The Finance Committee Report defined Corporate Governance as “the process and structure used to direct and manage the business and affairs of the company towards enhancing business prosperity and corporate accountability with the ultimate objective of realizing long-term shareholder value, whilst taking into account the interest of other stakeholders”. Over the years, corporate governance has received enormous attention as a result of high-profile corporate scandals involving the exploitation of corporate power and alleged criminal activity by corporate officials themselves. Classic examples include Enron, WorldCom, Xerox and Tyco are some unforgettable foreign exemplary models, and even in Malaysia, we are not totally excluded in these predicaments, cases such as Axis Inc Kenmark, Silverbird, Renong and of course, the infamous Transmile corporate scandal. This report will basically look back into the development of corporate governance in Malaysia and the US while at the same time critically compare the state of corporate governance in these two countries. 2.0LITERATURE REVIEW
2.1The development of Corporate Governance in Malaysia
Corporate governance has come a long way mainly due to market impacting factors such as corporate failures, corporate losses, scandals, economic turmoil as well as demand from stakeholders. The Asian financial crisis has been an eye opener to policy makers as weaknesses were clearly evident in the corporate governance structure. The crisis has led to the collapse of numerous prominent organizations across the country. As a result, a number of initiatives have been made by the Malaysian government to restore investor confidence through the strengthening of corporate governance framework and improving the quality of corporate management practice. The High Level Finance Committee was established in 1999 under the Ministry of Finance to review and address the corporate governance issues in the aftermath of the Financial Crisis (Nor Azizah & Halimah, 2007). According to Das (2000), the Committee has identified weaknesses particularly in requirement transparency and disclosure, corporate monitoring responsibilities and accountability of company directors including the rights of minority shareholders. A report was later issued by the committee that marked the beginning efforts by regulators who worked hand in hand with industry expert to promote sound corporate governance. The Committee recommendations has resulted in significant improvement to the Kuala Lumpur Stock Exchange (KLSE) Listing Requirements (Singam, 2003). Bursa Malaysia formerly known as KLSE together with Security Commission had imposed that public listed companies were required to disclose their financial status, loan position and shareholders structure on a quarterly basis.
Consequently, the Malaysian Code on Corporate Governance (Code) was introduced in 2000, which meant to encourage transparency in company management while providing relevant information to the investors to achieve company’s objective. In 2007, a revision had been made to the Code to address the function of internal audit and to reinforce the roles and responsibility of board of directors and audit committee. The Minority Shareholder Watchdog Group (MSWG) was established in 2000 by five government fund institutions namely Employees Provident Fund (EPF), Armed Forces Fund Board, National Equity Corporation (PNB), Social Security Organisation (SOCSO) and Pilgrimage Board (Lembaga Tabung Haji). The MSWG is part of the initiatives to safeguard the interests of minority shareholders through shareholder activism (MSWG, 2012). The Securities Commission’s five years Corporate Governance Blueprint was launched in 2011 to provide an action plan in improving the corporate governance standards by strengthening self and market discipline on top of promoting greater internalization of good governance culture. The Blueprint contains 35...