This article was first published in the November 2018 China edition of Accounting and Business magazine.

If anybody harbours doubts as to whether the boardroom really resides at the heart of corporate governance, they should take a look at the Corporate Governance Blueprint 2011, issued by the Securities Commission (SC).

The document has a diagram that depicts the corporate governance ecosystem as a sphere comprising four layers. The outermost layer represents the regulators. Next come the gatekeepers, followed by the shareholders. The core of the sphere, is of course the board of directors.

And yet, in Malaysia, directors are not an organised and unified class of professionals. Yes, there are local organisations representing company directors but none with the numbers and influence that can drive major improvements in corporate governance.

There is little to bind together directors in Malaysia. Their experience, expertise and training is as varied as their companies, and their allegiance to those who put them in the boardrooms is stronger than any sense of collective responsibility. As a result, it is hard to shape them into a cohesive force. But that will hopefully change soon.  

‘Corporate governance simply must start in the boardroom,’ said Tan Sri Zarinah Anwar in October. As a former SC chairman, her statement would have carried a lot of weight anyway, but it has bigger significance because she said it at the launch of the Institute of Corporate Directors Malaysia (ICDM), which she chairs.

The then SC chairman Tan Sri Ranjit Ajit Singh, who retired two weeks later, saw the launch as a milestone in Malaysia’s corporate governance journey: ‘Recognising that better boards will create better values, the establishment of the ICDM will add to the already rich and diverse corporate governance ecosystem to enhance director effectiveness and board leadership in Malaysia.’

One factor that gives the institute a more-than-decent chance of succeeding is the SC’s support. The incorporation of the ICDM in July 2017 was part of the regulator’s strategic priorities from 2017 to 2020 to address corporate governance challenges and concerns, and the institute’s startup grant is from the Capital Market Development Fund, which is chaired by the SC chairman.

The SC has recognised that Malaysia must emulate other countries that have set up institutes of directors to support continuous professional development and drive the adoption of corporate governance best practices.

‘The ICDM’s objective is to change ineffective board cultures by imbuing board effectiveness and directors’ professionalism through directors’ education, competency-based sourcing of directors, board effectiveness evaluation and feedback, and research and advocacy,’ said Zarinah at the launch.

Though very important, the SC’s backing alone will not be enough. The ICDM also needs directors and companies to sign up as members and to subscribe to its services.

If that happens, it tells us that corporate Malaysia, including directors, truly believe believes in good governance after all.

Errol Oh is executive editor of The Star