The MD started by explaining that he had been invited to meet the Queen of Jourdan, who is visiting KL, but decided to keep the appointment to talk to us instead (the very long royal motorcade went past the hotel last night). The MD gave a keynote address on "Malaysian Corporate Governance and Its Impact on the Competitiveness of the Country". The main message was about the need for confidence in companies, in the face of overseas corporate collapses.
Datuk Ranjit Ajit Singh argued that better corporate governance has been shown to increase the value of companies. Not only do large investors look for companies with good government, but also now invest in companies with poor governance with an aim to increase the value of those companies by improving the governance. He said that regulations cannot make companies act ethically; that this is something for corporate culture and ultimately a matter of the individuals in companies. But the auditors are the first line of defence for the company against malpractice. The SC is in the final stages of establishing an audit oversight board (AOB). This will check the auditors who audit major companies.
Also a forensic accounting investigation team is being put in place. One issue which came up in discussions before the event was the role of computer forensics in corporate regulation. However, this is normally only applied after an infringement is suspected. I suggest what is also needed is monitoring of the markets to look for suspicious activity. Data mining software can be used to look for problems. The Australian Taxation Office has a data mining capability, but is choosing a cooperative approach with companies, to agree corporate governance and compliance arrangements.
The MD pointed out that Malaysia has the fourth largest bond market in the region and the largest Islamic capital market in the world, with Islamic banking. In the commission's bookshop, I picked up some of the free booklets about Islamic Capital Markets. The commission issues lists of Syariah compliant securities and guidelines for such companies. It would be interesting to see how much there is in common between Syariah guidelines and environmental/social ethical guidelines used by Australian ethical investment companies, such as Australian Ethical Investments. I suspect they have much in common.
Talking to the MD later, I found he is a graduate of University of Melbourne and he suggested that while there was some in common in assessing companies between Islamic and environmental guidelines, that Islamic capital markets are a different issue and very complex.
SESSION SIX: BUILDING ACCOUNTABILITY & SUSTAINABILITY
THROUGH INVESTOR RELATIONS
Moderator: Mr Puvan J. Selvanathan, Executive Director, Caux Round Table Malaysia
Whilst limitations on voluntary disclosure do exist as it may facilitate comparison by competitors, too little disclosure will defeat the purpose it serves. Thus, what would be the 'right' amount of disclosure to ensure the desirability of disclosure is achieved?
- What is the power of investor relations (IRs) function?
- How does a company maintain an effective communication policy with shareholders through IRs?
- How would one draw the line differentiating between Corporate Social Responsibility and IRs? They seem the same, but they are not.
- In order to achieve greater transparency and accountability in financial performance reporting, what would be the best IRs initiatives proposed/practiced by award winning companies?
Speaker: Mr Justin Leong, Chairman, Malaysian Investor Relations Association (MIRA), Head of Strategic Investments and Corporate Affairs, Genting Bhd
At this point I decided to take a break from the conference and visited the excellent SC library on the first floor. This has an extensive range of business book and periodicals, as well as online access. I found publications on Islamic banking and Islamic insurance. In terms of design of the library, there are semi-circular desks for casual access computers wrapped around the pillars of the building. Each desk can accommodate two computers to be used while standing. This makes good use of space, which otherwise would be unusable near the pillars. However, no computers have yet been installed on these desks. There was also free public WiFi, but I was not able to get it to work.
One useful publication was New Horizon: Global Perspective on Islamic Banking and Insurance, with an article "Malaysia: Leading the Way" (Rajab-Ramadan 1428, July September 2007). One point this made is that Malaysia's rise as an Islamic banking country has occurred since the 1980s. This started out with Tabung Haji, to provide a way to save for a pilgrimage and provide welfare services on the journey. The government introduced legislation in the 1980s for Islamic banks. There are also Islamic insurers (takaful). Islamic banking has 15% of the sector in Malaysia.
The article makes much of the Malaysia International Islamic Financial Centre (MIIFC) and its promotion of "sukuk" government bonds. They point out that Islamic bonds have to be backed by tangible assets, rather than an exercise in interest rate movements. Given the recent problems in global financial markets with financial instruments which turned out to be backed by noting at all, sukuk makes a lot of sense. There are also some government tax exemptions to promote the new market.
The library has an excellent view out to the Science Center opposite. The windows are shaded by the projecting roof of the building and by perforated metal louvers on the bottom third of the windows. As well as shading, the louvers give some reassurance for those with vertigo, such as myself, who are uncomfortable standing next to a floor to ceiling glass wall with a sheer drop below.
I had some difficulty getting into the library as while it is advertises as being open to the public, it has an access card lock on the door. Presumably members are issued with cards elsewhere. But I was able to attract some one's attention and was welcomed in to visit. After the bustle of KL's streets, a library is a calm and familiar space. One aspect of the library which created mixed feelings was censorship of publications. An edition of Newsweek magazine had a photo of some scantly clad young women covered with felt tip pen. The idea of such censorship I find worrying, but in this instance the photo was not essential to the article it was with (about the sexual views of US college students) and I would prefer not to have to look at the photo.
SESSION SEVEN:ICT IN CORPORATE GOVERNANCE -THE AUSTRALIAN EXPERIENCE
The importance of information and communications technologies (ICT) can not be ignored as the world is heading towards this direction for effective sources of information, communications and world-wide connectivity. Thus, this session aims to cover the followings:Moderator: Mr Puvan J. Selvanathan, Executive Director, Caux Round Table Malaysia
- Overview of Standards
- Electronic Reporting
- Fraud and other Threats from ICT
- ICT impact on Corporate Performance
- ICT Corporate Compliance Requirements
Speaker: Ms Marghanita da Cruz, Principal Consultant & Director, Ramin Communications, Australia
The slides for Ms Marghanita da Cruz's talk are available online. One interesting point which came out is that a new international standard for ICT Corporate Government is being developed, based on the Australian standard. This would appear an excellent opportunity for Australian consultants and trainers to provide services to the world about the new standard. Mr Puvan J. Selvanathan, the moderator entered into a dialog with the speaker on the relevance of code, using architecture as a metaphor. This seemed a very deep and significant discussion, but like most of the audience, I had no idea what they were talking about.
One audience member asked about the legal status of the Australian ICT Corporate Governance standard, which shows a difference in view in different national jurisdictions. Australian standards have no legislative force, being from a non-profit, non-government body. Some standards are given the force of law by federal or state legislation, or are included in regulations, but most are not.
Another question was about "e systems", such as online tax form submission and if the investment in such systems was worthwhile. I commented that take-up of systems such as Australia's eCensus was only about 15%, but this was enough to more than pay for the cost of the system.
SESSION EIGHT: COMMITING TO RESPONSIBLE BUSINESS PRACTICES
Moderator: Mr Puvan J. Selvanathan, Executive Director, Caux Round Table Malaysia
- How do responsible business practices contribute to the success of a company in global businesses?
- What kind of value do companies see in committing to responsible business practices in the long run?
- CSR encompasses many different aspects in relation to responsible business practices. The concern is how does a company manage all different aspects of CSR in the global competitive environment?
- What is the art of balancing the social aspect, economic welfare and environmental aspect of CSR?
Speaker: Dr Geoffrey Williams, Managing Director, OWW Consulting
Dr Williams discussed investor relations. He pointed out that hedge funds are starting to adopt a similar view to other investors, while still having a shorter view of time spans. Large investors expect personal access to senior company staff, possibly at their location overseas. These investors may only want a few investments in Malaysia. Financial analysts are time poor and risk averse and so will tend to favour large companies which are liquid, can be understood easily. They want reports in the morning and easily understood. He also had useful advice on dealing with the financial media. The main message was that Investor Relations information should be suitable for the particular audience. Even statutory information for the stock exchange needs to be well written as it is ultimately read by customers.
At question time I asked how to avoid being seen as devious if you produce different version of the information targeted to different audiences. The answer suggested was continuous disclosure, releasing information as it becomes available. One interesting suggestion was to lodge presentations to conferences with the stock exchange, before the presentation, if there is any price sensitive information in the presentation. Apart from meeting legal requirements, this could be useful marketing, with the stock exchange acting as an additional source of information.
End of Conference
The conference was a worthwhile event. Much of the value is in the informal discussions between participants, allowed for in the generous breaks in this conference. One insight by a delegate was that the Government has an ICT unit to encourage use of systems in government called MAPU (which seems equivalent to the Australian Government's AGIMO).
In may ways the issues of regulation and oversight I am familiar with for ICT systems apply more generally to corporations. ICT professionals could usefully learn about the wider context of business, but also have something to contribute, in terms of being able to build ICT systems to help with governance and also their more rigorous scientific and engineering approaches to governance.
Social Networking for Corporate Governance
An area in which I believe there is considerable scope for development is in the use of social networking technology for corporate governance. On May 12, 2008 Google announced "Google Friend Connect, a service using emerging social networking standards to allow third party web sites to provide social networking services. Currently this service is mostly confined to Google social networking products and aimed at non-business use. However, these show potential for expansion into business use.
The same standards as used for social networking, such as: OpenID, OAuth and OpenSocial, could be applied to corporate systems, using data access APIs as used by Facebook, Google, and MySpace. Management and board discussions could then take place using these tools, in much the same way social discussions now do. This would provide the rapid online communication and tools for group working, but with full audit trails complaint with government standards.
Those corporations and cities, who invest in the research, education and implementation needed for social networking for business may well be the Google, Microsoft and silicon valleys of the 21st Century.