This article first appeared in The Edge Malaysia Weekly on October 5, 2026 - October 11, 2026

THE 1Malaysia Development Bhd (1MDB) scandal exposed failures that extended beyond the individuals accused of wrongdoing, raising questions about the effectiveness of the institutions and oversight mechanisms entrusted with safeguarding public funds.

The fallout has extended to auditors and directors, with 1MDB and its former subsidiary SRC International Sdn Bhd filing 22 civil suits in 2021 to recover assets worth more than RM96.6 billion, including claims involving alleged breaches of fiduciary duties and negligence.

The government has since introduced measures to strengthen governance, including the National Anti-Corruption Strategy (NACS) 2024-2028, which seeks to improve integrity, transparency and accountability across the public and private sectors.

The events of the past few years raise a fundamental question: when governance fails despite the existence of audit committees, internal controls and independent directors, who should ultimately be held accountable?

Wee Hock Kee, chairman and founder of corporate governance advisory firm CG Board Asia Pacific, said the board ultimately bears the responsibility.

“If something goes wrong in an organisation, ultimately the board holds full responsibility over the failure of governance,” he commented during a recent panel discussion titled “Governance Under Pressure: Accountability, Transparency & Public Trust” at the Institute of Internal Auditors (IIA) Malaysia National Conference 2026.

“[The] board can delegate, cannot abdicate. That fiduciary duty lies with the board of directors,” he added, responding to a question on whether internal and external auditors were unfairly blamed whenever something goes wrong in an organisation.

The question of board accountability becomes more complicated when directors must challenge those who wield considerable influence, particularly political appointees in government-linked companies (GLCs) and statutory bodies.

Malaysia has long grappled with political appointments to public institutions. Despite pledges to reform the practice, a 2024 study by the Institute for Democracy and Economic Affairs (IDEAS) identified 95 political appointments under Prime Minister Datuk Seri Anwar Ibrahim’s administration.

On this, Wee argued that appointments to government-linked boards must be made through a transparent and defensible process, while those responsible for making the appointments should ultimately be held accountable for their choices.

“In terms of political appointees, I think that if somebody up there decides to appoint [someone to the board], at the end of the day, he or she must be fully accountable and [the appointment] must be defensible,” he said.

For independent directors, however, there may come a point when remaining on the board is no longer tenable, Wee noted.

He recalled resigning from the board of a statutory body after five years of what would have been a maximum six-year tenure, following disagreements with a newly appointed chairman.

“After five years, a new chair came on board and the chair and I could not see eye to eye. I decided that I had to leave even though the shareholder told me not to until I had served the six years,” he said.

The ability to challenge authority also depends on whether organisations protect those who raise concerns.

Institute of Corporate Directors Malaysia (ICDM) president and CEO Jackie Mah warned that encouraging directors, auditors and employees to demonstrate courage is insufficient without secure whistleblowing mechanisms.

“What we have witnessed in many circumstances is that when somebody speaks up, they are sidelined or they lose their job,” she said.

“As we are building courage among professionals, not just board directors, we also have to build a very sound and solid whistleblowing system in companies so that people are protected when they speak up.”

Malaysia amended the Whistleblower Protection Act 2010 in 2025, expanding the protection framework by establishing a Whistleblower Protection Committee to oversee the implementation of the Act and narrowing the grounds on which an enforcement agency may revoke a whistleblower’s protection.

Mah also highlighted the importance of independent board evaluations, which allow directors and senior management to provide confidential feedback on board performance, including that of the chairman.

“In a board evaluation, every board member will evaluate their peers, including the chair, while management will also have an opportunity to give feedback,” she said.

But fear of repercussions can discourage candid responses, prompting some organisations to turn to independent external advisers to conduct the assessments.

“People may think, ‘What if I get reprimanded for saying something?’ That is why some organisations have opted for independent evaluations, where they can speak to an external adviser and voice their views confidentially and candidly,” said Mah. “And I promise you, it does get picked up.”

She added that the exercise should not simply be about judging individual directors, but also identifying gaps and improving board dynamics and relationships.

While boards must take responsibility when governance fails, Javier Chavarria, auditor-general of the Asian Development Bank (ADB), argued that internal auditors must also rethink their role in preventing failures.

Internal auditors, Chavarria said, need to move beyond examining past failures and use data to anticipate emerging risks.

“In my team, we’re already developing tools that cross multiple data and information systems and try to project future outcomes, rather than telling us outliers in the past,” he continued. “We need to transition from past insights into foresight.”

Chavarria said this shift would also require auditors to play a greater advisory role, engaging with management while new policies and technologies are still being developed instead of reviewing them only after implementation.

“We need to be at that table, then and there. Otherwise, we keep doing past assessments and we don’t inform future decisions.”

For boards, this could mean having an assurance function that identifies what has gone wrong while providing an earlier warning of what could go wrong next. 

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