The Importance Of Corporate Governance In Malaysia

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The East Asian economic and financial crisis of 1997/1998 generated a significant amount of analysis and debate, particularly about macroeconomic issues in the region. It also increased awareness about issues concerning the role and functions of regulators and the need for improved disclosure and good corporate governance. Meanwhile there were many public listed companies adopted relatively high-levels of corporate abuse and in some cases breakdown, attributable in part of effective corporate governance structures. Poor financial management of directors and related party transaction are one of the corporate abuse that existed. This problems got more worst by ineffectual enforcement, difficulties concerning ownership concentration and the limited…show more content…
The following year, the Finance Committee released its report on corporate governance which contained 70 recommendations pertaining to three board areas which is the development of the Malaysian Code on Corporate Governance outlining a set of principles and best practice for corporate governance for listed companies, reform of laws and regulations concerning the duties of directors and officers, improving disclosures, enhancing the rights of shareholders and improving the value of company meetings and training and education for the corporate sector, particularly in improving the skills and qualification of directors. The code is however hybrid in nature, which is similar to the Combined Code on Corporate Governance in United Kingdom. The Malaysian Government accepted the recommendations of the Finance Committee. The future challenge is to ensure effective enforcement of the new code and rules for corporate…show more content…
Corporate governance has succeeded in attracting a good deal of public interest because of its apparent importance for the economic health of corporations and society in general. However, the concept of corporate governance should be defined to suit the needs of our own nation because it potentially covers a large number of different economic phenomenon where we are different from other developing nations. Corporate governance can’t just fit all. The regulators have created a commendable framework for corporate governance, but Malaysian corporations have yet to achieve a satisfactory level of corporate governance practices and compliance. This is evident from a joint study conducted by the emerging market investment bank CLSA and Asian Corporate Governance 2003 in which the country was ranked number in terms of rules and regulation but only managed to obtain an average score of 5.5 out of 10 for overall corporate governance practice. In fact, the rules in the code are only recommendations, and there is much doubtful that best-practice recommendation or principle-based approaches are effective substitutes for more rule-based approaches. This raises the question whether corporate governance disclosure should be made a mandatory rather than voluntary. Nevertheless, it should be noted that corporate governance at its core, is

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