KUALA LUMPUR: The Securities Commission’s inaugural Corporate Governance (CG) Monitor 2019 highlighted the need for policies and practices for long serving independent directors and gender diversity in the boardroom.
SC chairman Datuk Syed Zaid Albar lauded the adoption of the best practices by public listed companies, which includes the nine-year tenure limit for independent director.
“A survey by Institutional Shareholder Services Inc that found 70% of institutional investors agreed that having a large number of directors with long tenure is a concern. It is believed to prevent boards from introducing new skills and ideas to the running of the business,” he said.
According to the SC report, setting a tenure limit is also recognised as a means of controlling the risk of entrenchment and facilitating board refreshment to ensure it has the optimum mix of skills and experience required to lead and navigate the company.
The report highlighted that there has been a reduction in the average tenure of independent directors from seven years in 2015 to five years as at December 2018.
In addition, Asian Corporate Governance Association’s (ACGA) CG watch 2018 ranked Malaysia 4th in the region for corporate, a jump its from 7th place finish in 2016.
While Malaysia climbed the corporate governance ranking due to concrete moves by the government to tackle endemic corruption issued fostered by the previous administration, its weakest score was in the independence category which is measured by a company’s board size, tenure and share of independent directors.
Nonetheless, ACGA founding secretary-general Jamie Allen cautioned that the reduction of the average tenure from seven to five years might not be ideal for an independent director.
“Somewhere, between six to nine years would be a good length of time for an independent director to be on the board, though this estimate might vary from company to company. If it can put forth a good case to its shareholders for a director that has been on the board for nine years but still extremely independent that should be okay.”
With regards to gender diversity, Malaysia has achieved its target of eliminating all-male boards in the top 100 listed companies in January last year.
In 2018, women participation in the top 100 companies was at 23.68%, a seven percentage point increase from 16.6% recorded in 2016.
Meanwhile, women account for 28% of senior management positions for all listed companies, higher than the Asia Pacific average of 23%.
Maybank Kim Eng CEO Datin Ami Moris said diversity in the boardroom should be approached through a structured and systematic way instead of just box ticking to meet the 30% target.
Source: The Sun Daily