Board composition influences the ability of the board to fulfil its oversight responsibilities. An effective board should include the right group of people, with an appropriate mix of skills, knowledge, experience and independent elements that

fit the company’s objectives and strategic goals. The right board composition will ensure sufficient diversity and independence to avert ‘groupthink’ or ‘blind spots’ in the decision-making process. It also enables the board to be better equipped to respond to challenges that may arise and deliver value.

2. Using Corporate Governance Monitor 2021 and 2022, describe the accomplishment of listed companies with regards to the principles in MCCG.

From 2021 to 2022, Malaysian listed companies made substantial progress in improving their board composition in line with MCCG principles. The key areas of achievement included:

i. Enhanced Board Independence:

- Significant strides towards achieving the recommended 50% threshold for independent directors.

ii. Improved Gender Diversity:

- Increased female representation on boards and formalized gender diversity policies.

iii. Stronger Policies on Board Tenure:

- Greater adherence to limiting the tenure of independent directors to ensure ongoing independence.

iv. Comprehensive Skills and Competencies:

- Emphasis on diverse skills and competencies among board members to enhance board effectiveness.

These accomplishments demonstrate a strong commitment by listed companies to uphold the principles of the MCCG, contributing to better governance practices and increased trust among stakeholders. Future focus areas could include achieving the 50% independent director threshold, further enhancing gender diversity, and continuing to strengthen board competencies and effectiveness.

Firstly, the accomplishments of public listed companies are participation of women on boards (WOB) across all plc’s increased by 12.4% and 8.5% respectively from 2016 to 2022. This accomplishment came from adhering to principle a in MCCG which is board leadership and effectiveness.

Second, Regarding the board appointment, the S&P 500 board gender diversity index increased to 39. 9% in 2022, with 64% of the new appointments being INED which are especially relevant to firms with a small capitalization level. This is consistent with the provisions of the MCCG on board structure and independence of the board.

Listed companies have improved their transparency and disclosure practices, providing more comprehensive and timely information to shareholders and stakeholders. This includes clearer reporting on executive compensation, risk management practices, and sustainability initiatives, in line with MCCG recommendations on transparency.

Listed companies in Malaysia have achieved notable progress in Corporate Social Responsibility (CSR) initiatives, following the principles of the Malaysian Code on Corporate Governance (MCGG). They have focused on initiatives that benefit the environment, local communities, and ethical business practices. These companies ensure transparency by publishing detailed reports on their CSR activities, showcasing their commitment to sustainable development goals and community welfare.

The board of directors is a group responsible for ensuring the long-term success of a company. Their job is to create lasting value for everyone who has an interest in the company, such as employees, shareholders, customers, and the community.

• Risk Management

The Board of Directors needs to identify and handle risks that could affect the company. This includes risks from outside the company, like market changes and new technology, and risks from within, like financial, operational, and legal issues. They must set up systems to manage these risks and keep an eye on efforts to reduce them.

• Strategy and Performance

The board must take the lead in setting the company's goals and strategies, deciding how resources are used, and reviewing the company's performance. They should make sure the company meets its responsibilities to shareholders and other interested parties.

• Overall Responsibilities

The board has specific duties to ensure the company is managed well and supervised properly. This includes overseeing the management team, controlling the organization, and deciding its long-term direction.

• Corporate Reporting and Stakeholder Relations

The board needs to ensure that the company's financial reports are accurate and follow the rules. They should have a good communication strategy to keep shareholders and other stakeholders informed about what the company is doing. They should also encourage shareholders to take part in Annual General Meetings (AGMs) to improve engagement and involvement.

Effective remuneration must be aligned with the company's performance and strategic goals to ensure that these incentives will urge directors and executives to act in the best interests of shareholders and the company.

Additionally, a significant portion of remuneration should be tied to long-term performance to align executives' interests with those of shareholders.

• Audit committee is an operating committee of a company's board of directors that is in charge of overseeing financial reporting and disclosure.

• Financial Expertise: At least one member should have financial expertise, with the ability to understand complex accounting and financial reporting issues. All members should be financially literate.

• Clear Responsibilities: The audit committee's role and responsibilities should be clearly defined in a charter, covering areas like financial reporting oversight, risk management, internal controls, and oversight of internal and external auditors.

• Proactive engagement: The committee should actively engage with management, internal auditors, and external auditors through regular meetings and open communication. This includes holding executive sessions without management present.

Engagement is key, and companies should utilize a variety of communication channels tailored to each stakeholder group. This could involve formal channels like annual reports, or informal ones like social media. The frequency of communication also matters, with a balance between regular updates to build trust, proactive communication to address issues, and reactive responses to stakeholder concerns.

But communication is a two-way street. Companies need to actively listen to stakeholder feedback through surveys, forums, or dedicated channels. Demonstrating responsiveness by acknowledging and addressing concerns builds trust and shows that stakeholder input is valued.

Finally, transparency and clear communication are paramount. Companies should use easy-to-understand language, provide complete and accurate information, and make it readily accessible. This can be achieved through various channels, both traditional and online. As the communication landscape evolves, companies are increasingly using social media and integrated reporting to connect with stakeholders on a deeper level. By prioritizing open and honest communication, companies can build strong and sustainable relationships with stakeholders, ultimately leading to long-term success.

- Risk management identifies threats and opportunities, while internal control helps counter threats and capitalize on opportunities.

- ⁠Help in making informed decisions about risk levels and implementing necessary controls to achieve their objectives.

- The board of directors (BOD) is responsible for setting internal control policies and ensuring these systems function effectively, manage risks, and are part of the corporate culture.

Example:

Risk management

- Risk identification workshop

Internal control

- Regular audit and review

- Proper risk management and effective internal control are essential in corporate governance. Risk management identifies threats and opportunities, while internal control helps counter threats and capitalize on opportunities. This aids companies in making informed decisions about risk levels and implementing necessary controls to achieve their objectives.

- The board of directors is responsible for setting internal control policies and ensuring these systems function effectively, manage risks, and are part of the corporate culture.

- ⁠For example, a successful multinational company may have a dedicated risk management team and strict internal controls to ensure compliance and seize new market opportunities.

Firstly, in Malaysia's top 100 companies, women hold 23% of senior management positions, with two as CEOs, and 24 firms still have all-male senior teams. Most managers are in their 50s, with few women over 60, indicating potential barriers. Women's roles vary by sector, with many managers serving less than nine years, while CEOs typically have longer tenures, ensuring stability. Chief Risk Officers serve shorter terms, reflecting evolving risk roles. These findings underscore the need for improved gender diversity and succession planning aligned with MCCG principles.

Secondly, listed companies in Malaysia have significantly enhanced their risk management and internal control mechanisms. They have developed comprehensive frameworks, established dedicated risk management committees, and increased transparency in their disclosures. Regular internal audits and detailed control processes have strengthened financial reporting, compliance, and operational efficiency, boosting investor confidence and corporate resilience.

Lastly, listed companies have made notable progress in board leadership and effectiveness. Significant advancements include improved board diversity, particularly in gender representation, with many listed companies achieving or surpassing the 30% target for women on boards by 2023. Additionally, there has been an increase in the number of independent directors, which enhances oversight and governance. These efforts reflect a commitment to strengthening board composition and ensuring effective leadership within organisations.