Corporate Governance: The Importance of the GOVERNANCE STATEMENT

The content of the governance statement

Corporate governance is the structure of rules, practices, and processes used to direct and manage a company. A company’s board of directors is the primary force influencing corporate governance.

The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business, and reporting to shareholders on their stewardship.

Globally, investors are becoming more and more aware of the risks and opportunities around ESG factors. The pressure from investors is growing for greater transparency on corporate governance, adoption, and reporting of the ESG. According to the Global sustainable investment Alliance, over USD30 trillion of assets were managed under sustainable investment strategies globally in 2018 and it grows stronger year by year.

It is essential for corporate management, investors, and directors to stay up-to-date on Malaysia and the global shifting governance landscape and how it affects them. 

The Governance Statement

Being transparent on to what extend governance risk and opportunities are incorporated into your board’s understanding of directors’ duties?

What step has your board taken to test its composition allows to be informed and differentiated debate as well as objective decision-making on climate issues?

Has the way your board embedded governance allows for effective interaction with relevant members of the executive management (e.g if governance is embedded in the risk committee, does this committee ensure that governance is also addressed by the Chief Risk Officer, Chief Internal Audit or Chief Executive Officer.

1.Profile of the Board of Director

A brief profile of the composition of the board with detailed backgrounds, experiences, the board dynamics, diversity, competitive advantage, governance, and more.

2. Board Charter

Board charter consists of organisation vision and mission statement, principal roles, and responsibilities of the board, code of conduct, conflict of interest, dealing in securities, board composition, roles of chairman and the Managing Director, board committees, appointment and roles, training, and directors development, financial reporting, risk, information, external affairs, internal control, and risk management, investors relation and shareholder communication, company secretary, auditor and other related matters within board fiduciary duties

3. Corporate Governance ESG Overview Statement

For eg a long-standing commitment to corporate governance and protection of stakeholder value, which has been integral to the Group’s achievements and strong financial profile to date

4. Audit Committee Report

Consisted of a general statement, primary purpose, committee composition, authority, functions and duties, meetings, minutes, a summary of work carried out during the financial calendar year.

5. Nomination Committee Report

The nomination and election of board members is one of the fundamental elements of a functioning corporate governance system around the world and has accordingly been chosen as the theme for the fourth peer review by the OECD’s Corporate Governance Committee. it consists of a general statement, primary purpose, committee composition, authority, functions and duties, meetings, minutes, a summary of work carried out during the financial calendar year.

6. Tax Planning

More often than not, tax planning significantly impacts a company’s financial plans, management and investment decisions.

As such, the taxation services do not only restrict to the standard annual tax return preparation and tax filing. It should be extended to constant providing tax advice, planning, and implementation strategies all year round.

With proper tax planning strategies, current and potential tax concerns can be mitigated if not eliminated.

7. Code of Conduct & Business Ethics

The Code of Conduct & Business Ethics sets out the acceptable general practices and ethics that guide the employees, often consist of accountability, non-discrimination, business communication, record keeping, confidentiality, conduct outside employment, conflict of interest, political activities, insider trading, anti-bribery, anti-money laundering, whistleblowing, conduct inn public, press release, business associates, etc.

8. Anti-Bribery & Corruption Policy

This Anti-Bribery & Corruption (ABC) Policy is to further enforce the company’s Code of Conduct & Business Ethics to ensure that employees understand their responsibilities in compliance with the company’s zero-tolerance for bribery and corruption within the organisation. To refer to Corporate Liability Section 17A write up here: https://faisalmalikco.com/due-diligence/corporate-liability-s-17a/

9. Remuneration Policy and Procedures for Directors and Senior Management

The remuneration policy for members of the Board of Directors and Executive Management reflects the interests of the shareholders and the company, taking into consideration any specific matters, including the assignments and the responsibility undertaken. In addition, the remuneration policy helps promote long-term goals for safeguarding the company’s interests.

With respect to incentive pay, reference is made to the overall guidelines for incentive pay, which have been approved at the company’s Annual General Meeting and consisted of a general statement, primary purpose, committee composition, authority, functions and duties, meetings, minutes, a summary of work carried out during the financial calendar year.

Read related article: https://faisalmalikco.com/corporate-governance-problems-and-challenges/

Mohamad Faisal C.A. (M), CIPFA, CPSA, ASEAN CPA, CFP, DPIN, HRDF Cert Trainer has wide exposure in governance, business finance, corporate advisory, personal finance, and SME development. He is a business mentor, a certified accountant, a financial planner, and a certified business mentor. He is also a ‘Business Mentoring for Mentors’ from the Entrepreneurship Development Institute of India (EDII) and ‘Entrepreneurship in Emerging Economies’ from HarvardX Business School. He was also appointed as a council member to two national professional bodies, Chairman of SMP Malaysia, Member of the National Governing Committee to MPC Professional Nexus, an Industry Advisor to three local universities. He is also the founder of FaisalMALIK & co [CA].

Our Governance and risk leader provides advisory, mentoring, and training for commercial organizations conform with prudent management. Reach us at faisal@faisalmalikco.com