KUALA LUMPUR (April 26): Malaysian companies are to make detailed disclosures on named basis the remuneration of individual directors and top five senior management as well as have at least 50% of their board members made up of independent directors by year-end, according to the newly enhanced Malaysian Code on Corporate Governance (MCCG) released today.

"The detailed [remuneration] disclosure allows shareholders to make an informed decision when voting on the approval of directors' remuneration and to consider the appropriate remuneration package, taking into account the responsibility of the directors. [It also] allow stakeholders to understand the link between senior management remuneration and the company's performance," the MCCG read.

Previously, only companies that have a non-independent chairman are required to have majority independent directors. Now, all boards are to have at least 50% independent directors.

For large companies — companies on the FTSE Bursa Malaysia Top 100 Index or those with at least RM2 billion market capitalisation — more than 50% of board members need to be independent and at least 30% of the board should consist of women directors.

According to the Securities Commission of Malaysia (SC), 45 of the top 100 companies in Malaysia currently do not have majority independent directors on their board. The changes are aimed at improving impartiality in decision-making and effective oversight of management, it said.

As it is, women make up 16.8% of boards and 25.6% of top management and only 7.2% of 972 CEOs are women, the SC said.

The new code also introduces a two-tier voting process for boards that choose to retain independent directors who have served for more than 12 years. For the resolution to pass, the two-tier voting would need a positive vote from both: (a) the largest shareholder or those with more than 33% stake and (b) shareholders other than the large shareholders.

If a board chooses to retain an independent director beyond nine years of service, it should provide justification and seek annual shareholders' approval. An independent director who has served more than nine years may continue to serve on the board as non-independent director.

According to the SC, some 810 independent directors have served more than nine years with the longest serving independent director having served as much as 37 years. At least 52 companies did not table specific resolutions for reappointment of independent directors, it adds.

Compliance to the MCCG is not mandatory but serves as a benchmark for companies that aspire to adopt strong corporate governance practices and provide fair and meaningful disclosures for the benefit of all stakeholders.

Companies that depart from the MCCG practices are expected to have an alternative practice and explain how the latter achieves the intended outcome. Large companies that depart from the recommended practice are also required to disclose actions they have taken or will take, and the time frame required to apply the practice.

The MCCG is available on the SC website and will also be translated to Bahasa Malaysia and Mandarin. The SC also said it will also leverage technology for reporting and monitoring of corporate governance practices.