session two of the Malaysian Corporate Governance Conference at the Securities Commission, Kuala Lumpur, 15 - 16 May 2008, covered the Power of the Board:


Moderator: Mr Philip Koh, Senior Partner, Messr Mah-Kamariyah & Philip Koh
Speaker: Mr Jiv Sammanthan, Senior Executive Director, PricewaterhouseCoopers Advisory Services
Some parties have argued that many Malaysian directors do not take corporate governance seriously enough. This does not only hurt the organisations, but the society and nation as a whole. Thus, what role does the board of directors play in ensuring the welfare of the society and the competitiveness of the nation? What are the principal responsibilities of the board?
  • What constitute an effective board and what would be the demands and challenges to assume a leadership role in the emerging global environment?
  • Having good judgement is a subjective matter, but it is important especially in determining the size of non-executive participation. Thus, what factors are deemed good judgement? Is there a quintessential guide in exercising good judgement for directors?
  • Maintaining a successful relationship between the board and management is all about an issue of effective communication. Thus, what are the key elements in ensuring an effective communication between the two parties?
Jiv Sammanthan talked about the need for a culture of governance, governance versus management, short term compliance versus long term planning. PWC have done an analysis of the remuneration of directors in Malaysia in comparison with Australian and the UK, adjusted for the cost of living. The average for Malaysia is RM33K and for the top 100 companies RM35K.

Jiv noted that the average has been increasing each year, whereas the top 100 have been relatively stable. Malaysian remuneration is low compared with Australia and the UK. He suggested that companies had to be prepared to pay to get what is needed. I found the remuneration very high, given that the director effectively only does a few days work a year for their pay.


Speaker: Mr Philip Koh, Senior Partner, Messr Mah-Kamariyah

Philip went through changes to Malaysian corporate law which make it similar to that in Australia. Examples were explicit laws stating that directors cannot use company assets without approval. and whistle-blower protection. This made me wonder if there could be simply be a set of international laws to make compliance easier.

Leveraging on Technologies to Manage Challenges in Corporate Governance

Ms Michelle Yee, Solution Architect - Governance, Risk & Compliance, SAP (Asia-Pacific Japan)

Michelle was the first speaker to define what Corporate Governance is. She then showed how corporate governance legislation has been introduced in the Asian region in the last ten years. She argued that tools such as SAP's GRC Access Control and "dashboard" can be used to improve governance and risk management. She made a reasonable case, but some of its impact was reduced when someone asked what SAP stood for and that they had never heard of SAP. Michelle understandably found it hard to react to this, as like me, she assumed everyone had heard of SAP. Perhaps the company needs to do more of this awareness raising with senior corporate people.

There could be an opportunity for SAP, or another software company, with the Australian Government tendering for a Permit Management System Software tool for UN Sanction Enforcement law. Presumably this is to help prevent a repeat of the AWB debacle.

Networking Luncheon

Lunch was in one of the function rooms of the Security Commission's new building. This remarkable structure is circular, matching the Malayisia National Science Centre (Pusat Sains Negara) across the road. There is a sunken tropical garden outside the SC builsing, which seems to be used to propagate the pot plants for the offices, as well as providing an outdoor child minding center for children of the staff. The building also has a store selling publications about corporate law, including Islamic capital markets (they produce a free quarterly bulletin: "Malaysian ICM"). Examinations are also held in the building for people working in the securities industry.

Conference Room

The conference was held in a well equipped conference room , but with the most complex video projector mount I have ever seen. The projector is mounted on top of a section of the ceiling tiles which is lowered by an electric motor, with a bellows type mount. But the video screen is on a slight angle to the wall, and to match this the hole cut in the ceiling for the projector is also on an angle. It would have been a lot simpler to make the hole the size and shape of of four ceiling tiles, so no cutting or trim would be required.

During a break I discovered from one of the delegates that the Security Commission's is considered a smart building with computer control of services for energy efficiency. The only evidence I saw of this was automatic taps and flushing in the toilets. This is not a criticism of the building, but high praise. Unfortunately with many such smart buildings the systems become very obvious when then break down after a short while, but the SC systems seem to be working well. One minor problem I saw were touch screen kiosks around the building which were all switched off (and perhaps were being replaced with wall mounted screens).

  • What are the duties of audit committees in relation to IAF? What are their roles in accountability?
  • How do audit committees establish and preserve their independence with the management?
  • What would be the expectations and perceptions of internal audit in the continuous engagement with the management?
Moderator: Mr Walter Sandosam, Vice President Audit, Maybank and Vice President, Institute Internal Auditors Malaysia
Speakers Mr Lee Min On, Partner, KPMG Business Advisory and Governor, Institute of Internal Auditors Malaysia

One interesting internal audit issue Lee Min On discussed was compliance versus consulting. He argued that IA had a role in consulting, using the example of an organisation which used two staff to look after petty cash, in excess of what the risk from the loss of the small amount of money involved. He also talked about examples such as system design weakness, breakdown in control and management override.

I was a little uncomfortable with the idea that the internal auditors would also act as consultants, as if they suggest a process for the organisation to use, they then will find it difficult to dispassionately audit the process they recommended. Lee Min On responded that the auditors should only make suggestions for management to decide on and not be involved in the decision or implementation. Some of the most interesting issues, of the relationship between the IAs and the audit committee, were left to last.


Moderator: Ms Marghanita da Cruz, Principal Consultant & Director Ramin Communications, Australia
Speaker: Mr Lee Leok Soon, Head, Client Services, The Minority Shareholders WatchDog Group

Mr. Lee Leok Soon has a slightly different point of view to most of the other speakers at the conference, as he effectively works for the small shareholders of companies:

1999 : MSWG recommended.
The creation of a Minority Shareholder Watchdog Group was proposed in the Report on Corporate Governance (Green Book), February 1999 Issue, commissioned by the Ministry of Finance on how to enhance Corporate Governance in Malaysia. The Report recommended the adoption of a Malaysian Code on Corporate Governance. Click here to view the Green Book of February 1999 and the the Code on Corporate Governance of March 2000.

2000 : MSWG incorporated.
In August 2000, MSWG was incorporated as a public company limited by guarantee.

2001 : MSWG established.
“The year 2001 ushered in two further milestones, namely, the incorporation of the Malaysian Code on Corporate Governance into the revamped Listing Rules of the Kuala Lumpur Stock Exchange and the establishment of Badan Pengawas Pemegang Saham Minoriti Berhad, or the Minority Shareholder Watchdog Group Limited. The latter will promote better and more effective corporate governance practices which could set a benchmark for others in the region.”

From: Our History, MSWG

See also Books:
Corporate governance
Technology and Corporate Governance
Leadership in corporate governance
Audit and Corporate Governance
Corporate social responsibility (CSR)
Shareholder Activism

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