1

UPCOMING SEMINARS AND ACTIVITIES IN APRIL 2016

Members’ Breakfast Talk, 21 April 2016 @ The Royal Lake Club, Kuala Lumpur

(Members Only)

- Fee is RM60/Person + 6% GST

Director Duties, Business Ethics and Governance Seminar, 28 April 2016 @

Istana Hotel, Kuala Lumpur

- REGISTER NOW! Special Discount for Early Bird before

8 April 2016

- Investment Fee is RM 1,200/Person + 6% GST

- 20% discount for Members.

(For more information, please contact Aida or Imen at 03 7957 6799)

MICG EVENTS

5th National Procurement & Integrity Forum for Public and Private

Sectors 2016

10 March 2016 @ Istana Hotel, Kuala Lumpur

About 150 delegates from both public and private sectors attended this high profile annual

seminar focused more on Government procurement. The reason being Malaysia has

signed the TPP. Chapter 26 of the TPP is all about Transparency and Anti-Corruption.

Procurement is one area where corruption is most rampant.

YB Senator Datuk Paul Low Seng Kuan gave a Special Keynote Address on ‘Combatting

Procurement Corruption in Public & Private Sectors’ whilst Tan Sri Dato’ Setia Haji Ambrin

Buang spoke on ‘ Issues in Procurement: Report on the Third Series of the 2014 Auditor-

General’s Report- Recurring Issues/Problems in Government Procurement;

Recommendations and Steps Taken’.

CONTENTS

2 President’s Message

2 Appointment of New Director

3 Highlights of the 5th Annual

National Procurement &

Integrity

4 What’s New At MICG?

5 Partners in Corporate

Governance (PICG) Progamme

5 1st MICG Dialogue with

Universities

6 Courtesy Visits

7 ‘ Factors That Motivates

Management To Commit

Fraudulent Financial Reporting’

article contributed by University

Research Team

8 Article on ‘Integrity,

Transparency, Reputation,

Accountability’

10 Calendar of Events – 2016

11 MICG Board of

Governance & Secretariat

11 Contact Us

YBhg. Dato’ Yusli gave the token of

appreciation to YBhg. Datuk Paul Low

Joint Seminar with FPLC ‘Annual National

Seminar on Directors Duties, Governance,

Regulatory Updates & Current Issues 2016‘

26 & 27 January 2016 @ The Haven, Ipoh

The seminar was jointly organised with Federal

Public Listed Companies (FPLC). It was well-attended

by 30 directors and top management from private &

public sectors. Among the panel of speakers were

from Commission of Companies Malaysia, the Big 4

and Bursa Malaysia.

Malaysian Institute of Corporate Governance (458959-M) (Institut Tadbir Urus Korporat Malaysia)

From left: En Megat Mizan, Lauren Peng,

YBhg. Dato’ Seri Abd Rahman, Mr Albert

Cheok & Imen Lai

THE ADVOCATE

April 2016

www.micg.org.my

2

PRESIDENT’S MESSAGE

Dear Members,

I am pleased to introduce this maiden issue of the MICG bimonthly e-newsletter. This e-newsletter is emailed to all our

members to keep them informed on a regular basis on the new initiatives and events organised by MICG or with relevant

partners. MICG strives to be the leading advocate in Corporate Governance in Malaysia. Members will be notified the

upcoming seminars and conferences. Members and members’ staff can enjoy a discount of 20% for these events.

On 21 April 2016, I will be speaking at MICG’s Breakfast Talk specially organised for members. Your participation and

contribution at the event on your views on the current state of Corporate Governance in Malaysia will add a lot of value to

MICG’s work.

I am also meeting with other key stakeholders to discuss common issues and find opportunities to collaborate on joint

projects or activities to bring a higher level of awareness of good Corporate Governance. Partnering with universities is also

very important especially in the area of joint applied research which is lagging in Malaysia compared to the most countries

in the West.

Members are most welcomed to contribute articles and feedback to MICG so that we can continuously improve to serve

members better.

I look forward to meeting you in person at our 1st Breakfast Talk on 21 April 2016.

You can reach us at info@micg.org.my should you have any question or comment for us.

Thank you.

Dato’ Yusli Bin Mohamed Yusoff

President

MICG.

Appointment of Director

The Board of Governors appointed Ms Lauren Tam Kam Peng as Director to helm the MICG Secretariat

with effect from 2 January 2016.

Ms Tam, FCPA, is a qualified accountant, with more than twenty five years of experience in accounting

education and senior management role. Prior to joining MICG, Ms Tam was attached to CPA Australia

from 2002 to 2005 as Director-Malaysia Division and Chartered Institute of Management Accountants as

Director of Learning Development from 2005 to end of 2013. From 2014 to 2015, she was on a career

sabbatical and set up a social enterprise 100% for charity.

She and her team of 4 staff will work together with the Board of Governors to achieve the Vision of MICG

which is to be the leading advocate in Corporate Governance in Malaysia.

3

HIGHLIGHT OF THE 5TH ANNUAL NATIONAL PROCUREMENT &

INTEGRITY FORUM FOR PUBLIC AND PRIVATE SECTORS 2016

Participants at the

registration table.

Welcome Address by

President of MICG, YBhg.

Dato’ Yusli Mohamed Yusoff

YBhg. Dato’ Yusli handing token of

appreciation to YBhg. Tan Sri

Ambrin Buang, Auditor General

Malaysia after his speech on

Financial Management &

Procurement Process.

YBhg. Dato’ Sri Hj. Mustafar Hj. Ali,

Deputy Chief Commissioner, MACC

presenting on Preventing Corruption

in Public & Private Sector

Press interview with MICG Board

of Governors

YBhg. Paul Low Seng Kuan was

interviewed by the press after his

Keynote Address.

A participant posing a

question to the speaker

YBhg. Dato’ Seri Abdul Rahman

handing a token of appreciation

to speaker, Dr. Geoffrey Williams

4

INTRODUCING A NEW PROGRAMME FOR ORGANISATIONS AND COMPANIES CALLED “PARTNERS IN

CORPORATE GOVERNANCE”.

Malaysian Institute of Corporate Governance or MICG in short was incorporated as a company limited

by guarantee in 1998. Its principal activity is to promote and encourage corporate governance

development, education and training for the benefit of its members and other institutions or bodies

interested in Corporate Governance.

Vision – To be the leading advocate of Corporate Governance in Malaysia

Mission - To promote Corporate Governance in Malaysia

- To define Corporate Governance best practices

- To facilitate the adoption of Corporate Governance best practices

The Board of Governors is looking at furthering MICG’s position and its standing in the corporate world

and achieving its Vision and Mission. To do so, MICG needs steady funding to strengthen its financial

position and drive its development initiatives.

We are initiating a programme called ‘Partners in Corporate Governance’ where we are inviting

organisation to provide sponsorship for three (3) years and become a member of our PICG

Programme. We are looking for a contribution of RM21,200* (Ringgit Malaysia Twenty Thousand)

per annum for three (3) years from each member in the PICG Programme, which will include free

Corporate Membership for the period. We hope to raise RM500,000 per annum from this programme

to help defray our operational costs and carry out new initiatives.

The funds raised will be used in the following manner:

1) To revamp the MICG website to provide more education and training contents.

2) To set up a technical team to engage in more applied research output in Corporate Governance

best practices relevant to organisations.

3) To organize more quality and relevant education and training courses to enhance the standard of

Corporate Governance in Malaysia.

4) To play a more pro active role in advocating Corporate Governance to Government and regulators

as well as other relevant authorities.

If your organisation interested with the PICG Programme, please call Ms Lauren Tam Kam Peng,

Director of MICG at 03-7957 6799 (office) or email to laurenpeng@micg.org.my.

* Inclusive of 6% GST

WHAT’S NEW AT MICG?

5

PARTNERS IN CORPORATE GOVERNANCE

PROGRAMME

Congratulations to YINSON HOLDINGS BERHAD

for your support in the

Partners In Corporate Governance Programme!

1st DIALOGUE WITH UNIVERSITIES ON 23 FEBRUARY 2016

23 February 2016 - The Membership Committee organised its 1st Dialogue with universities to foster

closer working relationship on areas of applied research and development.

6

MICG’s Director, Lauren Peng with Mr. Lee Min On,

KPMG Retired Partner (R) and Mr Chang Kong Foo,

Auditor (L)

Lauren Peng with Prof Dr Mahamad Tayib

from DRB Hicom University, Pahang (5 Feb 2016)

COURTESY VISITS

On 26 Feb 2016, YBhg. Dato’ Seri Abd Rahman,

Lauren Peng and Afiqah Mohamad Rafi paid a

courtesy visit to Accounting Research Institute,

UITM, Shah Alam

On 8 March 2016, YBhg. Dato’ Yusli, Lauren

Peng and Afiqah Mohamad Rafi visited the

Institute Business School, UTM, Kuala Lumpur

Courtesy visit to MAICSA with President &

CEO, Ms Chua Siew Chuan and Ms. YC Chan

Courtesy visit by Tuan Haji Ahmad Zakie

Ahmad Shariff from Malaysian Directors

Academy on 31 March 2016.

7

CONTRIBUTION FROM UNIVERSITY RESEARCH TEAM

FACTORS THAT MOTIVATES MANAGEMENT TO COMMIT FRAUDULENT FINANCIAL REPORTING

Mahanum Sulaiman, Universiti Teknologi Mara

Hasnah Haron, Universiti Malaysia Pahang

Effiezal Aswadi Abdul Wahab, Curtin University of Technology, Australia

The collapse of a number of companies as a result of accounting manipulation by managers has raised

serious questions about the effectiveness of the monitoring mechanism to protect investors’ interests

and control managerial opportunistic behaviour. This study examines financial performance,

environmental characteristics and governance mechanisms on fraudulent financial reporting in

Malaysia. Logit regression was performed on a sample of 36 fraud firms and 46 no-fraud firms for the

period of 2001 to 2009. The predictive accuracy of the logistic regression model is 66.1 percent. This

study found that the greater the direct shares of the company owned by the board of director, the

lesser would be the likelihood of fraudulent financial reporting. High stock ownership of board of

director will increase the firm value, thus eliminating some of the inherent agency conflicts between

the management and shareholders which is related to managers making decisions to benefit

themselves rather than the shareholders. Even though the internal control quality was found not to

contribute significantly to fraudulent financial reporting, it was found that fraud companies, have

lesser voluntary disclosure of internal control system compared to no-fraud companies.

This study also found that the shorter the tenure of the CEO, the greater the tendency of the company

to be involved in fraudulent financial reporting. It could be that fraudulent financial reporting activities

were detected earlier rather than later, which could have led to the earlier termination of CEOs who

were found to be fraudulent.

According to Malaysian Code of Corporate Governance 2012, it is recommended that the maximum

tenure for independent directors should be a term of 9 years. However, others in the Corporate

Governance Sector suggest an absolute term limits for directors, including CEOs who are directors be

introduced. It is suggested that shareholders should be the group responsible to determine the tenure

of CEOs, which could be the maximum of 9 years or shorter depending on whether the shareholders

are happy with their performance.

MICG has agreed to the publication of the above extract in its newsletter in the interests of encouraging debate as

an essential element of the development of thought and progress in the field of Corporate Governance best practice.

MICG has not sighted or validated the data behind the study which led to the above extract and does not express

any opinion as to the findings and recommendations contained in the study or the above extract.

8

INTEGRITY, TRANSPARENCY, REPUTATION, ACCOUNTABILITY

By En Ahmad Shahab Din, General Manager MICG

People understand business strategies well; they know that the financial books need to be properly

recorded; that investors expect to harvest returns. But what of integrity, transparency, reputation?

And accountability? How do we record these in the registers?

Integrity and transparency invariably spell trust, a vital ingredient leading to a beaming reputation. All

these do not come together by accident. They need to be understood and made to be second nature

to persons and organisations including even governments. Good leadership cannot be effective and

functional without these contents. For example, integrity is in abundance in stock and shares trading.

Deals are initiated via verbal communication and on trust prior to affirmation on record. This means

integrity and trust can be worth billions of ringgit in relation to the stock market alone. We don’t

realise just how powerful the role of integrity is in multiplication of business value in all areas of a

nation’s economy. Further, how then do you place a value on transparent leadership?

Integrity of a company affects its stakeholders; this is why inculcating ethics and integrity into the

structure and fabric of an organisation is vital. In marketing its products and services, a company is

expected to uphold its commitments to the customer; there is a contract between them in whatever

form. Similarly with integrity of the product offered via advertisements and the actual item sold and

delivered. How often have we been baited by the ads only to feel short-changed by the actual

product?

Apart from with the customer, inhouse honesty and transparency in managing the company’s finances

is another crucial factor in keeping customers’ including financiers’ faith and trust. Callous attitude

can lead to careless management including accounting practices which affect an organisation’s

integrity. In many things we do, all operations involve finance and therefore its management and

control is central to probity, topped by straight-laced leadership and management.

Whilst we talk of good governance and best management practices and systems, we often forget to

look at the person. Business leaders are expected to live in moderation. They have to live a lifestyle

of integrity and maintain high ethical standards; what they do even in private life can affect the

company’s reputation.

There have been many examples of the oppulence of senior executives mixed in a bowl of corporate

misdemeanour affecting the company’s integrity and value.

One case was that of Tyco International in early 2000s wherein the excesses of the Chairman Dennis

Kozlowski and several senior executives caused the company loss of US$150 million (RM570 million).

Another was the case of Dominique Strauss – Kahn, CEO of the IMF.

9

It feels good to own a perfectly polished product. How about having a polished disposition? Warren

Buffet says, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that,

you’ll do things differently.”

Trust is a key building block in the creation of a company’s reputation, and as a direct result, its

shareholder value. You can very well imagine it would take a long time for most people to reshape their inherent

character attributes.

It may even take real courage and determination to change. Courageous and normal-thinking people

take responsibility for their own contribution to their bad traits and failures. A courageous leader

promotes personal responsibility in the Company or public service. Infusing an attitude of

responsibility throughout the organisation begins with that person himself.

Infusing an attitude of responsibility throughout the organisation begins with that person himself. We

all have to take ownership of our own weaknesses and errors.

If you avoid responsibility, it will eventually come back to get you, ready or not. The reference to ‘the

tone at the top’ so often repeated is actually talking about role modelling.

When such modelling comes from someone in a high position, the behavioural influence can be most

pronounced. Leadership at all levels is there but leadership has its terms. We always have a choice,

we can always choose between right and wrong. Easy.

Integrity and reputation do matter very much to consumers and investors too. Following the string of

large financial and corporate scandals in the last 20 years, all stakeholders have become more

demanding that people be transparent. They now enquire more deeply and expect honest

transparency. The EPF, PNB, KWAP, insurance companies and other large institutional investors with

large and diverse portfolios are particularly concerned over issues such as this and have been known

not voting in some directors at an AGM of investee companies.

The market favours companies that they believe share their values; those that don’t are shunned.

Business must show clearer evidence of congruency of values and principles by their actual actions.

The people can see through fake values. Rules cannot substitute character, Alan Greenspan believes.

Integrity, transparency, reputation, accountability. To put them together correctly, Confucius offers

this advice: “To put the world in order we must first put the nation in order. To put the nation in order

we must first put the family in order. To put the family in order we must first cultivate our personal

life. And to cultivate our personal life, we must set our hearts right.”

10

NO. EVENT EXPECTED DATE

2016 VENUE

1 Annual National Seminar on Directors Duties, Governance, Regulatory Updates and Current Issues

26 & 27 January The Haven, Ipoh

2 5th National Procurement & Integrity Forum for Public and Private Sector

10 March Istana Hotel, Kuala

Lumpur

3 Members’ Breakfast Talk 21 April Royal Lake Club, Kuala

Lumpur

4 Director Duties, Business Ethics & Governance Seminar 28 April Istana Hotel, Kuala

Lumpur

5 Half Day Seminar on Fraud Risk Management 9 May Bayview Hotel, Penang

6 Half Day Seminar in Kuala Lumpur : "Amendments to Bursa's Listing Requirements - How to rise up to meet those challenges!”

12 May ACCA office KL (TBC)

7 Corporate Legal Counsel May TBC

8 Regulatory Updates for Directors May TBC

9 3rd Annual Asean Corporate Governance Summit June TBC

10 Code of Corporate Governance for the Public Sector End of July TBC

11 Governance Symposium August Securities Commission

(TBC)

12 Sabah Skills & Technology Centre August TBC

13 Local Authority Forum August TBC

14 Human Resources Management Seminar September TBC

15 2nd Half Members’ Breakfast Talk October TBC

16 Corporate Governance Updates 2016 October TBC

17 Directors Duties and Regulatory Updates Seminar November TBC

18 Corporate Liability Bill November TBC

NOTICE

MICG will be holding its 18th Annual General Meeting on 24 May 2016 at Royal Lake Club, Lake Gardens, Kuala Lumpur at 3.00pm.

All members will be informed by post and email in April 2016. Please call or email us if you need more information re the upcoming AGM.

CALENDER OF EVENTS - 2016

REGISTER EARLY !!!

MICG‘S 1ST GOVERNANCE SYMPOSIUM –

“DRIVING PUBLIC-PRIVATE GOVERNANCE FORWARD”

on 16 August 2016 (TBC) at Securities Commission (TBC)

KEYNOTE SPEAKER: DATUK PAUL LOW, Minister in Prime Minister’s Department –

Corporate Governance

More information about the details of the programme event the event will be emailed to you.

11

BOARD OF GOVERNORS

Y.Bhg Dato’ Yusli Mohamed Yusoff – President

David William Berry – Deputy President

Margaret Chin – Vice President

Y.Bhg Tan Sri Megat Najmuddin Megat Khas (Honorary Patron)

Albert Cheok Saychuan

Megat Mizan Nicholas Denney

Y.Bhg Dato’ Seri Abdul Rahman Haji Ali

SECRETARIAT

Lauren Tam Kam Peng – Director – laurenpeng@micg.org.my

Address:

3A-02 Block F, Pusat Dagangan Phileo Damansara I

9 Jalan 16/11, Off Jalan Damansara

46350 Petaling Jaya, Selangor Darul Ehsan, Malaysia.

Website: www.micg.org.my

Tel: +603 7957 6799 Fax: +60957 3722 / 7957 2722 Email: info@micg.org.my

The MICG Newsletter is circulated strictly to members only. On the republication of articles/work of

others, permission were obtained. MICG shares with members; however MICG takes no views or

responsibilities on them.