'Speech by Y.B. Datuk Haji Mohd. Shafie Bin
Haji Apdal - Minister of Domestic Trade and Consumer Affairs - Presentation of National
Annual Corporate Report Awards 2004'
Address by : Y.B. Datuk Haji
Mohd. Shafie Bin Haji Apdal
Date : 30 November 2004
Yang
Berusaha Encik Ken Puspanathan
Pengerusi, Jawatankuasa Penganjur NACRA 2004
Yang
Berusaha Encik Lam Kee Soon
Pengerusi, Jawatankuasa Pengadil NACRA 2004
Yang
Berusaha Encik Foo Sheh Loon
Ketua Eksekutif, MIM
Tuan-tuan
dan puan puan sekalian
Assalamualaikum
W.H.T dan Salam Sejahtera
Alhamdullilah,
I am honoured to be here this evening in the company of such a distinguished gathering of
corporate leaders and business professionals. What is even more noteworthy is the purpose
of our meeting which is to promote excellence in Annual Corporate Reporting.
Corporate
reporting
is an integral part of corporate governance. The world bank says in its corporate
governance best practice:
"Corporate
Governance is concerned with holding the balance between economic and social goals and
between individual and the efficient use of resources and equally to require
accountability for the stewardship of these resources. The aim is to align as nearly as
possible the interests of individuals, corporations and society"
As you
know, the Ministry of Domestic Trade and Consumer Affairs is entasked with financial hub.
To achieve this one of the critical success factors is that Malaysian company annual
reports must be of international standard. The theme of NACRA, `Towards
Excellence' underscores the vital role of annual reports in promoting transparency
and corporate accountability. This will
make a direct contribution to enhancing the integrity of the capital market.
In a
competitive capital market the need for annual reports that provides adequate, relevant
and reliable financial and other corporate information is vital to enable investors to
gauge the true and fair value of a company and its potential for growth.
There is
no doubt that the investing public equates high quality annual reports with high quality
management as this demonstrates the company's commitment to the ethics of transparency -
the full and timely disclosure of information. This phenomenon has become even more
important in the Malaysian capital market's current disclosure based regime where
investors have to access the viability of their investment based on available information.
A
commitment to high standards of business and corporate ethics brings several advantages:
1 . It is good
for business. Ethical companies are more profitable, have higher market value, are more
respected and have longer term future than those are not.
2. Staff is
more motivated and productivity is higher if they are managed with integrity.
3. Customers
have greater trust in the company and are likely to purchase its goods and services.
4. It is
good for the country.
The
quality of annual reports is important for them to form a cornerstone for developing
market conditions. A company's annual report provides valuable information about its
financial position and past performance. In addition it should give investors insights
into a company's operations and it future prospects.
Annual
reports are what the investment community studies and analyses. Whereas `bottom line' performance is vitally
important so too is the manner, format and style in which the information is presented.
The clearer and more concise in the presentation the more it helps to appropriately inform
judgment.
The
international financial community will judge our capital market on the extent to which we
meet:
- Best
International Practices
- Best
Standards of Investor Protection
- Standards
of Corporate Governance
- Financial
Reporting and Disclosure
An annual
report is one of the most important vehicles through which information is conveyed and
upon which the investing public relies on when making investment decisions.
The
annual report has served not only as a valuable source of information for minority
shareholders and investors but can become a useful means of influencing shareholder and
public perception.
Ladies
and gentlemen,
Efforts
to enhance corporate governance in Malaysia have been going on even prior to the financial
crisis of 1997/1998. One of the results of that
crisis and the corporate collapses in the USA and other countries has strengthened the
impetus for more comprehensive and coordinated reforms.
While the
government cannot guarantee the integrity of financial reporting we have put in place a
regulatory framework that facilitates proper disclosures. Furthermore there have been a
number of other measures designed to raise the standards of cooperate integrity. For
example, the publication of the finance committee report on corporate governance is an
important step towards enhancing the standards of integrity and the financial management
of businesses.
There has
been significant progress in implementing the recommendations of the finance committee
report. These include the development of the Malaysian code of corporate governance that
will enhance the self-regulatory mechanisms and promote good governance.
Various
changes have also been made to :
- The
Securities Commission ACT 1993
- The
Securities Industry ACT 1983 AND
- The
listing requirements of Bursa Malaysia Securities
These
have served to strengthen the statutory and regulatory framework for corporate governance.
In view
of the above, the Companies Commission of Malaysia has also finalised its proposed bill to
amend the Companies Act 1965.
This
bill will incorporate the recommendations of the finance committee on corporate
governance. The proposed amendments include
new provisions in the following areas:
(1)
Disclosure
of directors' interest;
(2)
Restriction
on interested directors voting at board of directors meetings;
(3)
Directors'
duty of care, skill and diligence and the introduction of a statutory business judgment
rule;
(4)
Director's
conflict of interest;
(5)
Introduction
of the statutory derivative action;
(6)
Amendments
to substantial property transactions between a company and its directors;
(7)
Introduction
of the duty of fair dealing between a director or substantial shareholder or persons
connected with them towards the company; and
(8)
Introduction
of protection for whistle blowing by officers and auditors.
Whilst
the authorities will continue in their role to promote the standards of corporate
governance, it should be noted that the private sector has an important role to play. Surely companies aiming to achieve high levels of
performance will make excellence a corporate objective.
They will be motivated to follow and adhere to the best practices of good
corporate governance.
Ladies
and gentlemen,
The
government under the leadership of our Honourable Prime Minister Datuk Seri Abdullah Ahmad
Badawi, launched the Pelan Integriti Nasional or PIN on 23rd April 2004 together with the
Institut Integriti Malaysia.
The
National Integrity Plan is a major undertaking with the intention of formulating
strategies and providing direction to all sectors of society so that they can cooperate
and participate directly in the efforts to enhance ethical standards and levels of
integrity.
At
our Ministry, we have established a steering committee to implement the national integrity
plan on corporate governance and business ethics. The
Companies Commission of Malaysia (SSM) has been assigned as the secretariat. Their task is to:
1.
Study
the issues;
2. Undertake
the drafting of specific action plans; and
3. Establish
specific deliverables and timelines.
This
will enable the ministry to implement the strategies and objectives as envisaged in the
National Integrity Plan.
The
long term objective of the national integrity plan is to meet the challenge of vision
2020, i.e.
"to
develop a society which is strong in moral and ethical characteristics with its people
having firm religious and spiritual values, and supported by a noble disposition."
In
addition, the national integrity plan has the objective to increase the level of
conscience commitment and cooperation of all the people in an effort to raise the levels
of integrity.
Ladies
and gentlemen,
One
of the major reforms of the Malaysian capital market is the shift away from a merit-based
system to a Disclosure-based Regulatory Environment (DBR).
Started in 1996, the full DBR regime was fully implemented in 2001. Under the new regime a company's access to
the securities market will be conditional on the provision of full and accurate
disclosure. This will require relevant
information in accordance with the parameters established by the securities laws and
regulations.
Investors
require material and timely information to assist them in making investment decisions. The responsibility for ensuring this will reside
with:
- The
promoters;
- Directors
and advisers;
- Advising
merchant banks;
- Reporting
accountants;
- Lawyers;
and
- Valuers.
The
authorities' role is to regulate the disclosure of information on the securities
offerings.
The
objective of the DBR is to promote greater efficiency and transparency in the capital
market and enhanced accountability among market participants. Therefore it is apparent than an essential
prerequisite for the successful implementation of the DBR regime is the existence of high
quality financial reporting standards.
Whilst
there is a need for regulation and enforcement there is also a need for people to operate
within the spirit as well as the letter of the law.
Much depends on each individual director's levels of integrity and
attitudes towards compliance.
May
I take this opportunity to remind everyone that when a company is listed on the stock
exchange, it has assumed a higher level of responsibility and accountability. From that point on, it is the custodian and
manager of the public's funds. The
company has a duty and obligation to ensure that proper governance is maintained. It should account for its performance through
timely publication of its financial results and other corporate information.
In
Malaysia, there has been a marked improvement in the standards of annual corporate
reports. This is thanks to the efforts of the
organizers of NACRA. Now with the regulatory
authorities emphasis on corporate governance we can expect further improvements. To all NACRA participants may I take this
opportunity to urge you to continually improve on the standards of financial reporting. I would also like to congratulate all the winners
which will be announced this evening.
To
the organising committee headed by Mr. Ken Pushpanathan, I congratulate you on your
sterling efforts.
Let
me end by reminding everyone that what underpins good corporate governance are the four
pillars of:
·
Fairness
·
Transparency
·
Accountability;
and
·
Responsibility.
Thank
you.
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