Corporate governance can be defined as system in which various types of rules and practices are included (Ibrahim, Arif and Paino, 2017). It is required to be implemented in every organisation as through this whole organisation is kept under good control. The organisation referred here is AFFIN Bank which is doing their operations in Malaysia since 1975. This report will discuss about laws associated with shareholders rights, duties and responsibilities of corporate participants etc.
1. CARE and its applications
Cooperate Governance define as an effective process and structure which used by company for manage and direct entire affairs of the firm. Basically it provide better framework which support company for attaining its goals and objectives. Along with this, effective governance defines appropriate rights and responsibilities which may lead firm in their decision making process. In addition of this, the MCCG (2017), determine a new approach which help in promoting internalisation of corporate governance culture.
CARE: It is an appropriate term which support as well as encourage business organization for determining thought process which include effective as well as good corporate governance in order to provide fair and meaningful explanation for how an business organization apply this practices within their business. Basically, CARE contribute in establishing positive and mutual trust among firms and its stakeholders in which they provide valid as well as appropriate disclosures. By which stakeholders effectively engage with company in appropriate way (Visser and Tolhurst, 2017).
- Comprehend: Effective corporate governance practices defines company vision, structure, process which helps firm to attain long term sustainability. Along with this, it also provide better support to business organization to maintain ethical behaviour in overall business strategies. In addition of this, elements like investors, stakeholders, creditors are helping in recognize the environmental as well as social responsibilities which may leads in attaining long term sustainability in most effective manner. By applying MCCG, firm ensure that workers are effectively understand towards the governance process by attaining better training and awareness programs in most effective way.
- Apply: It is also an effective principle of MCCG, which include culture change, mindset for corporate governance in order to promote meaningful application to attain better intend outcomes. Along with this, it also help in implementing the practices which may leads business organization to attain positive outcomes which may lead strong corporate governance culture.
- Report: It is also an effective principle of MCCG, which define fair and meaningful results. With the help of this company enhance their profitability level and make strong corporate governance practices (Tee and et. al., 2017). Along with this, it also provide an effective explanation for the departure in which stakeholder and investors required reliable and integrated information in order to assess the ownership of the structure. With the help of this capital get attracted for long period of time which may leads in maintaining better confidence in market.
2. Key principles of good corporate governance
Corporate governance report consist some rules, procedures and practices and with assistance of this organisation will controlled and directed. This will comprise interest of clients, stakeholders, suppliers, government and many more. There are three key principles which will include into this, stated as beneath:
Board leadership and effectiveness: It consists:
- Board responsibilities: They are much responsible for growth and success of an association. They are collectively accountable for attaining targets and goals of an enterprise. It is essential for them to set some objectives for staff members which they need to attain. Main responsibility of board chairman is to establish leadership and good corporate governance practices. In board there must be competent and qualified company secretary who is having significant knowledge about all rules and regulations. According to the report of corporate governance of AFFIN Bank, their board committee promote good business conduct so that they will be able to maintain integrity, fairness and transparency at workplace (Krishnan and Amin, 2017).
- Board composition: It is required for them to acquire judgement as per the interest of organisation. For this, they have to take into account diverse insights and perspectives. It is essential for BOD to develop some thoughts regarding overall effectiveness of board and in addition individual director. This has been determined that, an individual director will be appointed for almost nine years.
- Remuneration: It is required for company to set effective remuneration for directors as it helps to attract them and in addition retain talent for maximum duration in affiliation. In this manner, they will be able to attain coveted targets effectually. Policies regarding this need to be developed by independent as well as transparent procedure.
Effective audit and risk management: As indicated by the Corporate governance report of AFFIN bank, some outcomes will attained:
- Audit committee: This is entirely independent and it is must for board to review their recommendations as well as findings properly. For this, they will utilize financial statement of firm properly as it is much reliable in nature.
- Risk management and internal control framework: Organisation needs to obtain an appropriate judgement to reduce level of risk. Therefore, they will easily attain coveted targets effectively and efficiently. AFFIN bank is having significant structure for internal control, risk management and governance as well. It is fundamental for bondholder to examine appropriateness of this sort of framework (Esa and Zahari, 2017).
Integrity in corporate reporting & meaningful relationship with stakeholders: It comprise:
- Communication with stakeholders: It is required to maintain an effective communication amongst stakeholders and firm. Therefore, they will develop mutual understanding with each other's expectations and goals. Along with, it is needed for bondholder to obtain judgement regarding CSR, environment and governance policies.
3. Examples for practising good corporate governance
According to the statements of which has been given in corporate governance report of AFFIN Bank, board of directors plays an important role in order to create favourable conditions for it or to sustain at marketplace of Malaysia. For an example: AFFIN BANK is looking forward to other areas of Malaysia where it is not doing business. Here, BOD can do meetings in which they can discuss about major aspects so that favourable conditions can be created.
Another example can be taken under which is integrity, transparency and fairness is being brought up BOD of AFFIN Bank so that to shareholders can show their interest in future aspects (Hassan, Hijazi and Naser, 2017).
As per given under report of AFFIN Bank, Managing Directors have understood the perceptiveness of its clients and taken initiatives so that to reduce all the risks and gain competitive advantages as well so that to sustain at financial market for a longer period of time. For an example: BOD of AFFIN Bank, reduces diversity and risks through building up the interests of company people.
One more example under this that can be taken under this as, BOD of AFFIN Bank considers their stakeholders as main point while conducting a meeting as they are the one who brought up funds whenever it is needed to attain desired goals and objectives.
This part which is being given under corporate governance report of AFFIN Bank has mentioned that, Formal and transparent policies should be made for BOD so that every single senior gets equal opportunity. For en example: Government of Malaysia has formulated rules and regulations where votes can be given by employees in order to select an individual in Board of Directors (Farhan, Obaid and Azlan, 2017).
4. Practice and guidance in order to involve shareholders in participation of voting decisions at General Meetings
It is very necessary for Affin Bank to involve their stakeholders in their meetings as they are also an integral part of management and it is their right to participate in all the meetings. By attending these, the shareholders will be able to understand the objectives of the organisation in a better manner and quality of its management as well.
- Communication with Stakeholders – It is very necessary for Affin Bank to have a good communication with their stakeholders as it will help them in understanding their concerns which they are having regarding company and then try to solve it. There are many ways through which company can develop communication with its stakeholders like:
- By implementing engagement meetings
- By making use of social media and other websites
- By organising investor relation functions etc.
Along with this, Affin Bank is required to form an intrinsic report in which all the details about company will be included like its financial statements, governance reports etc. This report will be given to investor so that they can get all the minute details about the company and know about what is happening inside the company in a proper manner as well (Rahman, Ibrahim and Ahmad, 2017).
- Conduct of general meetings – This is also an effective way through which Affin Bank can include their shareholders in their meetings. Through these meetings, a shareholder will be able to understand the business, its performance and its position in the market in an effective manner. The board of company is required to make sure that stakeholders are given notice of meeting at least 28 days before the meeting so that they can take their decision to come in meeting effectively. The notice should be having all the details about what matters will be discussed in the meeting and along with this details of resolutions will also be included. Also, the board of directors should also make sure that shareholders are participating in the meeting. If they want that large no. of shareholders should participate then they should make sure that they are having electronic voting and remote shareholder participation.
From the above report, it can be concluded that it is necessary for every organisation to implement corporate governance as then only they will be able to keep the whole organisation under control. Shareholders are an integral part of management so they are also required to be taken care of properly and it is to be made sure that they participate in the meetings as then only they will be able to understand the organisation in a better manner.
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- Farhan, A., Obaid, S. N. and Azlan, H., 2017. Corporate governance effect on firms’ performance–evidence from the UAE. Journal of Economic and Administrative Sciences. 33(1). pp.66-80.
- Hassan, Y., Hijazi, R. and Naser, K., 2017. Does audit committee substitute or complement other corporate governance mechanisms: Evidence from an emerging economy. Managerial Auditing Journal. 32(7). pp.658-681.
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- Tee, C. M. and et. al., 2017. Institutional Monitoring, Political Connections and Audit Fees: Evidence from Malaysian Firms. International Journal of Auditing. 21(2). pp.164-176.
- Visser, W. and Tolhurst, N., 2017. The world guide to CSR: A country-by-country analysis of corporate sustainability and responsibility. Routledge.