PUTRAJAYA (April 15): Directors of government-linked investment companies (GLICs) and the adoption of environmental, social and governance (ESG) standards will come under greater scrutiny, according to Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz.
The finance minister launched the Principles on Good Governance for GLICs (PGG) at a press conference here on Friday (April 15).
Malaysia’s GLICs consist of six organisations, namely the Employees Provident Fund (EPF), Permodalan Nasional Bhd (PNB), Retirement Fund (Incorporated) (KWAP), Khazanah Nasional Bhd, Lembaga Tabung Haji dan Lembaga Tabung Angkatan Tentera (LTAT).
The six GLICs have a total asset under management of RM1.7 trillion, making the GLICs one of the main pillars of the nation’s socio-economic development.
“To ensure that the GLICs have good stewardship, the PGG will focus on the roles and responsibilities of the board of directors. All directors should lead by example based on principles as well as carry out their duties with diligence, transparency and fidelity,” Tengku Zafrul said.
He stressed that only qualified individuals with broad experience and integrity will be given the mandate to join the board of the GLICs while emphasising that the appointment process and a director’s qualifications are paramount under the PGG.
Tengku Zafrul also said that the PGG would place an emphasis on having a diverse board of directors for the GLICs in terms of the background, culture, experience, age and gender.
Female directors
“I want to stress here that the involvement of women as directors can give a positive impact for effective leadership as well as the financial and non-financial performance of an entity, which has been proven through empirical studies.
"Therefore, the PGG recommends female directors at a minimum of 30% of the entire composition of a GLIC’s board,” Tengku Zafrul added.
Meanwhile, the finance minister said that to ensure that the GLICs are ready to meet market demand for ESG, a corporate governance structure that includes ESG monitoring within the GLICs’ investment strategy, capacity building and expertise relating to ESG is also included in the PGG’s recommendations.
In a separate statement on Friday, the Ministry of Finance (MoF) said that the newly-launched PGG will be the primary reference for the baseline corporate governance standards and sustainability practices of all GLICs.
The ministry said that the PGG was prepared after taking into consideration standards, practices and discussions relating to public and corporate governance locally and abroad, including the Malaysian Code on Corporate Governance which was updated by the Securities Commission Malaysia in 2021.
“The PGG is supported by three key principles, which are leadership and effectiveness of the board of directors, strengthening the board of directors’ composition, and encouraging accountability and transparency in investment management,'' the statement read.
Besides the main framework behind the PGG’s principles, it will have the following:
- Setting the baseline of governance and sustainability practices, taking into account the role, unique needs and mandate of the GLICs;
- Ensuring that GLIC standards and practices in Malaysia are consistent and in line with good governance and sustainability of international standards; and
- Promoting accountability and transparency across entities including the GLICs with their stakeholders, which include the government, suppliers in the ecosystem and the public.
The MoF also added that the PGG is part of the GLIC/GLC Transformation (GLCT) Programme launched 18 months ago by the ministry, which includes the government’s earlier Perkukuh Pelaburan Rakyat initiative launched in August 2021.