While the corporate liability provision of the Malaysian Anti-Corruption Commission Act is considered a game-changer, companies are still not ready for it, says Errol Oh
This article was first published in the January 2020 China edition of Accounting and Business magazine.
We are five months away from the enforcement of Section 17A – better known as the corporate liability provision – of the Malaysian Anti-Corruption Commission Act. It is potentially a game-changing turn in the fight against corruption, placing Malaysia’s companies right in the middle of the battlefield.
Ahead of this major transition, there must be significant adjustments in how business is conducted and, like fidgety kids on a long, uneventful road trip, we keep asking: ‘Are we there yet?’ Going by a recent assessment of Malaysia’s top 100 listed companies, this is the most likely reply: ‘Better buckle up. We may be in for a bumpy ride.’
The Malaysian Institute of Corporate Governance (MICG) has studied progress in these companies’ anti-corruption programmes and determined whether they have a solid defence if charged with corruption. It boiled down to two questions. Firstly, have the anti-corruption programmes grown stronger since 2017, when the MICG first surveyed them? And, secondly, how prepared are these 100 companies with regard to putting in place adequate procedures to prevent the occurrence of corruption in relation to their business activities?
In November 2019, the institute revealed its findings in Transparency in Corporate Reporting. The first question led to a reassuring answer. The MICG examined 13 aspects of anti-corruption programmes (for example, commitment, training, whistleblowing and policies) and awarded points to each company based on what they had reported. The average score was 30% in 2017. Last year, it was 62%. In addition, 13 companies achieved scores of more than 90% in 2019 compared with none two years earlier, while the number of companies in the bottom half of the class reduced from 78 in 2017 to 34 in 2019.
However, that is not the full picture: the MICG project found that the average state of completion for adequate procedures was ‘a sobering 54%’. The institute reckons that the laggards have 50% to 75% of the work left outstanding. Time is not on their side because the government has said many times that Section 17A will take effect from the beginning of June. The MICG points out that it will take several months for a big company to install a framework of adequate procedures.
There is a tendency to underestimate the impact of changes in the law and the seriousness of the authorities in implementing these new measures. When people finally realise they are mistaken, it is often too late to comply wholly before the deadline. Naturally, this is followed by appeals for leniency and more time.
So here is another question: what will the government do in response to the lack of readiness for the corporate liability provision?
It will be a tough call but the thing to note is that nobody can say Section 17A has popped up without warning. This is an occasion for the wisdom of Benjamin Franklin: ‘By failing to prepare, you are preparing to fail.’
Errol Oh is executive content officer of The Star.
"There is a tendency to underestimate the impact of changes in the law and the seriousness of the authorities in implementing these new measures"