the advocate - Malaysian Institute of Corporate Governance

April 2016
Malaysian Institute of Corporate Governance (458959-M)
www.micg.org.my
(Institut Tadbir Urus Korporat Malaysia)
THE ADVOCATE
UPCOMING SEMINARS AND ACTIVITIES IN APRIL 2016
CONTENTS
2
President’s Message
2
Appointment of New Director
3
Highlights of the 5th Annual
National Procurement &
Integrity
REGISTER NOW! Special Discount for Early Bird before
8 April 2016
Investment Fee is RM 1,200/Person + 6% GST
20% discount for Members.
4
What’s New At MICG?
5
Partners in Corporate
Governance (PICG) Progamme
(For more information, please contact Aida or Imen at 03 7957 6799)
5
1st MICG Dialogue with
Universities
6
Courtesy Visits
7
‘ Factors That Motivates
Management To Commit
Fraudulent Financial Reporting’
article contributed by University
Research Team
8
Article on ‘Integrity,
Transparency, Reputation,
Accountability’
Members’ Breakfast Talk, 21 April 2016 @ The Royal Lake Club, Kuala Lumpur
(Members Only)
Fee is RM60/Person + 6% GST
Director Duties, Business Ethics and Governance Seminar, 28 April 2016 @
Istana Hotel, Kuala Lumpur
-
MICG EVENTS
5th National Procurement & Integrity Forum for Public and Private
Sectors 2016
10 March 2016 @ Istana Hotel, Kuala Lumpur
About 150 delegates from both public and private sectors attended this high profile annual
seminar focused more on Government procurement. The reason being Malaysia has
signed the TPP. Chapter 26 of the TPP is all about Transparency and Anti-Corruption.
Procurement is one area where corruption is most rampant.
YB Senator Datuk Paul Low Seng Kuan gave a Special Keynote Address on ‘Combatting
Procurement Corruption in Public & Private Sectors’ whilst Tan Sri Dato’ Setia Haji Ambrin
Buang spoke on ‘ Issues in Procurement: Report on the Third Series of the 2014 AuditorGeneral’s Report- Recurring Issues/Problems in Government Procurement;
Recommendations and Steps Taken’.
10 Calendar of Events – 2016
11 MICG Board of
Governance & Secretariat
11 Contact Us
Joint Seminar with FPLC ‘Annual National
Seminar on Directors Duties, Governance,
Regulatory Updates & Current Issues 2016‘
26 & 27 January 2016 @ The Haven, Ipoh
YBhg. Dato’ Yusli gave the token of
appreciation to YBhg. Datuk Paul Low
The seminar was jointly organised with Federal
Public Listed Companies (FPLC). It was well-attended
by 30 directors and top management from private &
public sectors. Among the panel of speakers were
from Commission of Companies Malaysia, the Big 4
and Bursa Malaysia.
From left: En Megat Mizan, Lauren Peng,
YBhg. Dato’ Seri Abd Rahman, Mr Albert
Cheok & Imen Lai
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PRESIDENT’S MESSAGE
Dear Members,
I am pleased to introduce this maiden issue of the MICG bimonthly e-newsletter. This e-newsletter is emailed to all our
members to keep them informed on a regular basis on the new initiatives and events organised by MICG or with relevant
partners. MICG strives to be the leading advocate in Corporate Governance in Malaysia. Members will be notified the
upcoming seminars and conferences. Members and members’ staff can enjoy a discount of 20% for these events.
On 21 April 2016, I will be speaking at MICG’s Breakfast Talk specially organised for members. Your participation and
contribution at the event on your views on the current state of Corporate Governance in Malaysia will add a lot of value to
MICG’s work.
I am also meeting with other key stakeholders to discuss common issues and find opportunities to collaborate on joint
projects or activities to bring a higher level of awareness of good Corporate Governance. Partnering with universities is also
very important especially in the area of joint applied research which is lagging in Malaysia compared to the most countries
in the West.
Members are most welcomed to contribute articles and feedback to MICG so that we can continuously improve to serve
members better.
I look forward to meeting you in person at our 1st Breakfast Talk on 21 April 2016.
You can reach us at [email protected] should you have any question or comment for us.
Thank you.
Dato’ Yusli Bin Mohamed Yusoff
President
MICG.
Appointment of Director
The Board of Governors appointed Ms Lauren Tam Kam Peng as Director to helm the MICG Secretariat
with effect from 2 January 2016.
Ms Tam, FCPA, is a qualified accountant, with more than twenty five years of experience in accounting
education and senior management role. Prior to joining MICG, Ms Tam was attached to CPA Australia
from 2002 to 2005 as Director-Malaysia Division and Chartered Institute of Management Accountants as
Director of Learning Development from 2005 to end of 2013. From 2014 to 2015, she was on a career
sabbatical and set up a social enterprise 100% for charity.
She and her team of 4 staff will work together with the Board of Governors to achieve the Vision of MICG
which is to be the leading advocate in Corporate Governance in Malaysia.
2
HIGHLIGHT OF THE 5TH ANNUAL NATIONAL PROCUREMENT &
INTEGRITY FORUM FOR PUBLIC AND PRIVATE SECTORS 2016
Participants at the
registration table.
Welcome Address by
President of MICG, YBhg.
Dato’ Yusli Mohamed Yusoff
YBhg. Paul Low Seng Kuan was
interviewed by the press after his
Keynote Address.
Press interview with MICG Board
of Governors
YBhg. Dato’ Yusli handing token of
appreciation to YBhg. Tan Sri
Ambrin Buang, Auditor General
Malaysia after his speech on
Financial Management &
Procurement Process.
YBhg. Dato’ Sri Hj. Mustafar Hj. Ali,
Deputy Chief Commissioner, MACC
presenting on Preventing Corruption
in Public & Private Sector
A participant posing a
question to the speaker
YBhg. Dato’ Seri Abdul Rahman
handing a token of appreciation
to speaker, Dr. Geoffrey Williams
3
WHAT’S NEW AT MICG?
INTRODUCING A NEW PROGRAMME FOR ORGANISATIONS AND COMPANIES CALLED “PARTNERS IN
CORPORATE GOVERNANCE”.
Malaysian Institute of Corporate Governance or MICG in short was incorporated as a company limited
by guarantee in 1998. Its principal activity is to promote and encourage corporate governance
development, education and training for the benefit of its members and other institutions or bodies
interested in Corporate Governance.
Vision – To be the leading advocate of Corporate Governance in Malaysia
Mission -
To promote Corporate Governance in Malaysia
To define Corporate Governance best practices
To facilitate the adoption of Corporate Governance best practices
The Board of Governors is looking at furthering MICG’s position and its standing in the corporate world
and achieving its Vision and Mission. To do so, MICG needs steady funding to strengthen its financial
position and drive its development initiatives.
We are initiating a programme called ‘Partners in Corporate Governance’ where we are inviting
organisation to provide sponsorship for three (3) years and become a member of our PICG
Programme. We are looking for a contribution of RM21,200* (Ringgit Malaysia Twenty Thousand)
per annum for three (3) years from each member in the PICG Programme, which will include free
Corporate Membership for the period. We hope to raise RM500,000 per annum from this programme
to help defray our operational costs and carry out new initiatives.
The funds raised will be used in the following manner:
1) To revamp the MICG website to provide more education and training contents.
2) To set up a technical team to engage in more applied research output in Corporate Governance
best practices relevant to organisations.
3) To organize more quality and relevant education and training courses to enhance the standard of
Corporate Governance in Malaysia.
4) To play a more pro active role in advocating Corporate Governance to Government and regulators
as well as other relevant authorities.
If your organisation interested with the PICG Programme, please call Ms Lauren Tam Kam Peng,
Director of MICG at 03-7957 6799 (office) or email to [email protected].
* Inclusive of 6% GST
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PARTNERS IN CORPORATE GOVERNANCE
PROGRAMME
Congratulations to YINSON HOLDINGS BERHAD
for your support in the
Partners In Corporate Governance Programme!
1st DIALOGUE WITH UNIVERSITIES ON 23 FEBRUARY 2016
23 February 2016 - The Membership Committee organised its 1st Dialogue with universities to foster
closer working relationship on areas of applied research and development.
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COURTESY VISITS
MICG’s Director, Lauren Peng with Mr. Lee Min On,
KPMG Retired Partner (R) and Mr Chang Kong Foo,
Auditor (L)
Lauren Peng with Prof Dr Mahamad Tayib
from DRB Hicom University, Pahang (5 Feb 2016)
On 26 Feb 2016, YBhg. Dato’ Seri Abd Rahman,
Lauren Peng and Afiqah Mohamad Rafi paid a
courtesy visit to Accounting Research Institute,
UITM, Shah Alam
On 8 March 2016, YBhg. Dato’ Yusli, Lauren
Peng and Afiqah Mohamad Rafi visited the
Institute Business School, UTM, Kuala Lumpur
Courtesy visit to MAICSA with President &
CEO, Ms Chua Siew Chuan and Ms. YC Chan
Courtesy visit by Tuan Haji Ahmad Zakie
Ahmad Shariff from Malaysian Directors
Academy on 31 March 2016.
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CONTRIBUTION FROM UNIVERSITY RESEARCH TEAM
FACTORS THAT MOTIVATES MANAGEMENT TO COMMIT FRAUDULENT FINANCIAL REPORTING
Mahanum Sulaiman, Universiti Teknologi Mara
Hasnah Haron, Universiti Malaysia Pahang
Effiezal Aswadi Abdul Wahab, Curtin University of Technology, Australia
The collapse of a number of companies as a result of accounting manipulation by managers has raised
serious questions about the effectiveness of the monitoring mechanism to protect investors’ interests
and control managerial opportunistic behaviour. This study examines financial performance,
environmental characteristics and governance mechanisms on fraudulent financial reporting in
Malaysia. Logit regression was performed on a sample of 36 fraud firms and 46 no-fraud firms for the
period of 2001 to 2009. The predictive accuracy of the logistic regression model is 66.1 percent. This
study found that the greater the direct shares of the company owned by the board of director, the
lesser would be the likelihood of fraudulent financial reporting. High stock ownership of board of
director will increase the firm value, thus eliminating some of the inherent agency conflicts between
the management and shareholders which is related to managers making decisions to benefit
themselves rather than the shareholders. Even though the internal control quality was found not to
contribute significantly to fraudulent financial reporting, it was found that fraud companies, have
lesser voluntary disclosure of internal control system compared to no-fraud companies.
This study also found that the shorter the tenure of the CEO, the greater the tendency of the company
to be involved in fraudulent financial reporting. It could be that fraudulent financial reporting activities
were detected earlier rather than later, which could have led to the earlier termination of CEOs who
were found to be fraudulent.
According to Malaysian Code of Corporate Governance 2012, it is recommended that the maximum
tenure for independent directors should be a term of 9 years. However, others in the Corporate
Governance Sector suggest an absolute term limits for directors, including CEOs who are directors be
introduced. It is suggested that shareholders should be the group responsible to determine the tenure
of CEOs, which could be the maximum of 9 years or shorter depending on whether the shareholders
are happy with their performance.
MICG has agreed to the publication of the above extract in its newsletter in the interests of encouraging debate as
an essential element of the development of thought and progress in the field of Corporate Governance best practice.
MICG has not sighted or validated the data behind the study which led to the above extract and does not express
any opinion as to the findings and recommendations contained in the study or the above extract.
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INTEGRITY, TRANSPARENCY, REPUTATION, ACCOUNTABILITY
By En Ahmad Shahab Din, General Manager MICG
People understand business strategies well; they know that the financial books need to be properly
recorded; that investors expect to harvest returns. But what of integrity, transparency, reputation?
And accountability? How do we record these in the registers?
Integrity and transparency invariably spell trust, a vital ingredient leading to a beaming reputation. All
these do not come together by accident. They need to be understood and made to be second nature
to persons and organisations including even governments. Good leadership cannot be effective and
functional without these contents. For example, integrity is in abundance in stock and shares trading.
Deals are initiated via verbal communication and on trust prior to affirmation on record. This means
integrity and trust can be worth billions of ringgit in relation to the stock market alone. We don’t
realise just how powerful the role of integrity is in multiplication of business value in all areas of a
nation’s economy. Further, how then do you place a value on transparent leadership?
Integrity of a company affects its stakeholders; this is why inculcating ethics and integrity into the
structure and fabric of an organisation is vital. In marketing its products and services, a company is
expected to uphold its commitments to the customer; there is a contract between them in whatever
form. Similarly with integrity of the product offered via advertisements and the actual item sold and
delivered. How often have we been baited by the ads only to feel short-changed by the actual
product?
Apart from with the customer, inhouse honesty and transparency in managing the company’s finances
is another crucial factor in keeping customers’ including financiers’ faith and trust. Callous attitude
can lead to careless management including accounting practices which affect an organisation’s
integrity. In many things we do, all operations involve finance and therefore its management and
control is central to probity, topped by straight-laced leadership and management.
Whilst we talk of good governance and best management practices and systems, we often forget to
look at the person. Business leaders are expected to live in moderation. They have to live a lifestyle
of integrity and maintain high ethical standards; what they do even in private life can affect the
company’s reputation.
There have been many examples of the oppulence of senior executives mixed in a bowl of corporate
misdemeanour affecting the company’s integrity and value.
One case was that of Tyco International in early 2000s wherein the excesses of the Chairman Dennis
Kozlowski and several senior executives caused the company loss of US$150 million (RM570 million).
Another was the case of Dominique Strauss – Kahn, CEO of the IMF.
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It feels good to own a perfectly polished product. How about having a polished disposition? Warren
Buffet says, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that,
you’ll do things differently.”
Trust is a key building block in the creation of a company’s reputation, and as a direct result, its
shareholder value.
You can very well imagine it would take a long time for most people to reshape their inherent
character attributes.
It may even take real courage and determination to change. Courageous and normal-thinking people
take responsibility for their own contribution to their bad traits and failures. A courageous leader
promotes personal responsibility in the Company or public service. Infusing an attitude of
responsibility throughout the organisation begins with that person himself.
Infusing an attitude of responsibility throughout the organisation begins with that person himself. We
all have to take ownership of our own weaknesses and errors.
If you avoid responsibility, it will eventually come back to get you, ready or not. The reference to ‘the
tone at the top’ so often repeated is actually talking about role modelling.
When such modelling comes from someone in a high position, the behavioural influence can be most
pronounced. Leadership at all levels is there but leadership has its terms. We always have a choice,
we can always choose between right and wrong. Easy.
Integrity and reputation do matter very much to consumers and investors too. Following the string of
large financial and corporate scandals in the last 20 years, all stakeholders have become more
demanding that people be transparent. They now enquire more deeply and expect honest
transparency. The EPF, PNB, KWAP, insurance companies and other large institutional investors with
large and diverse portfolios are particularly concerned over issues such as this and have been known
not voting in some directors at an AGM of investee companies.
The market favours companies that they believe share their values; those that don’t are shunned.
Business must show clearer evidence of congruency of values and principles by their actual actions.
The people can see through fake values. Rules cannot substitute character, Alan Greenspan believes.
Integrity, transparency, reputation, accountability. To put them together correctly, Confucius offers
this advice: “To put the world in order we must first put the nation in order. To put the nation in order
we must first put the family in order. To put the family in order we must first cultivate our personal
life. And to cultivate our personal life, we must set our hearts right.”
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CALENDER OF EVENTS - 2016
NO.
EVENT
EXPECTED DATE
2016
VENUE
1
Annual National Seminar on Directors Duties, Governance,
Regulatory Updates and Current Issues
26 & 27 January
The Haven, Ipoh
2
5th National Procurement & Integrity Forum for Public and
Private Sector
10 March
Istana Hotel, Kuala
Lumpur
3
Members’ Breakfast Talk
21 April
Royal Lake Club, Kuala
Lumpur
4
Director Duties, Business Ethics & Governance Seminar
28 April
Istana Hotel, Kuala
Lumpur
5
Half Day Seminar on Fraud Risk Management
9 May
Bayview Hotel, Penang
6
Half Day Seminar in Kuala Lumpur :
"Amendments to Bursa's Listing Requirements
- How to rise up to meet those challenges!”
12 May
ACCA office KL (TBC)
7
Corporate Legal Counsel
May
TBC
8
Regulatory Updates for Directors
May
TBC
9
3rd Annual Asean Corporate Governance Summit
June
TBC
10
Code of Corporate Governance for the Public Sector
End of July
TBC
11
Governance Symposium
August
Securities Commission
(TBC)
12
Sabah Skills & Technology Centre
August
TBC
13
Local Authority Forum
August
TBC
14
Human Resources Management Seminar
September
TBC
15
2nd Half Members’ Breakfast Talk
October
TBC
16
Corporate Governance Updates 2016
October
TBC
17
Directors Duties and Regulatory Updates Seminar
November
TBC
18
Corporate Liability Bill
November
TBC
NOTICE
th
MICG will be holding its 18 Annual General Meeting on 24 May 2016 at Royal Lake Club, Lake
Gardens, Kuala Lumpur at 3.00pm.
All members will be informed by post and email in April 2016. Please call or email us if you need
more information re the upcoming AGM.
REGISTER EARLY !!!
MICG‘S 1ST GOVERNANCE SYMPOSIUM –
“DRIVING PUBLIC-PRIVATE GOVERNANCE FORWARD”
on 16 August 2016 (TBC) at Securities Commission (TBC)
KEYNOTE SPEAKER: DATUK PAUL LOW, Minister in Prime Minister’s Department –
Corporate Governance
More information about the details of the programme event the event will be emailed to you.
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BOARD OF GOVERNORS
Y.Bhg Dato’ Yusli Mohamed Yusoff
– President
David William Berry
– Deputy President
Margaret Chin
– Vice President
Y.Bhg Tan Sri Megat Najmuddin Megat Khas (Honorary Patron)
Albert Cheok Saychuan
Megat Mizan Nicholas Denney
Y.Bhg Dato’ Seri Abdul Rahman Haji Ali
SECRETARIAT
Lauren Tam Kam Peng – Director – [email protected]
Address:
3A-02 Block F, Pusat Dagangan Phileo Damansara I
9 Jalan 16/11, Off Jalan Damansara
46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia.
Website: www.micg.org.my
Tel: +603 7957 6799
Fax: +60957 3722 / 7957 2722
Email: [email protected]
The MICG Newsletter is circulated strictly to members only. On the republication of articles/work of
others, permission were obtained. MICG shares with members; however MICG takes no views or
responsibilities on them.
11