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KUALA LUMPUR, Tues: A few rotten apples can spoil the barrel, or do they help to initiate improvement on the barrel instead? The much debated Enron and Worldcom scandals and the local Transmile and Megan Media cases and the effect they have on the current corporate law were highlighted from different point of views by the astounding speakers during the afternoon session of the 14th Malaysian Law Conference today.

This seventh session of the day, broadly entitled “Corporate Law” was streamlined by its moderator, Mr. P. Gananathan from Messrs Bodipalar Ponnudurai Nathan, into discussion on corporate governance, its practical aspects and the applicability and effectiveness of the recent substantial amendments to the Malaysian Companies Act 1965, which received Royal Accent on July 27.

Mr. Michael Lim, a long standing corporate lawyer with 30 years experience from Messrs Shearn Delamore & Co took the stage with a dissenting view, notably on the importance and effectiveness of corporate governance. Although Malaysia’s corporate governance principles have been described as one of the best in the world, the accounting irregularities in Transmile and Megan Media cases show that we cannot expect high principles and rules per se to be a panacea for corporate ills. He further observed that Enron has nothing to do with lack of internal control but was mainly due to accounting manipulation and irregularities.

The addition of Section 132E into the Companies Act which states that directors/substantial shareholders/connected persons can transact with a company but the transaction must be approved in a general meeting at which these people are not allowed to vote. This new section catches thousands of innocent family companies’ transactions where transfer of assets for inheritance purposes is not uncommon. Micheal insisted that amendment should be quickly implemented so as not to impede business efficacy.

Companies should not focus too much on social responsibilities as the employees, suppliers, creditors and even the environment are already afforded protections by other statutes. He maintained that the duty of directors is to make money for the shareholders.

A corporate litigator, Dato’ Loh Siew Cheang from Messrs. Cheang & Ariff took a lighter stand on corporate governance by drawing the participants’ attention to the changing corporate landscape and how to co-relate Malaysian corporate governance, corporate social responsibility and statutory reforms to our lives, national well being and national competitiveness in global economy.

According to him, the catalyst accounting for the current fervour is not just our fair share of financial scandals and corporate collapses as they have existed ever since the statutory person was invented for economic reasons. The global business community summons for clearly defined acceptable corporate behaviour and efficient dispensation of justice in resolving investment and commercial disputes.

It is responsible conduct that will enable us to compete better. He added that this is the best brand for Malaysia and for Malaysians to acquire.

Speaking on behalf of the corporate regulator was Mr. Abdul Karim Abdul Jalil, Chief Executive Officer of the Companies Commission of Malaysia (SSM), which stated that the aim of introducing the amendments to the Companies Act, which was based on studies of corporate legislations of mainly Commonwealth jurisdictions which have similar legal frameworks, was to ensure that the corporate governance framework is enhanced and strengthened towards creating a dynamic and healthy business environment. The amended provisions of the Companies Act promote social responsibility and transparency which are called for in the global business community. One of the given examples was high regards granted to whistleblowers Cynthia Cooper of Worldcom and Coleen Rowley of Enron when they were named ‘Persons of the Year’ by Time magazine in 2002.

He explained that SSM is using the concept of ‘balanced enforcement’ as one of its primary tools in enforcing the Companies Act. Just until August this year alone, SSM has initiated action against 6,505 companies for various offences including those of failed governance and a total 3,931 cases have been resolved. “There will be drastic change in compliance issues” he announced, adding the fact that SSM is aiming to increase level of compliance to 95% from the current 75%. SSM is also launching a Training Academy to educate relevant parties in the practice of corporate governance.

The amendment to the Companies Act is a start of a new chapter – where the business environment is not devoid of the notions of conscience, responsibility, transparency and accountability, he concluded.

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