GOVERNANCE
The Corporate Governance Blueprint
A step forward in Malaysia’s journey in corporate governance
By Vijayam Nadarajah


JAN 2012 | The Corporate Governance Blueprint 2011 (CG Blueprint) is premised on a paradigm that the Corporate Governance Ecosystem should collectively strengthen corporate governance, reinforce investor trust and confidence in the Malaysian capital market, and set the basis for a proper system of accountabilities for sustainable growth.

The Corporate Governance Ecosystem comprises regulators, gatekeepers, shareholders and board of directors, to strengthen self and market discipline by internalising the culture of good governance in companies, managing perception and reputation of stakeholders, and enhancing the economic value of businesses through long term value creation.

Companies should create strategic boards with the right board balance and composition. There should also be a sustainable and entrepreneurial long term business plan, fair and transparent information disclosure to stakeholders, effective management oversight coupled with a strong operational leadership and employees.

Enterprise-wide risk and financial and non financial accountabilities should also be a key consideration. Strategic boards should set ethical corporate behaviours and accountabilities from top to bottom – ensuring People, Planet and Profits are considered in managing companies.

What do all of these mean to Human Resource (HR) management? Every company should have a communication policy to inform employees regularly on the strategic and operational direction, and performance of the company. The Corporate Code of Conduct should reflect the corporate values, ethical behaviours, and compliance culture embraced by the company. Integrity management, a customer centric ethos and socially responsible attributes should be engrained in the Code, and this can be achieved by having occupational, safety and health rules, whistle blowing and fraud risk reporting processes. The Code should be disclosed so that outsourced business partners can inculcate these values in dealing with the company and its stakeholders.

On governance processes, enterprise-wide risk, risk appetite and allowable risks, how risks impact their daily work and corporate dealings should be communicated to employees. Stakeholders, like employee unions, should not be allowed to disrupt operations, and cause disrepute to the company, therefore requiring harmonious industrial relations.

Investor relations involve dealing with investors and other stakeholders on an array of issues from products and services to shareholder rights. Therefore, the corporate structure with the right people to manage complaints, suggestions and feedback is an HR responsibility.

Two major areas on HR strategy require attention in the CG Blueprint. Remuneration policies should be competitive for employees, and pegged to long term corporate performance for the Chief Executive Officer and senior management. A possible agenda item for discussion when engaging with shareholders is the need to know who the real management team is. I believe that the operational leadership provided by the C-suite is critical for corporate performance and providing the right level of information to Boards to facilitate informed decision-making.

HR as a leader has to provide feedback on HR issues to the Board Remuneration Committee.
Diversity should necessarily be an HR strategy and Policy, ensuring appropriate balance in gender, ethnicity and age to populate the operational and management roles not only to meet succession planning requirements, fulfil corporate expertise requirements internally and also for growth. Women should be groomed to senior management levels and to potentially assume Board positions, thereby fulfilling a national call to increase women participation in Boards to 30% by 2015.

The Corporate Governance Blueprint 2011 sets out the strategic direction and specific action plans to be implemented over the next five years, a deliverable under the Capital Market Masterplan 2.

Regulators have stepped up enforcement, and recently court judgments have been less lenient with Chief Financial Officers and directors who sway from their corporate accountabilities and fiduciary duties. The oversight on gatekeepers - rating agencies, external auditors and corporate analysts - to avoid risk of misleading disclosures on company financials and long term sustainability to safeguard investors and other stakeholders, is progressively increasing. The media and financial journalists as influencers are working towards active yet responsible reporting. The CG Blueprint reinforces corporate citizenship, sustainability and value creation in tandem with globalisation and growth.

Vijayam Nadarajah has worked in insurance companies and banks for more than 18 years. Her extensive experience in operations, internal audit, investigation and risk coupled with leadership, drive and passion for good governance, control and corporate behaviours has seen her through a series of commendable achievements in the appointments that she has held. One of these achievements is a 90 page Treasury policy she wrote after three months in the job and the first such policy for a Bank that had been in operation for more than 20 years.

The President of the Institute of Internal Auditors Malaysia (IIAM) in 1996/97, Vijayam was also instrumental in setting up training courses for internal auditors in banks and finance, stock broking and insurance companies. Currently, she runs training programmes on risk-based topics, corporate governance, corporate reporting and ethics. A Fellow member of CPA Australia and IIAM, and a chartered accountant of MIA, Vijayam holds an LLB as well.