The Prime Minister Datuk Seri Abdullah Ahmad Badawi announced the streamlining of Bursa Malaysia’s main and second boards, as well as the structure of Mesdaq market. The two boards would be unified for more established companies with strong financial track records. The Mesdaq market would be revamped under the proposed streamlining process to allow smaller companies to access the equity market at an earlier stage of their lifecycle.

This move is expected to catalyse the listing of more high quality companies in the local equities market. The Government would be establishing a market-making framework for Bursa Malaysia. Market makers can include proprietary traders in commercial and investment banks as well as foreign traders to provide liquidity in the market. He adds that the initiative would help price discovery, promote innovation and enhance market liquidity.

The government will offer incentives such as tax concessions and lower fees to attract financial institutions to act as market makers. Also, the government would allow the setting up of a third credit rating agency with foreign strategic partners holding up to 49% equity interest. It hopes that the domestic rating agencies will enhance their performance through better supervision and more competition. Currently, Malaysia has two rating agencies: Rating Agency Malaysia Bhd and Malaysia Rating Corp Bhd. The Prime Minister also announced that the government would liberalise the bond market approval framework.

~ The Star ~

New research showed that companies with best corporate governance practices yield higher returns for shareholders than their poorly governed peers such as troubled British mortgage lender Northern Rock NRK.L.

Director of investment affairs at the insurance industry trade body, Peter Montagnon said that good governance produces better returns with less volatility - something long-term savers need. Association of British Insurers (ABI) member companies hold shares in a fifth of Britain’s stock market on behalf of millions of pensioners and savers.

ABI uses a colour system to define how well a company is governed, with red showing the strongest concern about an issue, followed by amber. A green top indicates an issue that has been resolved while best-governed firms receive a blue top. ABI amber-topped Northern Rock, which in September fell victim to the global credit crunch, for over-generous bonuses and salary hikes for four years running, with the latest amber top - for its governance in 2006 - given in April last year.

ABI also found that the right balance between non-executive directors on a board and their executive counterparts is crucial to achieving greater profitability. The researchers examined 654 British FTSE All-Share companies from 2003 to 2007.

~ Reuters ~

Geoff Dart, Director of Corporate Law and Governance at the Department for Business, Enterprise & Regulatory Reform (BERR), confirmed that the general implementation of the Companies Act 2006 was ‘fully on track’. There have been concerns about the ongoing implementation of the Act, as a number of clauses that were dependent on the upgrade of Companies House’s computer systems have been delayed until October 2009.

However, the Registrar of Companies, Gareth Jones, has confirmed that the agency’s new computer system is now in place, and that any further delays are unlikely. The Registrar also defended Companies House’s record on corporate ID fraud, and revealed that the agency is currently developing an electronic application process for its protected online filing system - likely to be launched next year.

The next tranche of clauses from the Companies Act are due to come into force on 6 April 2009, and cover areas including audit and accounting, dormant companies and the removal of the requirement for private companies to have a company secretary. For more information on the Companies Act, visit http://wwww.companiesact.org.uk

~ Chartered Secretary Newswire ~

Malaysian companies are increasingly aware of the detrimental effects of global warming, and some have been actively addressing its impact via systematic initiatives over the past three to five years. The initiatives focus on sustainability via clean technology, renewable energy, trading of carbon credits through Kyoto Protocol’s clean development mechanism (CDM), and biomass plant projects.

Championing the environmental cause is YTL Group, a principal investor of the Asian Renewable Energy and Environment Fund (AREEF). AREEF is a vehicle that allows companies to invest in and encourage them to innovate in clean technology and the renewable energy sector. YTL Corp Bhd director of investments Ruth Yeoh said that climate change and global warming had reached a global level of importance where it was embedded into the consciousness of every individual. Countries like Australia is pledging to ratify the Kyoto Protocol and cap carbon emissions under the new leadership (Post-Conference of Parties in Bali), even creating a Ministry of Climate Change and Water led by Malaysian-born Penny Wong.

Foreign companies like Wal-Mart and GE are already responding to climate change. GE is creating an “Ecomagination” arm which focuses on innovative solutions such as clean coal technology to adapt to climate change. A report by Stern Review said the global carbon market was forecast to be US$70bil by 2010. The report says that by acting now to cut carbon will cost 1% of global gross domestic product (GDP) per year; and by doing nothing, the costs at the time would be a minimum of 5% and as high as 20% of GDP a year. Although the track towards sustainability is challenging, it is certainly not impossible.

The other Malaysian corporations that are equally conscious about the environment are IOI Corp Bhd, CB Industrial Product Holdings Bhd and Kim Loong Resources Bhd. These companies have put in place mechanism in their production processes that reduce the emission of greenhouse gases and other environmentally harmful substances.

~ The Star ~

According to a new survey, 32 per cent of respondents to a recent Ipsos MORI poll, conducted on behalf of the Institute of Business Ethics (IBE), reckon that ‘discrimination in treatment of people’ is a business ethics issue that most needs addressing, followed by ‘harassment and bullying in the workplace’. Whistle blowing and dealing with sweatshop labour were also identified as significant issues.

The IBE reckons that these concerns may be a reflection of the respondents own experience in their workplace and influenced by increased media coverage on labour conditions in emerging economies. Overall, 54 per cent of respondents argued that British business behaves ethically, and 33 per cent reckon that businesses operate more ethically than they did 10 years ago. Even so, only 5 per cent of those polled say that business behaves very ethically.

~ Chartered Secretary Newswire ~

The Financial Reporting Council is proposing a number of changes to the Smith Guidance, which are intended to improve auditor objectivity. The revisions form part of the implementation phase of the FRC’s Choice in the UK Audit Market project, and were a key element of the 15 recommendations put forward by its Market Participants Group November 2007. Audit committees (ACs) should make more efforts to ensure greater auditor independence under new proposals from the corporate governance regulator.

The amendments include the insertion of two new clauses, which will require audit committees to assess the risk of the firm’s auditor leaving the market, as well as explaining to shareholders how it reached its recommendation to the board on the appointment, reappointment and removal of external auditors. That explanation, the FRC argues, should ‘normally include’ any contractual obligations that acted to restrict the audit committee’s choice of auditors, when the audit was last subject to tender, and when the current group auditor was appointed. Several other clauses are also amended, mostly intended to strengthen the independence of auditors and provide safeguards against conflicts of interest. Other minor changes also reflect changes to the Combined Code introduced last year.

~ Chartered Secretary Newswire ~

A joint statement issued by the National Association of Pension Funds (NAPF) and the Association of British Insurers (ABI) is arguing that the remuneration committees should have a ‘clear understanding’ of their responsibility to negotiate suitable contracts and to be able to justify severance payments to shareholders. Boards should establish clear policies to ensure any non-contractual payments are linked to performance alone, and that no director should be entitled to discretionary payments if their contract is terminated in the event of poor corporate performance.

The new publication is an update to a previous statement issued by the two bodies in 2002, and highlights several other aspects of executive remuneration. It suggests, for instance, boards should consider making contracts with notice periods of less than 12 months, they should ensure that executives show leadership by aligning their financial interests with those of the company, and that executive pension arrangements should be regularly reviewed by remuneration committees to ensure that these do not lead to unmerited payments in the event of severance. The statement is available http://www.napf.co.uk/policy/governance.cfm

~ Chartered Secretary Newswire ~