THE Malaysian Institute of Corporate Governance (MICG) has urged the government to reject any proposal to defer implementation of the corporate liability provisions in the amended Malaysian Anti-Corruption Commission (MACC) Act.
It felt that the argument for a postponement was not well-founded and would be detrimental to Malaysia’s international standing in terms of the perceptions of corporate governance in the country.
MICG has noted with concern recent proposals to defer the June 1 enforcement date for the corporate liability provisions in the MACC (Amendment) Act 2018.
The argument behind the deferment is that companies are ill-prepared and the Covid-19 crisis means companies have not had sufficient time to get ready.
The likely negative impact on future foreign investment in the country would make recovery from the current economic downturn even more difficult.
The current concern is the introduction in Section 4 of corporate liability for offences under the “mother Act,” coupled with a new Section 17A which provides a defence for a company and its directors and senior management in the form of the introduction of “adequate procedures” to guard against the commission of corrupt acts.
One report presenting the case for deferment cited MICG’s 2019 Transparency in Corporate Reporting, or 2019 TRAC report, quoting an overall finding that only 54% of Malaysia’s top 100 Listed Companies had completed preparations for enforcement of the MACC (Amendment) Act.
The single statistic extracted from the TRAC report can be, and appears to have been, misconstrued, and it should be understood in its context, MICG said. The 2019 TRAC report was designed to establish the status of the anti-corruption practices of the country’s top 100 listed companies based on information available in the public domain.
The benchmark used was the market capitalisation of the companies at Dec 31, 2018, as stated by Bursa Malaysia. This means the 54% readiness figure dates back 17 months, a considerably longer timeline than the six months that has elapsed since the 2019 TRAC report was launched last November.
Worth noting also is the fact that the MACC (Amendment) 2018 Act was passed and gazetted on May 4, 2018. The act came into operation on Oct 1, 2018 except for Section 4 of the Act on corporate liability, which is to be effective from June 1.
That means companies have had 25 months to prepare to ensure compliance with the Act. The loss of 10 weeks to Covid19, should the MCO continue to the end of May 2020, is of little significance in such a timeline, MICG contended.
Most companies that were unprepared before the commencement of the MCO would have remained so in any case.
“In times of economic stress there is always a temptation to ‘do what it takes’ even if it means cutting corners. Postponing the enforcement of corporate liability will appear to be enabling the very behaviour the Act seeks to forbid.
“Weakening the definitions of what constitutes a corrupt act will be similarly regarded. This is a time when the boards and senior management of Malaysia’s leading companies should be standing firm as champions of business integrity and ethics, not arguing for a way out,” said MICG president Datuk Yusli Mohd Yusoff.
If there is any allowance given at all, it should only be for those companies which have consistently upheld the principles of corporate governance but, during the current crisis, dropped their guard, inadvertently allowing dubious acts to pass undetected, or were not alert to third parties or agents doing so.
In these circumstances, it should be possible for MACC to negotiate a Deferred Prosecution Agreement (DPA). This is a process in which the company admits liability but agrees to adopt adequate processes and procedures within a defined timeline to ensure against future occurrences and, where possible, to rectify the situation, MICG said.
The quid pro quo would be reduced fines or other punishments, and performance of the company’s obligations under the DPA would be adjudicated by the courts. – May 6, 2020
