Investors and regulator in Malaysia publish AGM checklist to boost shareholder scrutiny

New document covers sustainability and governance topics, and comes as neighbouring Singapore says it will strengthen climate stress testing

The Securities Commission Malaysia (SC) has worked with pension funds and institutional investors in the country to create a checklist of questions to encourage more effective shareholder engagement at AGMs.

The questions provide a basis for investors to establish potential performance gaps on corporate governance and sustainability topics, including remuneration packages and appointing directors.

The AGM Corporate Governance Checklist asks shareholders to consider questions such as whether a company’s sustainability efforts centre solely on philanthropic activities; negative impacts on the environment resulting from company operations; the ability of board candidates with multiple non-executive positions or a full-time executive position to serve; and whether remuneration policy has a sufficient focus on long-term performance.

The Checklist highlights eight “critical issues” including Risk Management, Sustainability, Anti-corruption and Corporate Governance Best Practices.

Datuk Syed Zaid Albar, Chairman of the SC, said: “Shareholders play an important role in driving responsible corporate behaviour and the AGM is one of the platforms where they can raise material issues for discussion or seek explanation from the board and management.

“The AGM CG Checklist is meant to guide shareholders on key issues they may need to consider or raise at an AGM before they exercise their voting rights.”

The Checklist was developed together with the Institutional Investors Council Malaysia (IIC) and the Minority Shareholders Watch Group (MSWG), key proponents of investment stewardship and corporate governance within the country.

The IIC is an industry-led body focusing on collaborative engagement to improve “corporate governance culture” and counts local institutional investors such as the pension fund KWAP, sovereign wealth fund Khazanah and private-sector pension fund EPF among its members.

Meanwhile, the MSWG was established by the government in 2000 and monitors the corporate governance performance of 300 listed companies. Together with the SC, the MSWG developed the 2014 Malaysian Code for Institutional Investors (MCII) which sets out six principles of effective stewardship by institutional investors, the first code of its kind in the region.

The Checklist’s publication comes as the central bank of Singapore, Malaysia’s closest neighbor to the south, indicated it is ramping up its efforts on climate stress testing, creating a more robust model on the back of a flood-focused pilot undertaken in 2018.

In response to a question submitted in parliament, the Monetary Authority of Singapore (MAS) board member Ong Ye Kung revealed that the supervisory body was “working towards incorporating a broader range of climate change-related risks in thematic scenarios as part of a future Industry-Wide Stress Test” despite stress testing methodologies still being at “a nascent stage”.

According to Ong, MAS – a founding member of environment-focused central banking group the Network for Greening the Financial System (NGFS) – is also due to open a public consultation over Environmental Risk Management guidelines for financial institutions which will be issued in the first quarter of this year.