The Securities Commission Malaysia (‘SC’) launched the Corporate Governance Strategic Priorities 2021 – 2023 (‘CG Strategic Priorities’) on 24 November 2021.
 
The CG Strategic Priorities, which forms part of the SC’s Capital Market Masterplan 3 (CMP3) launched on 21 September 2021¹, focuses on five thrusts, comprising 11 strategic initiatives as follows:
 
Strategic Priority 1 : Strengthen Board Leadership for Agile and Responsible Business
 
This Strategic Priority will emphasise on board refreshment, accelerate the participation of women on boards and enhance the professional development framework for boards.
 
Strategic Initiative 1.1 : Emphasis on Board Refreshment
 
The SC recognises that a change in the skills profile and composition of the board of directors is required to meet the increasing demand for businesses to evolve beyond the traditional emphasis on shareholders and profit maximisation towards greater consideration of wider stakeholders interest. To this end, the SC will work with the Institutional Investors Council (‘IIC’) and the Minority Shareholders Watch Group (‘MSWG’) to engage boards on their refreshment policies and practices, to ensure that boards have the right mix of directors to respond to present challenges and anticipate future risks as well as opportunities.
 
Strategic Initiative 1.2 : Mandatory 12 Years Tenure Limit for Independent Directors
 
Based on its findings, the SC was of the view that shareholders of listed companies may not fully appreciate the issues related to long tenure of independent directors and the need for board refreshment. Accordingly, a mandatory 12-year limit will be imposed on the tenure of independent directors in 2022 through amendments to Bursa Malaysia’s Listing Requirements.²
 
Strategic Initiative 1.3 : Accelerate the Participation of Women on Boards
 
The SC was of the view that only marginal progress had been made on this issue in the past three years. Accordingly, the SC proposes to establish a Public-Private Partnership (‘PPP’) to support the implementation of the requirement for boards of listed companies to have at least one woman director, and accelerate progress towards achieving a 30% target. The PPP will, among others, facilitate collective action between the public and private sector to expand the existing talent pool with the inclusion of more qualified women.
 
Strategic Initiative 1.4 : Enhance the Mandatory Accreditation Programme
 
The Mandatory Accreditation Programme (‘MAP’), an onboarding programme which newly appointed directors of listed companies on Bursa Malaysia are required to complete, will be enhanced to incorporate content on emerging issues such as the shift to a stakeholder economy as well as reputation and crisis management. The MAP 2.0 will be delivered by the Institute of Corporate Directors Malaysia (ICDM).
 
Strategic Priority 2 : Strengthen the Environmental, Social and Governance Fitness of Boards
 
This Strategic Priority will provide capacity building support for boards on sustainability and widen the availability of sustainability information through an enhanced reporting framework and annual
progress report in the SC’s Corporate Governance Monitor report.
 
Strategic Initiative 2.1 : Leading for Impact Programme
 
The Leading for Impact Programme (‘LIP’), a new onboarding programme focusing on sustainability, will be introduced for directors of listed companies. The LIP will complement the MAP by providing directors with the foundational knowledge and practices to address sustainability effectively, with a focus on climate action and transition.
 
Strategic Initiative 2.2 :  Capacity Building for Boards of Mid and Small-Cap Companies
 
A prerequisite for leadership in Environmental, Social and Governance (‘ESG’) is the capacity of the board to understand and address ESG issues. To support continuous capacity building on sustainability, in particular for boards of mid and small-cap companies, deep dive programmes on priority ESG issues will be developed as elective extensions of the LIP.
 
Strategic Initiative 2.3 :  Enhance Transparency on Sustainability Practices
 
An enhanced sustainability reporting framework for listed companies to improve the quality of sustainability disclosures and meet the information needs of capital market stakeholders is scheduled to be released in the second half of 2022.
 
Strategic Priority 3 : Support Investor Stewardship and Engagement
 
The objective of this Strategic Priority is to enhance retail shareholder-board engagement on corporate governance (‘CG’) and sustainability through investor education, and support institutional investor stewardship and engagement.
 
Strategic Initiative 3.1 : Education Programmes for CG and Sustainability for Retail Investors
 
The SC will collaborate with the MSWG to develop a series of programmes to enhance retail shareholders’ awareness and understanding on CG and sustainability issues, including evaluating companies’ governance practices, measures to improve board diversity, digital aptitude and performance in managing sustainability risks and opportunities.
 
Strategic Initiative 3.2 : Support Institutional Investor Stewardship and Engagement through PERKUKUH
 
The SC will support the Ministry of Finance (MOF) in developing baseline governance requirements and best practices that government-linked investment companies (‘GLICs’) are expected to adopt under the Perkukuh Pelaburan Rakyat (PERKUKUH) programme launched by the Malaysian Government on 12 August 2021³ to strengthen the governance and optimise the performance of GLICs.
 
The SC will also work closely with the IIC and Capital Markets Malaysia to update and enhance the Malaysian Code for Institutional Investors (MCII) to promote effective and outcome oriented stewardship as well as address capacity-building needs of GLICs to scale up their engagement approach and measures.
 
Strategic Priority 4 : Leverage Digital Tools to Enhance Transparency
 
The objective of the fourth Strategic Priority is to widen public access to CG and sustainability data.
 
Strategic Initiative 4.1 : Widen Public Access to CG and Sustainability Data
 
Recognising that access to current and reliable CG and sustainability data is important to enable stakeholders to understand a company’s CG structure and practices, evaluate its CG performance, and to support research on CG, the SC will explore the development of a public dashboard where CG and sustainability information such as data on board composition and material sustainability risks will be made available to the public in an interactive online format.
 
Strategic Priority 5 : Deepen Engagement with Youth on CG
 
This Strategic Priority seeks to develop further collaboration with universities, including through joint research and enrich academic studies as well youth exposure to current CG issues.
 
Strategic Initiative 5.1 : Further Collaboration with Universities on CG
 
The SC will develop further collaboration with universities to deepen its engagement with youth on CG and widen the exposure of students to current discussions and developments and enrich empirical evidence on these issues.
 
Comments
 
The CG Strategic Priorities seeks to lay the foundation for ESG from ground up, with new or enhanced education programmes for the youth, investors as well as for directors of listed companies. The ability to transition the outlook of directors from the traditional narrow focus on shareholders and profit maximisation towards a consideration of wider stakeholders interest will determine whether ESG values will be meaningfully embedded into the culture of listed companies or remain a box-ticking exercise.
 
Significantly, the CG Strategic Priorities also lay the groundwork for board refreshment and the introduction of women onto boards of directors to increase diversity of gender and views.
 
Alert by To’ Puan Janet Looi (Partner) of the Environmental Law Practice and Kok Chee Kheong of the Corporate Practice of Skrine.
 

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