KUALA LUMPUR (July 24): The Securities Commission Malaysia (SC) may introduce mandatory corporate governance practices in the upcoming revision of the Malaysian Code on Corporate Governance (MCCG).

This will mark a shift from its traditionally voluntary approach, moving away from a purely principles-based regime to a more rules-based framework in selected areas.

SC chairman Datuk Mohammad Faiz Azmi said certain elements in MCCG 2026 could become compulsory if they are deemed effective in improving corporate behaviour and outcomes.

"This year, the SC is undertaking a review of the MCCG as part of our Capital Market Masterplan review. I am prepared to make some of what matters in the upcoming MCCG mandatory, if we believe it will help corporates to demonstrate better governance and better results,” he said in his opening address at the Asean Corporate Governance Conference 2025 on Thursday.

The MCCG, which was last updated in 2021, has traditionally operated on an “apply or explain” basis, allowing listed companies flexibility in adopting best practices.

Faiz said the next iteration of the code, due in 2026, will focus on improving board quality and effectiveness, as well as strengthening the board’s role in long-term value creation.

For that, the SC will undertake a stakeholder engagement exercise later this year to gather input on areas that require refinement or reform.

"We will be engaging stakeholders later this year through targeted discussions and consultations on where we are and what we can do better. This consultative approach ensures any revisions to the code remain relevant and impactful," he said.

Faiz noted that other regulators in the region, including Singapore, are also reviewing their respective governance codes. This, he said, reflects a common understanding that regulatory frameworks must evolve in response to shifting expectations and global standards.

Still, he stressed that each Asean jurisdiction must tailor its governance framework to suit local context, market maturity and strategic priorities.

“There is no one-size-fits-all approach in governance. Local relevance ensures the principles we adopt are effective, practical and transformative,” he said.

The MCCG was first introduced in 2000 and has been a significant tool for corporate governance reform in the SC's effort to influence corporate governance practices in Malaysian companies.

The code was reviewed and updated in 2007, 2012, 2017, 2021 and is now due for its fifth revision in 2026, to ensure that it remains relevant and is aligned with globally recognised best practices and standards.

In 2021, the revision included best practices for board diversity and environmental, social and corporate governance (ESG) for the first time.

Faiz also called on Malaysian and Asean companies to view good corporate governance not merely as a compliance issue, but as a strategic advantage.

“Corporate governance is no longer just about compliance. It should be a strategic advantage.” he said, noting that well-governed companies are more resilient, attract investor confidence and are better equipped to respond to market uncertainty.

He added that board members, particularly the chairman, must lead by example, and that ongoing learning is essential to remain fit for purpose.

"I sometimes hear from board members that there is too much to learn. Too many things to be an expert on and too much responsibility and not having enough time.

"I do empathise with that, as I too have to keep up with a lot of things as SC chairman. However, that is the expectation of a board member and that is why you are there, to help guide management in providing value to your stakeholders. And you cannot do that if you are not up to date," Faiz stressed.