BURSA Malaysia will introduce a 12-year tenure limit without further extension for independent directors under its Listing Requirements with targeted implementation in 4Q 2021 following an update of the Malaysian Code on Corporate Governance (MCCG 2021).
This is after the Securities Commission (SC) found that issues relating to re-appointment of long-serving independent directors remain a concern.
As of end-March this year, 434 independent directors have tenures of more than 12 years, out of which 49 independent directors have served on the same board for more than 20 years.
“To encourage periodic refresh of composition, the MCCG recommends that the two-tier voting process be implemented for re-appointment of independent directors with tenures of more than nine years,” the SC pointed out in a statement.
“The two-tier voting process which was first introduced in 2017 acts as a speed bump for boards and shareholders to carefully evaluate the decision to retain independent directors with tenures of more than 12 years and provide minority shareholders the opportunity to vote against such retention in the second tier voting process.”
In order to promote the exercise of objective and independent judgment in line with global best practices, the MCCG 2021 also discourages the appointment of active politicians on the boards of listed companies.
Elsewhere, to accelerate the progress of women participation on boards, the MCCG 2021 recommends all listed companies to have boards that comprise at least 30% women directors.
The participation of women on boards currently stands at 25.3% for the top 100 listed companies although the target was to reach at least 30% by end-2020.
The 2017 edition of the MCCG had recommended having 30% women directors on boards of large companies.
The MCCG 2021 takes effect today with the first batch of companies to begin reporting on their adoption of these practices to be those with financial years ending Dec 31, 2021.
“The two-tier voting process will be applicable for resolutions tabled at general meetings held on or after Jan 2, 2022,” added the SC. – April 28, 2021
