An Analysis of Corporate Governance and Corruption in Malaysia

This report examines the state of corporate governance in Malaysia, focusing on the disparity between the perception of good governance and the reality of corrupt practices. It explores the historical context of corruption, including major scandals and the failures of the Malaysian Code of Corporate Governance (MCCG). The report analyzes legislative changes, such as the implementation of the OECD Convention and the introduction of criminal responsibility for legal persons. It also discusses measures for corporate governance, including board responsibilities, ethical policies, and risk management. The report emphasizes the role of top management in fostering integrity and provides recommendations, including the use of whistleblowing and the importance of ethical programs applicable to third parties. Examples from the US, UK, and Australia are used to illustrate successful corporate governance implementations. The conclusion highlights the need for strengthened governance and the inculcation of integrity to combat corruption effectively.

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Introduction
Malaysia was also aware of corruption in the headlines, but not in recent years. Lately, on the
contrary, Malaysia has been very well stopped in all international measures of corruption ... or
absence of it. Why this good rating? Among the decisive factors we can highlight our traditional
administrative system, a typical bureaucracy based on the rule of law; the political system of
consensus, which emphasizes the solution of common problems; freedom of speech and our
active press; open and transparent administration; a sensitive civil society, and the exceptionally
strong Nordic egalitarian tradition (Bainbridge and Bainbridge, n.d.). Therefore, the fight against
corruption must be an inescapable part of the ethical commitment of any company. Not doing so
is denying the business concept itself.
Gap between perception of good corporate governance and the reality of corrupt practices
There is a very big difference between the perception in good corporate governance and the
reality of the corrupt practices in Malaysia. Although, Malaysian Code Of Corporate
Governance(MCCG) was established, it is clear that the rankings in transparency index in
Malaysia is becoming lower each year. This is partly because MCCG cannot be used for
prosecution, further, it should be noted that a good act will not necessarily translate into
entrenching punitive measures for corruption in Malaysia. A good example is the Bumitora Bank
heist. This was a good example where directors of a company and other actors collude and

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defraud the company. In Bumi, business man George Tan was found culpable and handed
maximum sentence after his Carrian Group of companies collapsed in what is the biggest
bankruptcy case in Malysia yet. The case led to the murder of Jalil Ibrahim, a bank assistant
manager who was investigating the case. This was a successful case. However, another case
wher MCCG have failed is the 1MDB. the main actors in this case were Low Jho Tek and the
then Malaysian PM Najib Razak. Due to the political correctness of the actors no prosecution or
convictions have been done so far.
The reality is there is a gap between good corporate governance and the corruption witnessed in
Malaysia. Major corruption scandals have rocked Malaysia entangling bank officials and
government official in equal measure. The Government of former Prime Ministers were involved
in big corruption scandals that almost rocked the country to its knees. The reality is, although
most of the bank scandals have been unearthed most of the officials have not been jailed or
prosecuted (Roth and Kindler, 2013). This has shown that without goodwill, MCCG largely
remain good policies and that is why there is a perception gap between good governance and
actual corruption witnessed(Bainbridge and Bainbridge, n.d.).
At the legislative level, Malaysia has made a profound progress in this area following the
ratification in January 2000 of the OECD Convention on the Fight against Corruption of Foreign
Public Officials of 1999, which urges member countries to make important changes in their
legislation (Dellaportas, 2005).
Although the Convention focuses on corruption abroad, the measures proposed and their
recommendations are equally valid to prevent internal corruption. In Malaysia, the
implementation of the OECD Convention has entailed important legislative changes, including at

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least two important aspects in the fight against corruption:
The introduction in 2010 of the criminal responsibility of the legal person, and of the
prevention and compliance programs as elements of criminal exoneration in the year 2015, has
been a shock to companies to face the risk of corruption in a preventive way.
The reforms implemented, also in 2010, both in the Criminal Code and in the Law on
Prevention of Money Laundering and Terrorism Financing, require financial operators to
exercise greater control over illegal money transactions arising from criminal activities such as
corruption or tax evasion (Fundamentals of ethics, corporate governance and business law,
2012).
In this context of change, how can the company fight against corruption?
For the implementation of an ethical model of prevention and control of corruption, companies
have a great model in the OECD Guide to Good Practices, which incorporates the
recommendations made by the Working Group on Corruption under the Convention
(WIELAND, 2016).
Measures in Corporate governance
Again, although recommendations are foreseen for corruption in international transactions, the
guide is perfectly effective in preventing corruption in all areas in the US, the UK and even
Australia.
There are various remedies that have been put in place to ensure that there is effective corporate
governance in Malaysis just like other countries that share the same MCCG policies in the

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country. Board of governance in companies should put a raft of measures that help to instill good
ethics in the company and in the employees. A company should have clearly defined vision and
mission statement that help it in operationalization of functions and reducing fraud. MCCG,
should ensure that the companys structures are clearly defined and understand the key principles
of corporate governance(Boros and Duns, 2013).. Attending continuous development programs
to ensure that the MCCGs are updated and are upto par with the current corporate governance
trend. MCCG is not merely a comploiance issue but an application issue.
In summary, the measures that a committed company should apply involve the following
behaviors: The support of the highest levels of the organization of internal control measures and
ethical commitment in the fight against corruption.The responsibility for the control and
monitoring of anti-corruption measures should fall on autonomous personnel and bodies, with
sufficient resources and with the power to inform the audit committees of the Board of Directors
or the supervisory boards. Clear and defined ethical policies for your employees and executives
on gifts, accommodation and leisure expenses, customer travel, political contributions, donations
to organizations and sponsorships, and facilitation payments (WIELAND, 2016).
In the united State,
It should provide guidance and advice to its employees and managers, especially in difficult
situations or doubts about ethical behavior (Boros and Duns, 2013).
We have a set of practices of transparency, ethics, corporate governance, internal control and
risks that ensure that we have a solid and sustainable Corporate Governance model that generates
confidence for all our stakeholders and ensures the sustainability of companies' businesses in all
the countries where we have presence.

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Throughout our history, we have sought to cement decision-making in sound ethical principles
and transparency, and culture in a system of institutional values that are reflected in our action,
generating coherence between those who think, say and do. All the companies in all the countries
in which has a presence have a unique model of Corporate Governance, which makes it possible
to apply the principles and policies so that we can (Dorresteijn and Dorresteijn, 2009):
Suggest remedies that may further help improve and strengthen the corporate governance
initiatives in Malaysia
Have strong systems of risk management, internal control, financial, accounting and
administration and process management. Ensuring that the benefits to our interest groups
derived from financial results are fundamental premise the generation of value
Businesses are not corrupt. Corrupted are the people who run businesses. Based on this statement
I can indicate that a company is the long shadow of its managers. For this reason, I will point out
that the creator and determinant of corporate corruption is at the apex of the organization
(whether by its decisions or its omissions).
The hallmark of top management, said Peter Drucker, lies in the emphasis, strength and
insistence on integrity and high standards of conduct and justice that the top management of its
employees demands and commands.
A country, a company and an organization depend, to a great extent, on the mood of their
managers. If those who have earned the right to lead do not reflect integrity, coherence and
credibility in their actions and words, others will see corruption as a cultural matter, typical of

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the expression that says everyone does so in this place (Anis Yusal Yusoff., n.d.).
The 3 elements that configure corruption in companies (according to Medtronic):
1. Personal desire for economic and professional gain
All, legitimately, aspire to a better life from a material and professional point of view. The
problem is, therefore, in the fact of wanting to achieve our objectives through shortcuts and using
fast paths. We forget that success goes hand in hand with sustained and careful work. The other
problem is in the type of society in which we live. It is a society that presses us all the time
towards consumerism and ostentation (Siddiquee, 2013).
3. The rationalizations performed by the person before making the decision
Before making the corrupt decision, comes the determinant element of the corruption: the
rationalizations or justifications of the conduct. It consists of saying to ourselves or to
accomplices the following expressions: "everyone does, my salary is unfair, nobody will notice,
this is like taking a cat's hair, it's not illegal, I do not do this to him bad to anyone, violating this
rule I'm not stealing a weight, I deserve it, I'll do it only once and now (Siddiquee, 2013).
Recommendations from examples of more successful corporate governance
implementations from other countries with similar legal system as Malaysia such as the
UK, Australia and even the USA

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In the United States, the example of Rupert Murdoch Ponzi scheme is best illustrated. He had
defrauded the public more than $65 billion in a span of 20 years. The profits of the company
proved to be too good, however, due to good corporate governance structures he was arrested
and is serving a life sentence in prison. Encouraging corporate whistle –blowing is also an
effective way of to encourage and improve corporate governance initiatives(WIELAND, 2016)..
In the UK, major bank heists have been unearthed due to whistle blowing that helped save billion
especially in top banks like Barclays bank.
This does not mean that economic incentives should be eliminated, but their existence and
bestowal demand care especially in the US with companies such as IBM, Dell and Wal-Mart
having good corporate governance (Siddiquee, 2013).
Ethics programs in corruption should be applicable to third parties as agents, intermediaries,
consultants, distributors, contractors, suppliers . The company's financial and accounting
procedures should include adequate internal controls to ensure the accuracy of books and
accounts so that they cannot be used to conceal corrupt payments. Periodic communication and
documented training should be ensured at all levels of the company on prevention measures and
code of ethics. It should be encouraged through positive aid policies for compliance with
prevention program. The company must have appropriate disciplinary procedures to sanction
non-compliance with anti-corruption policies.
More examples come from Enron USA where the whole company came tumbling down due to
fraud and corruption., the us corporate governance came up with measures that will reduce
corporate theft and missapropriation of shareholders fund. In Australia and UK firms such as BP
were found to be guilty of unethical behaviors especially when oil was spilt in the gulf of mexico

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and the company had to take responsibility. The recommendation is that a lot of decisions had to
be made affected the head of the companys and they must bear the greatest responsibilities.
Conclusion
For MCCGs to work, good corporate governance should be laid into practice. Malaysia has good
systems but the implementation is wanting. The best remedy is to strengthen good governance
and help board to inculcate integrity in the systems.
The behavior of people is shaped by law, morality and culture. These three factors, the makers of
personal decisions, limit or encourage people to act in one way or another. For this reason,
several commitments by governments, managers and universities are essential to reduce
corruption
The business world is a field of objectives and results and, also, principles. Businesses are not
corrupt. Corrupted are the people who run businesses. Based on this statement I can indicate that
a company is the long shadow of its managers. For this reason, I will point out that the creator
and determinant of corporate corruption is at the apex of the organization (whether by its
decisions or its omissions (Siddiquee, 2013).

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References
Anis Yusal Yusoff. (n.d.). Combatting corruption.
Bainbridge, S. and Bainbridge, S. (n.d.). Corporate law.
.Boros, E. and Duns, J. (2013). Corporate Law. Melbourne: OUPANZ.
Cilliers, H. (2000). Corporate law. Durban: Butterworths.
Dellaportas, S. (2005). Ethics, governance & accountability. Milton (Qld.): J. Wiley & Sons
Australia.
Dorresteijn, A. and Dorresteijn, A. (2009). European corporate law. Alphen Aan Den Rijn:
Kluwer Law International.
Fundamentals of ethics, corporate governance and business law. (2012). Oxford: CIMA Pub.
Roth, G. and Kindler, P. (2013). The spirit of corporate law. Oxford, United Kingdom: Hart.
Shelar, N. (2016). Corporate law. [Place of publication not identified]: I K International Publish.
Siddiquee, N. (2013). Public management and governance in Malaysia. London: Routledge.
WIELAND, J. (2016). GOVERNANCE ETHICS. [Place of publication not identified]:
SPRINGER INTERNATIONAL PU.

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