Malaysian firms need to improve corporate governance disclosures: S and P

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1 Malaysian firms need to improve corporate governance disclosures: S and P 28 May 2004 Agence France Presse Copyright Agence France-Presse, 2004 All reproduction and presentation rights reserved. KUALA LUMPUR, May 28 (AFP) - Most Malaysian companies have high boardroom independence but there is much room for improvement in disclosure of corporate governance practices, Standard and Poor's said Friday. The ratings agency said a study it conducted of the Kuala Lumpur Stock Exchange's top 50 companies in market capitalisation terms showed considerable variation in their disclosure practices. The study was conducted jointly with the Corporate Governance Financial Reporting Center at the National University of Singapore to assess corporate governance disclosure practices based on annual reports. S and P Governance Services managing director Calvin Wong said that on a scorecard with a maximum of 140 points, most of the companies were clustered between 45 and 75 points. "Judging from scores, there seems to be much room for Malaysian companies to improve disclosures of their corporate governance practices," Wong said in a statement. The study named five companies -- Malakoff Bhd., top bank Malayan Banking Bhd., Malaysia Mining Corp. Bhd., conglomerate Sime Darby Bhd. and Tanjong plc -- as among top performers but said they still fell short of global best practices. Among the five firms, only one had a board with at least a majority of independent directors but none had more than two-thirds. Only two provided the directors or board with independent access to management and disclosed this fact in the annual report. Only three disclosed they evaluated the individual performance of board members but gave no details on the criteria used to assess a board member's performance, S and P said.

2 ROOM FOR COS TO IMPROVE DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES 28 May 2004 Bernama Daily Malaysian News (c) 2004 Bernama - Malaysian National News Agency Although most Malaysian companies have high independence within their board of directors, there is room for them to improve disclosure of their corporate governance practices, a study said. The study was made on 50 Kuala Lumpur Composite Index (KLCI) companies by Standard and Poor's Governance Services and the Corporate Governance and Financial Reporting Centre (CGFRC) at the National University of Singapore. "Judging from study, there seems to be much room for Malaysian companies to improve disclosure of their corporate governance practices," said the managing director of Standard and Poor's Governance Services, Calvin Wong. The co-director of CGFRC, Prof Mak Yuen Tee said one of the areas which Malaysian companies could improve was the independence of the directors of the board and the board committees to have a better corporate governance practices. "We found that this is the other key area that Malaysian companies were found lacking in the corporate governance practices," he told reporters when reviewing the study entitled "Corporate Governance Disclosures in Malaysia" here today. He said only one of the top five companies had a board with at least a majority of independent directors, but none had over two-thirds, two out of five provided the directors or board with independent access to management and this was disclosed in the annual report. The top five companies are Malakoff Bhd, Malayan Banking Bhd, Malaysia Mining Corporation Bhd, Sime Darby Bhd and Tanjong PLC. Mak said that 14 percent of the companies had between one-half and two-thirds of the board made up of independent directors, while just four percent had more than two-thirds of independent board. On the other hand, all the companies disclosed the number of board meetings held a year and 20 percent of them had at least 12 meetings. Also encouraging was that 43 companies reported directors' attendance at board meetings ranging from 81 percent-99 percent, with two companies saying they had 100 percent attendance. This study involved the top 50 companies of the KLCI ranked by market capitalization as of Sept 30, 2003 with the latest annual reports (available as of Feb 5, 2004) for each company used in the assessment of the corporate governance disclosure practices. Out of 50, only five companies were found to have better disclosures of their overall corporate governance practices. -- BERNAMA

3 Boards of directors highly independent. By Ayu Musa Kamal. 29 May 2004 The Malay Mail (c) 2004 New Straits Times Press (Malaysia) Berhad THE boards of directors of most Malaysian companies are highly independent although there remains room for them to improve disclosures of their corporate governance practices, according to a study by Standard & Poor's (S&P) Governance Services and the Corporate Governance & Financial Reporting Centre (CGFRC) at the National University of Singapore (NUS). The study was done on 50 companies in Bursa Malaysia Bhd's 100-strong Kuala Lumpur Composite Index (KLCI). The study involves the top 50 companies ranked by market capitalisation as of Sept 30, The latest annual reports (available as of Feb 5, 2004) for the companies were used in the assessment of the corporate governance disclosure practices. As part of the KLCI, the companies are likely to be of the greatest interest to international investors. "There were considerable variations in the disclosures among the 50 companies," said Calvin Wong, managing director of S&P's Governance Services. "Judging from the scores, there seems to be much room for Malaysian companies to improve disclosures of their corporate governance practices," he added. The results of the study, published in a report entitled "Corporate Governance Disclosures in Malaysia," highlighted that the top five companies - Malakoff Bhd, Malayan Banking Bhd, Malaysia Mining Corp Bhd, Sime Darby Bhd, Tanjong plc - are significantly different from the others in the sample. "The study highlighted nine areas where these top five companies were significantly better in disclosure," said Associate Professor Yuen Teen Mak, vice dean of the NUS Business School and co-director of the Corporate Governance & Financial Reporting Centre. Despite the high independence of the boards in most Malaysian companies, 32 per cent of the sample had independent directors forming at most one-third of the board. On the converse, all the companies disclosed the number of board meetings held in a year, and 20 per cent of them had at least 12 meetings. Also encouraging was that 43 companies reported directors' attendance at board meetings ranging from 81 per cent to 99 per cent, with two companies saying they had 100 per cent attendance.

4 Syed Mokhtar's, Ananda Krishnan's companies among the best in disclosure Kevin Tan 28 May 2004 The Edge Malaysia (c) 2004 The Edge Communications Sdn Bhd Three blue chip companies, which are controlled by two prominent tycoons, and two other companies have the best corporate governance disclosure record in a study on the top 50 companies in the Kuala Lumpur Composite Index (KLCI). The three companies are Malakoff Bhd and Malaysia Mining Corporation Bhd (MMC), which are controlled by Sri Syed Mokhtar Shah Syed Nor, better known as Syed Mokhtar Al-Bukhary, and Ananda Krishnan's Tanjong plc. The two other companies are Sime Darby Bhd and Malayan Banking Bhd. The top 50 KLCI companies were chosen for the survey based on their market capitalisations as at Sept 30, The findings were the result of a joint study conducted by Standard & Poor s (S&P) and the National University of Singapore Business School s Corporate Governance and Financial Reporting Centre. Among other things, the top five companies boards met more than six times a year, disclosed its nominating committee meeting frequency and remuneration committee meetings and organised orientation programme for new directors. This study, which is based on disclosures in the 2002/2003 annual reports, is the second in a series of four country-specific studies on corporate governance disclosure. The first study on Thailand s companies was released in April and similar studies on companies in Indonesia and Singapore will be released later this year. Speaking to reporters yesterday after unveiling the study on Malaysian companies, S&P s credit market services managing director Surinder D Kathpalia said Malaysian companies still have some way to go in terms of corporate governance disclosure. No Malaysian companies have above 100 scores, he said. S&P uses a scorecard, which consists of 136 items with a maximum score of 140 to assess the corporate governance disclosure practices. The 50 Malaysian companies scores ranged from 41 to 100, with a majority of them scoring between 51 and 70. The study also found the top five Malaysian companies had fallen short of global best practices in several key areas. Among others, only one of the five companies had a board with majority of independent directors and only two of them provided its directors with independent access to management. The study also revealed that only one company disclosed the exact remuneration of each director by name. However, Surinder said Malaysian companies scores were still relatively better than those of Thai companies, which ranged from 4 to 75 out of the maximum 140. He said the focus of the study was disclosure in form and not on the substance that would be more challenging to discover.

5 S&P: Some firms still not transparent K.P. LEE 29 May 2004 The Star Online THE overwhelming majority of Malaysia s top 50 largest companies failed to make the grade in corporate governance disclosures, a new study by Standard & Poor s (S&P) has revealed. Most of the companies audit, remuneration and nomination committees were still far from independent, while there was a lack of transparency in how board members were chosen. The survey, using the ratings agency s corporate governance disclosure scorecard and conducted jointly with the National University of Singapore (NUS) Business School, found that 74% or 37 of the 50 largest Bursa Malaysia-listed companies by market capitalisation attained half or less than half of the total score of 140. There is still a huge gap, S&P managing director (Credit market services) Surinder Kathpalia told a press conference in Kuala Lumpur yesterday to announce the survey results. No company received more than 100 out of 140 points and this represents plenty of room for improvement, he added. He said the challenge was even bigger because the survey looked purely at disclosures. It s just the form and already there s a huge gap to global best practices; the other challenge is substance, and we haven t even talked about that yet. Most of the scores were clustered between 45 and 75 points, with the largest band of 17 firms or 34% scoring between 61 and 70 out of 140. Another band of 15 companies (30%) scored between 51 and 60 points, while the worst performing company among the top 50 scored less than a third a paltry 44 points out of 140. The mean score was while the company with the best disclosure in the survey scored 94. The scorecard, that tested 136 items, reflects principles and best practices embodied in international corporate governance codes. Although performing rather poorly, Malaysian companies did better than their peers in Thailand, which averaged 37 points in a survey released last month. S&P will be releasing study results on companies in Singapore and Indonesia soon. S&P did not publish the scores of individual Malaysian companies but highlighted the top five scoring ones as Malakoff Bhd, Malayan Banking Bhd, Malaysia Mining Corp Bhd, Sime Darby Bhd and Tanjong Plc. The study highlighted nine areas where the top five companies were significantly better in disclosure, said NUS Business School vice-dean, Professor Mak Yuen Teen, adding that there was a big difference in scores between them and the other 45. He said these companies had better disclosures on their nomination and remuneration committees, scheduled more of such committee and board meetings and organised formalised training for new directors.

6 KL listed firms not transparent enough: study Eddie Toh 29 May 2004 Business Times S&P, NUS find they have long way to go in corporate governance MALAYSIAN listed companies score better than their Thai counterparts in terms of corporate governance but still have a long way to go, according to a joint study by a foreign credit rating agency and the National University of Singapore. 'Judging from the scores, there seems to be much room for Malaysian companies to improve disclosure of their corporate governance practices,' Calvin Wong, managing director of Standard & Poor's (S&P) Governance Services, said in the Malaysian capital yesterday. The study, covering 50 listed components of the 100-stock Kuala Lumpur Composite Index, was jointly undertaken with Mak Yuen Teen, vice-dean of the NUS Business School and co-director of the Corporate Governance & Financial Reporting Centre at the university. The authors said the Malaysian companies surveyed scored between 44 and 94 points out of a maximum of 140 points. The average score was 65 points - almost double the average of 37 points scored by Thai listed companies in an earlier survey. S&P and the NUS unit will release their scorecards on listed companies in Singapore and Indonesia later this year. The two organisations used yardsticks such as independence of the board, disclosure of directors' details, separation of CEOchairman, frequency of board meetings, attendance of board meetings, independence and activities of the nominating committee, independence of the audit committee, and communication with shareholders. Based on the criteria, the study singled out five Malaysian companies for good corporate behaviour. They are Malakoff, Malayan Banking, Malaysia Mining Corporation, Sime Darby and Tanjong. The authors of the report declined to disclose the identity of companies that fared poorly in the survey. Although the top five companies have better disclosure than the rest, they were found lacking in: the number of independent directors. Only one of the them had a board with at least a majority of independent directors, but none had more than two-thirds. independent access to management. Only two provided the directors and the board with independent access to management and disclosed this in the annual report. evaluation of board members. Only three disclosed that they evaluate the individual performance of directors. None provided details in the annual report on the criteria used to assess directors' performance.

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