MALAYSIAN CODE ON

CORPORATE GOVERNANCE
2012

CONTENTS
Foreword
Corporate Governance in Malaysia
Corporate Governance Principles and Recommendations
Principle 1: Establish clear roles and responsibilities
Principle 2: Strengthen composition
Principle 3: Reinforce independence
Principle 4: Foster commitment
Principle 5: Uphold integrity in financial reporting
Principle 6: Recognise and manage risks
Principle 7: Ensure timely and high quality disclosure
Principle 8: Strengthen relationship between company and shareholders
Table 1: Comparison between the MCCG 2012 and the 2007 Code

FOREWORD
By TAN SRI ZARINAH ANWAR
Chairman, Securities Commission Malaysia
The Securities Commission Malaysia (SC) had in July 2011 released the Corporate Governance
Blueprint 2011 (Blueprint) which sets out the desired corporate governance landscape going
forward. The essence of the Blueprint is to achieve excellence in corporate governance through
strengthening self and market discipline and promoting good compliance and corporate
governance culture. Boards and shareholders must embrace the understanding that good
business is not just about achieving the desired financial bottom line by being competitive, but
by also being ethical and sustainable.
The Malaysian Code on Corporate Governance (Code), first issued in March 2000, marked a
significant milestone in corporate governance reform in Malaysia. The Code was later revised
in 2007 (2007 Code) to strengthen the roles and responsibilities of the board of directors, audit
committee and the internal audit function. The Malaysian Code on Corporate Governance 2012
(MCCG 2012) focuses on strengthening board structure and composition recognising the role of
directors as active and responsible fiduciaries. They have a duty to be effective stewards and
guardians of the company, not just in setting strategic direction and overseeing the conduct of
business, but also in ensuring that the company conducts itself in compliance with laws and
ethical values, and maintains an effective governance structure to ensure the appropriate
management of risks and level of internal controls.
Boards and management must be mindful of their duty to direct their efforts and resources
towards the best interest of the company and its shareholders while ensuring that the interests
of other stakeholders are not compromised. Disclosure and transparency are essential for
informed decision-making. The timely availability of quality and accurate information including
the reporting of financial performance are key facets of investor protection and market
confidence.
A code of corporate governance is just part, albeit a very significant part, of the corporate
governance regulatory tapestry. As highlighted in the Blueprint, several key recommendations
will be implemented through the Bursa Malaysia Listing Requirements while others require
changes to the law. Additionally, a companys own internal codes and procedures are critical in
fostering a strong culture of corporate governance. It is therefore important that the MCCG
2012 is viewed and understood against the backdrop of this rich and strong tapestry.

In drafting the MCCG 2012, the views of many stakeholders were sought to understand the
practicalities, challenges and expectations of inculcating high standards of corporate
governance in listed companies and to ensure we have the necessary principles and
recommendations of best practices to meet those standards. The SC would like to thank Bursa
Malaysia, Federation of Public Listed Companies, Malaysian Institute of Corporate Governance,
Malaysian Directors Academy, Minority Shareholders Watchdog Group, Malaysian Institute of
Chartered Secretaries and Administrators, Malaysian Alliance of Corporate Directors and
international corporate governance experts for their invaluable feedback and comments. I
would also like to thank the staff of the SC for their efforts in the formulation and publication of
MCCG 2012.
As always, I look forward to the support and co-operation of all stakeholders to enable us to
achieve excellence in corporate governance to underpin the sustainable growth of the
Malaysian capital market.

TAN SRI ZARINAH ANWAR

March 2012

CORPORATE GOVERNANCE IN MALAYSIA

Malaysias Corporate Governance Journey

1.

Malaysia recognises the value of good governance and it is for this reason that we are
committed to promoting and sustaining a strong culture of corporate governance.
Investor confidence in Malaysia was severely affected during the 1997/98 Asian
Financial Crisis. Policy makers learnt valuable lessons and focused their attention,
amongst others, on the need to raise corporate governance standards. We undertook
numerous initiatives including the issuance of the Malaysian Code on Corporate
Governance (Code) in the year 2000 to strengthen our corporate governance
framework.

2.

Since then, we have embarked on a journey to continuously improve our corporate

governance framework. The Code was revised and securities and companies laws were
amended. The Audit Oversight Board was established to provide independent oversight
over external auditors of companies. The Securities Industry Dispute Resolution Center
was established to facilitate the resolution of small claims by investors. Statutory
derivative action was introduced to encourage private enforcement action by
shareholders.

3.

In 2011, the Securities Commission Malaysia issued the Corporate Governance Blueprint
2011 (Blueprint) which outlines strategic initiatives aimed at reinforcing self and market
discipline. The Malaysian Code on Corporate Governance 2012 (MCCG 2012) is a key
deliverable of the Blueprint.

The Malaysian Code on Corporate Governance 2012

4.

The MCCG 2012, consistent with the Blueprint, retains the definition of corporate
governance as set out in the High Level Finance Committee Report 1999.
Corporate governance is defined as:
The process and structure used to direct and manage the business and affairs of the
company towards enhancing business prosperity and corporate accountability with the

ultimate objective of realising long-term shareholder value, whilst taking into account
the interests of other stakeholders.
5.

The MCCG 2012, which supersedes the 2007 Code, sets out the broad principles and
specific recommendations on structures and processes which companies should adopt
in making good corporate governance an integral part of their business dealings and
culture.

6.

The MCCG 2012, like all corporate governance codes, advocates the adoption of
standards that go beyond the minimum prescribed by regulation. The observance of
the MCCG 2012 by companies is voluntary. Listed companies are however required to
report on their compliance with the MCCG 2012 in their annual reports.

7.

The MCCG 2012 focuses on clarifying the role of the board in providing leadership,
enhancing board effectiveness through strengthening its composition and reinforcing its
independence. The MCCG 2012 also encourages companies to put in place corporate
disclosure policies that embody principles of good disclosure. Companies are
encouraged to make public their commitment to respecting shareholder rights.

8.

The MCCG 2012 is arranged as follows:

Principles
The principles of MCCG 2012 encapsulate broad concepts underpinning good corporate
governance that companies should apply when implementing the recommendations.
Recommendations
The recommendations are standards that companies are expected to adopt as part of
their governance structure and processes. Listed companies should explain in their
annual reports how they have complied with the recommendations. As there is no one
size fits all approach to corporate governance, companies are allowed to determine
the best approach to adopting the principles. Where there is non-observance of a
recommendation, companies should explain the reasons.
Commentaries
Each recommendation is followed by a commentary which seeks to assist companies in
understanding the recommendation. It also provides some guidance to companies in
implementing the recommendation. Although some of the commentaries provide
examples and suggestions, these should not be taken to be exhaustive.
5

CORPORATE GOVERNANCE PRINCIPLES AND RECOMMENDATIONS

This section is a listing of the eight principles and their corresponding 26 recommendations.
The principles and recommendations focus on, amongst others, laying a strong foundation for
the board and its committees to carry out their roles effectively, promote timely and balanced
disclosure, safeguard the integrity of financial reporting, emphasise the importance of risk
management and internal controls and encourage shareholder participation in general
meetings.

Principle 1 Establish clear roles and responsibilities

Recommendation 1.1
The board should establish clear functions reserved for the board and those delegated to
management.
Recommendation 1.2
The board should establish clear roles and responsibilities in discharging its fiduciary and
leadership functions.
Recommendation 1.3
The board should formalise ethical standards through a code of conduct and ensure its
compliance.
Recommendation 1.4
The board should ensure that the companys strategies promote sustainability.
Recommendation 1.5
The board should have procedures to allow its members access to information and advice.
Recommendation 1.6
The board should ensure it is supported by a suitably qualified and competent company
secretary.
Recommendation 1.7
The board should formalise, periodically review and make public its board charter.

Principle 2 Strengthen composition

Recommendation 2.1
The board should establish a Nominating Committee which should comprise exclusively of nonexecutive directors, a majority of whom must be independent.
Recommendation 2.2
The Nominating Committee should develop, maintain and review the criteria to be used in the
recruitment process and annual assessment of directors.
Recommendation 2.3
The board should establish formal and transparent remuneration policies and procedures to
attract and retain directors.

Principle 3 Reinforce independence

Recommendation 3.1
The board should undertake an assessment of its independent directors annually.
Recommendation 3.2
The tenure of an independent director should not exceed a cumulative term of nine years.
Upon completion of the nine years, an independent director may continue to serve on the
board subject to the directors re-designation as a non-independent director.
Recommendation 3.3
The board must justify and seek shareholders approval in the event it retains as an
independent director, a person who has served in that capacity for more than nine years.
Recommendation 3.4
The positions of chairman and CEO should be held by different individuals, and the chairman
must be a non-executive member of the board.
Recommendation 3.5
The board must comprise a majority of independent directors where the chairman of the board
is not an independent director.

Principle 4 Foster commitment

Recommendation 4.1
The board should set out expectations on time commitment for its members and protocols for
accepting new directorships.
Recommendation 4.2
The board should ensure its members have access to appropriate continuing education
programmes.

Principle 5 Uphold integrity in financial reporting

Recommendation 5.1
The Audit Committee should ensure financial statements comply with applicable financial
reporting standards.
Recommendation 5.2
The Audit Committee should have policies and procedures to assess the suitability and
independence of external auditors.

Principle 6 Recognise and manage risks

Recommendation 6.1
The board should establish a sound framework to manage risks.
Recommendation 6.2
The board should establish an internal audit function which reports directly to the Audit
Committee.

Principle 7 Ensure timely and high quality disclosure

Recommendation 7.1
The board should ensure the company has appropriate corporate disclosure policies and
procedures.
Recommendation 7.2
The board should encourage the company to leverage on information technology for effective
dissemination of information.
8

Principle 8 Strengthen relationship between company and shareholders

Recommendation 8.1
The board should take reasonable steps to encourage shareholder participation at general
meetings.
Recommendation 8.2
The board should encourage poll voting.
Recommendation 8.3
The board should promote effective communication and proactive engagements with
shareholders.

In the following section, a commentary is provided for each recommendation. The commentary
seeks to explain and provide some guidance for each recommendation.

PRINCIPLE 1: ESTABLISH CLEAR ROLES AND RESPONSIBILITIES

The responsibilities of the board, which should be set out in a board charter,
include management oversight, setting strategic direction premised on
sustainability and promoting ethical conduct in business dealings.
Recommendation 1.1
The board should establish clear functions reserved for the board and those delegated to
management.
Commentary
The respective roles and responsibilities of the board and management should be clearly set
out and understood to ensure accountability of both parties.
The board together with the Chief Executive Officer (CEO) should develop the descriptions for
their respective functions. In addition, the board should develop and agree with the CEO, the
corporate objectives, which include performance targets and long-term goals of the business,
to be met by the CEO. Regular review of the division of responsibilities should be conducted to
ensure that the needs of the company are consistently met. This allocation of responsibilities
should reflect the dynamic nature of the relationship necessary for the company to adapt to
changing circumstances.

Recommendation 1.2
The board should establish clear roles and responsibilities in discharging its fiduciary and
leadership functions.
Commentary
The board should assume, amongst others, the following responsibilities:

Reviewing and adopting a strategic plan for the company

The role of the board is to review, challenge and approve managements proposal on a
strategic plan for the company. The board brings objectivity and breadth of judgment to
the strategic planning process as they are not involved in day-to-day management of the
business. The board should satisfy itself that management has taken into account all
appropriate considerations in establishing the strategic plan for the company. The board is
also responsible for monitoring the implementation of the strategic plan by management.
10

Overseeing the conduct of the companys business

A basic function of the board is to oversee the performance of management to determine
whether the business is being properly managed. The boards obligation to oversee the
performance of management contemplates a collegial relationship that is supportive yet
vigilant. Therefore, the board must ensure that there are measures in place against which
managements performance can be assessed.

Identifying principal risks and ensuring the implementation of appropriate internal controls
and mitigation measures
The board must understand the principal risks of all aspects of the companys business and
recognise that business decisions involve the taking of appropriate risks. This is intended
to achieve a proper balance between risks incurred and potential returns to shareholders.
The board must therefore ensure that there are systems in place which effectively monitor
and manage these risks.

Succession planning
The board should ensure that all candidates appointed to senior management positions are
of sufficient calibre. The board should also be satisfied that there are programmes in place
to provide for the orderly succession of senior management.

Overseeing the development and implementation of a shareholder communications policy

for the company
The responsibility of the board is to ensure that the company has in place a policy to
enable effective communication with its shareholders and other stakeholders. This policy
should include how feedback received from its stakeholders are considered by the
company when making business decisions.

Reviewing the adequacy and the integrity of the management information and internal
controls system of the company
The board has to ensure that there is a sound framework of reporting on internal controls
and regulatory compliance.

11

Recommendation 1.3
The board should formalise ethical standards through a code of conduct and ensure its
compliance.
Commentary
A key role of the board is to establish a corporate culture which engenders ethical conduct that
permeates throughout the company. The board needs to formalise and commit to ethical
values through a code of conduct and ensure the implementation of appropriate internal
systems to support, promote and ensure its compliance. The code of conduct should include
appropriate communication and feedback channels which facilitate whistleblowing. The board
should periodically review the code of conduct. A summary of the code of conduct should be
made available on the corporate website.

Recommendation 1.4
The board should ensure that the companys strategies promote sustainability.
Commentary
The board should formalise the companys strategies on promoting sustainability. Attention
should be given to environmental, social and governance (ESG) aspects of business which
underpin sustainability. Balancing ESG aspects with the interests of various stakeholders is
essential to enhancing investor perception and public trust. The board should ensure the
company discloses these policies and their implementation in the annual report and the
corporate website.

Recommendation 1.5
The board should have procedures to allow its members access to information and advice.
Commentary
The board should have access to all information pertaining to the company. Management
should supply accurate and complete information to the board in a timely manner to enable
the board to discharge its duties effectively.
Occasions may arise when the board has to seek legal, financial, governance or expert advice in
the course of their duties. The board should be able to consult advisers and, when considered
necessary, to seek independent professional advice. The board should be entitled to do so at
the companys expense through an agreed procedure.
12

Recommendation 1.6
The board should ensure it is supported by a suitably qualified and competent company
secretary.
Commentary
The board regularly consults the company secretary on procedural and regulatory
requirements. The company secretary also plays an important role in supporting the board by
ensuring adherence to board policies and procedures. Therefore, the board should appoint a
suitably qualified and competent company secretary who can support the board in carrying out
its roles and responsibilities.

Recommendation 1.7
The board should formalise, periodically review and make public its board charter.
Commentary
The board charter sets out the boards strategic intent and outlines the boards roles and
responsibilities. The board charter is a source reference and primary induction literature,
providing insights to prospective board members and senior management. It will also assist the
board in the assessment of its own performance and that of its individual directors.
In establishing a board charter, it is important for the board to set out the key values, principles
and ethos of the company, as policies and strategy development are based on these
considerations. The board charter should also include the division of responsibilities and
powers between the board and management, the different committees established by the
board, and between the chairman and the CEO. The board charter should set out processes
and procedures for convening board meetings. The board should periodically review and
publish the board charter on the corporate website.

13

PRINCIPLE 2: STRENGTHEN COMPOSITION

The board should have transparent policies and procedures that will assist in
the selection of board members. The board should comprise members who
bring value to board deliberations.

Recommendation 2.1
The board should establish a Nominating Committee which should comprise exclusively of nonexecutive directors, a majority of whom must be independent.
Commentary
The Nominating Committee is charged with the responsibility to oversee the selection and
assessment of directors.
An effective Nominating Committee will contribute towards ensuring that board composition
meets the needs of the company. The chair of the Nominating Committee should be the senior
independent director identified by the board.

Recommendation 2.2
The Nominating Committee should develop, maintain and review the criteria to be used in the
recruitment process and annual assessment of directors.
Commentary
The Nominating Committees responsibilities include assessing and recommending to the board
the candidature of directors, appointment of directors to board committees, review of boards
succession plans and training programmes for the board. In assessing suitability of candidates,
considerations should be given to the competencies, commitment, contribution and
performance. The Nominating Committee should facilitate board induction and training
programmes. The nomination and election process of board members should be disclosed in
the annual report.
The board should establish a policy formalising its approach to boardroom diversity. The board
through its Nominating Committee should take steps to ensure that women candidates are
sought as part of its recruitment exercise. The board should explicitly disclose in the annual
report its gender diversity policies and targets and the measures taken to meet those targets.
14

Recommendation 2.3
The board should establish formal and transparent remuneration policies and procedures to
attract and retain directors.
Commentary
Fair remuneration is critical to attract, retain and motivate directors. The remuneration
package should be aligned with the business strategy and long-term objectives of the company.
Remuneration of the board should reflect the boards responsibilities, expertise and complexity
of the companys activities.
The board should establish a Remuneration Committee to perform this function. The
Remuneration Committee should consist exclusively or a majority of, non-executive directors,
drawing advice from experts, if necessary. Companies without a Remuneration Committee
should have board policies and procedures on matters that would otherwise be dealt with by
the Remuneration Committee. Board remuneration policies and procedures should be
disclosed in the annual report.

15

PRINCIPLE 3: REINFORCE INDEPENDENCE

The board should have policies and procedures to ensure effectiveness of
independent directors.

Recommendation 3.1
The board should undertake an assessment of its independent directors annually.
Commentary
Independent directors bring independent and objective judgment to the board and this
mitigates risks arising from conflict of interest or undue influence from interested parties.
The existence of independent directors on the board by itself does not ensure the exercise of
independent and objective judgment as independent judgment can be compromised by,
amongst others, familiarity or close relationship with other board members.
Therefore, it is important for the board to undertake an annual assessment of the
independence of its independent directors. When assessing independence, the board should
focus beyond the independent directors background, economic and family relationships and
consider whether the independent director can continue to bring independent and objective
judgment to board deliberations. The Nominating Committee should develop the criteria to
assess independence. The board should apply these criteria upon admission, annually and
when any new interest or relationship develops.
The board should disclose that it has conducted such assessment in the annual report and in
any notice convening a general meeting for the appointment and re-appointment of
independent directors.

Recommendation 3.2
The tenure of an independent director should not exceed a cumulative term of nine years.
Upon completion of the nine years, an independent director may continue to serve on the
board subject to the directors re-designation as a non-independent director.
Commentary
The assessment criteria for independence of directors should also include tenure. Long tenure
can impair independence. For this reason, tenure of an independent director is capped at nine
16

years. The nine years can either be a consecutive service of nine years or a cumulative service
of nine years with intervals. An independent director who has served the company for nine
years may, in the interest of the company, continue to serve the company but in the capacity of
a non-independent director.

Recommendation 3.3
The board must justify and seek shareholders approval in the event it retains as an
independent director, a person who has served in that capacity for more than nine years.
Commentary
The shareholders may, in exceptional cases and subject to the assessment of the Nominating
Committee, decide that an independent director can remain as an independent director after
serving a cumulative term of nine years. In such a situation, the board must make a
recommendation and provide strong justification to the shareholders in a general meeting.

Recommendation 3.4
The positions of chairman and CEO should be held by different individuals, and the chairman
must be a non-executive member of the board.
Commentary
Separation of the positions of the chairman and CEO promotes accountability and facilitates
division of responsibilities between them. The responsibilities of the chairman should include
leading the board in the oversight of management, while the CEO focuses on the business and
day-to-day management of the company. This division should be clearly defined in the board
charter.

Recommendation 3.5
The board must comprise a majority of independent directors where the chairman of the board
is not an independent director.
Commentary
A chairman who is an independent director can provide strong leadership by being able to
marshal the boards priorities more objectively. If the chairman is not an independent director,
then the board should comprise a majority of independent directors to ensure balance of
power and authority on the board.
17

PRINCIPLE 4: FOSTER COMMITMENT

Directors should devote sufficient time to carry out their responsibilities,
regularly update their knowledge and enhance their skills.

Recommendation 4.1
The board should set out expectations on time commitment for its members and protocols for
accepting new directorships.
Commentary
Directors should devote sufficient time to carry out their responsibilities. The board should
obtain this commitment from its members at the time of appointment. Directors should notify
the chairman before accepting any new directorship. The notification should include an
indication of time that will be spent on the new appointment.

Recommendation 4.2
The board should ensure its members have access to appropriate continuing education
programmes.
Commentary
In a dynamic and complex business environment, it is imperative that directors devote
sufficient time to update their knowledge and enhance their skills through appropriate
continuing education programmes and life-long learning. This will enable directors to sustain
their active participation in board deliberations.

18

PRINCIPLE 5: UPHOLD INTEGRITY IN FINANCIAL REPORTING

The board should ensure financial statements are a reliable source of
information.

Recommendation 5.1
The Audit Committee should ensure financial statements comply with applicable financial
reporting standards.
Commentary
The board must recognise the value of an effective Audit Committee in ensuring the companys
financial statement is a reliable source of financial information. The Audit Committee must,
amongst others, ensure that the companys financial statements comply with applicable
financial reporting standards as this is integral to the reliability of financial statements.

Recommendation 5.2
The Audit Committee should have policies and procedures to assess the suitability and
independence of external auditors.
Commentary
The Audit Committee should review and monitor the suitability and independence of external
auditors. The independence of external auditors can be impaired by the provision of non-audit
services to the company. The Audit Committee should therefore establish policies governing
the circumstances under which contracts for the provision of non-audit services can be entered
into and procedures that must be followed by the external auditors.
To provide support for an assessment on independence, the Audit Committee should obtain
written assurance from the external auditors confirming that they are, and have been,
independent throughout the conduct of the audit engagement in accordance with the terms of
all relevant professional and regulatory requirements.

19

PRINCIPLE 6: RECOGNISE AND MANAGE RISKS

The board should establish a sound risk management framework and internal
controls system.

Recommendation 6.1
The board should establish a sound framework to manage risks.
Commentary
The board should determine the companys level of risk tolerance and actively identify, assess
and monitor key business risks to safeguard shareholders investments and the companys
assets. Internal controls are important for risk management and the board should be
committed to articulating, implementing and reviewing the companys internal controls system.
Periodic testing of the effectiveness and efficiency of the internal controls procedures and
processes must be conducted to ensure that the system is viable and robust. The board should
disclose in the annual report the main features of the companys risk management framework
and internal controls system.

Recommendation 6.2
The board should establish an internal audit function which reports directly to the Audit
Committee.
Commentary
The board should establish an internal audit function and identify a head of internal audit who
reports directly to the Audit Committee. The head of internal audit should have the relevant
qualifications and be responsible for providing assurance to the board that the internal controls
are operating effectively. Internal auditors should carry out their functions according to the
standards set by recognised professional bodies. Internal auditors should also conduct regular
reviews and appraisals of the effectiveness of the governance, risk management and internal
controls processes within the company.

20

PRINCIPLE 7: ENSURE TIMELY AND HIGH QUALITY DISCLOSURE

Companies should establish corporate disclosure policies and procedures to
ensure comprehensive, accurate and timely disclosures.

Recommendation 7.1
The board should ensure the company has appropriate corporate disclosure policies and
procedures.
Commentary
The board should have internal corporate disclosure policies and procedures which are practical
and include feedback from management. These policies and procedures should ensure
compliance with the disclosure requirements as set out in the Bursa Malaysia Listing
Requirements. In formulating these policies and procedures, the board should be guided by
best practices.

Recommendation 7.2
The board should encourage the company to leverage on information technology for effective
dissemination of information.
Commentary
Companies should consider wider usage of information technology in communicating with
stakeholders including establishing a dedicated section for corporate governance on their
website. This section should provide information such as the board charter, rights of
shareholders and the annual report.

21

PRINCIPLE 8: STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND

SHAREHOLDERS
The board should facilitate the exercise of ownership rights by shareholders.

Recommendation 8.1
The board should take reasonable steps to encourage shareholder participation at general
meetings.
Commentary
General meetings are an important avenue through which shareholders can exercise their
rights. The board should take active steps to encourage shareholder participation at general
meetings such as serving notices for meetings earlier than the minimum notice period.
The board should direct the company to disclose all relevant information to shareholders to
enable them to exercise their rights. The board should also consider adopting electronic voting
to facilitate greater shareholder participation.
The board can demonstrate their commitment to shareholders by ensuring that the company
publishes these measures on its corporate website.

Recommendation 8.2
The board should encourage poll voting.
Commentary
The board is encouraged to put substantive resolutions to vote by poll and make an
announcement of the detailed results showing the number of votes cast for and against each
resolution. Companies are encouraged to employ electronic means for poll voting.
The chairman should inform shareholders of their right to demand a poll vote at the
commencement of the general meeting.

22

Recommendation 8.3
The board should promote effective communication and proactive engagements with
shareholders.
Commentary
Direct engagement with shareholders provides a better appreciation of the companys
objectives, quality of its management and challenges, while also making the company aware of
the expectations and concerns of its shareholders. This will assist shareholders in evaluating
the company and facilitate the considered use of their votes.
Board members and senior management are encouraged to have constructive engagements
with shareholders about performance, corporate governance, and other matters affecting
shareholders interests.

23

Table 1: Comparison between the MCCG 2012 and the 2007 Code
The MCCG 2012 adopts a new structure and encompasses recommendations from the Blueprint and parts of the 2007 Code. The comparison
table below sets out the principles and recommendations of the MCCG 2012 with the corresponding Blueprint recommendations and relevant
parts of the 2007 Code to aid the navigation and understanding of the MCCG 2012.
Prin.
No.

MCCG 2012
Principle

Rec.

MCCG 2012 Recommendation

No.

Establish clear
roles and
responsibilities

2007 Code

No.
24
Mandate companies to focus on
substance rather than form in meeting
corporate governance requirements

Corporate Governance in Malaysia

Blueprint Recommendation

Introduction : 3 and 4

1.1

The board should establish clear functions

reserved for the board and those delegated
to management

Part 2 : AA XVI
Relationship of the
board to management

1.2

The board should establish clear roles and

responsibilities in discharging its fiduciary
and leadership functions

Part 1 : A I
The board

1.3

The board should formalise ethical

standards through a code of conduct and
ensure its compliance

Part 2 : AA I
Principal
responsibilities of the
board
10
Mandate boards to formulate ethical
standards and system of compliance
through the companys code of
conduct

Prin.
No.

MCCG 2012
Principle

Rec.
No.

Strengthen
composition

Blueprint Recommendation

2007 Code

No.

1.4

The board should ensure

companys
strategies
sustainability

1.5

The board should have procedures to allow

its members access to information and
advice

1.6

MCCG 2012 Recommendation

that the
promote

The board should ensure it is supported by

a suitably qualified and competent
company secretary

1.7

The board should formalise, periodically

review and make public its board charter

2.1

The board should establish a Nominating

Committee which should comprise
exclusively of non-executive directors, a
majority of whom must be independent

11
Mandate
boards
to
formulate
strategies that address sustainability
and stakeholder interests through
internal policies

30
Enhance the role of company
secretaries through clarifying their role
and
look
into
qualification
requirements needed to raise the skills
and professional standards for
company
secretaries
of
listed
companies
12
Mandate formalisation of the board
charter and disclosure of the charter in
the annual report
16
Mandate boards to establish a
Nominating Committee with enhanced
roles chaired by an independent
director.

Part I : A III
Supply of information
Part 2 : AA XIX
Access to information
Part 2 : AA XX
Access to Advice
Part 2 : AA XXI and XXII

Part I : A IV and Part 2 :

AA VIII
Appointments to the
board

Prin.
No.

MCCG 2012
Principle

Rec.

MCCG 2012 Recommendation

No.
2.2

2.3

Blueprint Recommendation

2007 Code

No.
The Nominating Committee should
develop, maintain and review the criteria
to be used in the recruitment process and
annual assessment of directors

The board should establish formal and

transparent remuneration policies and
procedures to attract and retain directors

Part 2 : AA IX
Part 2 : AA X
Part 2 : AA XIII
Directors training

Part 1 : B I
The level and make-up
of Remuneration
Part 1 : B II
Procedure
Part 1 : B III
Disclosure
Part 2 : AA XXIV
Remuneration
Committees

Reinforce
independence

3.1

The board should undertake an assessment

of its independent directors annually

14
Mandate boards to undertake an
assessment on independence annually,
upon re-admission and when any new
interests or relationships surfacebased on a set of criteria established
by the boards

Prin.
No.

MCCG 2012
Principle

Foster
commitment

Rec.

MCCG 2012 Recommendation

No.

Blueprint Recommendation

2007 Code

No.

3.2

The tenure of an independent director

should not exceed a cumulative term of
nine years. Upon completion of the nine
years, the independent director may
continue to serve on the board subject to
the directors re-designation as a nonindependent director

3.3

The board must justify and seek

shareholders approval in the event it
retains as an independent director, a
person who has served in that capacity for
more than nine years

3.4

The positions of chairman and CEO should

be held by different individuals, and the
chairman must be a non-executive member
of the board

3.5

The board must comprise a majority of

independent directors where the chairman
of the board is not an independent director

4.1

The board should set out expectations on

time commitment for its members and
protocols for accepting new directorships

13
Mandate a cumulative term limit of up
to nine years for an individual to serve
as an independent director

15
Mandate separating the position of
chairman and CEO and for the
chairman to be a non-executive
member of the board

21
Mandate boards to set out their
expectations on time commitment
including protocols for accepting other
external appointments in their board
charter

Part 2 : AA II
Chairman and Chief
Executive Officer

Prin.
No.

MCCG 2012
Principle

Uphold integrity in
financial reporting

Recognise and
manage risks

Ensure timely and

high quality
disclosure

Rec.

MCCG 2012 Recommendation

No.

Blueprint Recommendation

2007 Code

No.

4.2

The board should ensure its members have

access to appropriate continuing education
programmes

5.1

The Audit Committee should ensure

financial statements comply with applicable
financial reporting standards

5.2

The Audit Committee should have policies

and procedures to assess the suitability and
independence of external auditors

6.1

The board should establish a sound

framework to manage risks

Part I : D II
Internal control

6.2

The board should establish an internal

audit function which reports directly to the
Audit Committee

Part 2 : BB VII & VIII

7.1

The board should ensure the company has

appropriate corporate disclosure policies
and procedures

23
Move beyond minimum reporting by
making explicit the requirement for
shareholders to be provided with
quality and timely information

Part II : BB II

Prin.
No.

MCCG 2012
Principle

Strengthen
relationship
between company
and shareholders

Rec.

MCCG 2012 Recommendation

No.

Blueprint Recommendation

2007 Code

No.

7.2

The board should encourage the company

to leverage on information technology for
effective dissemination of information

8.1

The board should take reasonable steps to

encourage shareholder participation at
general meetings

25
Promote better use of technology by
companies to communicate with their
shareholders

5
Mandate companies to make public
their commitment to respecting
shareholder rights and take active
steps to inform shareholders of how
these rights can be exercised

Part 3 : I
Shareholder voting

27
Encourage companies to provide
better quality and timely information
through notices and documents and to
serve notices for meetings earlier than
the minimum notice period

8.2

The board should encourage poll voting

3
Impose obligation for the chairman of
the general meeting to inform
shareholders of their right to demand a
poll vote

Prin.
No.

MCCG 2012
Principle

Rec.

MCCG 2012 Recommendation

No.
8.3

Blueprint Recommendation

2007 Code

No.
The board should promote effective
communication
and
proactive
engagements with shareholders

Part I : C I
Dialogue between
companies and
investors
Part 2 : CC I
The relationship
between the board and
shareholders
Part 3 : II
Dialogue between
companies and
investors