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Malaysian Boards and Directors need to step up or step out as business risks escalate locally and globally

12 Jun 2024

Boards must take stock of their effectiveness and ability to work as partners to Senior Management to
effectively lead businesses into the future whilst upholding corporate governance excellence

KUALA LUMPUR, 12 June 2024 – The Institute of Corporate Directors Malaysia (“ICDM” or “the
Institute”) today shared its key highlights and milestone achievements for their financial year ended 31
December 2023 (FY2023) at their recent 7th Annual General Meeting (AGM). ICDM also emphasised the top themes and trends impacting companies, boards and directors. As a way forward, ICDM shared
action plans and pathways, alongside its progress and key milestones for their FY2023 and the year

Michele Kythe Lim, President and Chief Executive Officer (CEO) of ICDM said, “The Institute
has come a long way since we started six (6) years ago. However, the rapidly shifting environment and
consumer expectations, compounded by climate change and technological risks, geopolitical volatility,
to heightened regulatory requirement and scrutiny, continues to challenge boards, directors and senior
management alike. Therefore, as the national Institute of Directors (IoD) for Malaysia, we must ensure
we discuss and facilitate hard hitting conversations and engagements on risks and challenges facing
companies today and to prepare them to be good partners to senior management. Only when boards,
directors and senior management are aligned, with mutual trust, can they proactively and successfully
deal with challenges, perform better as a company, respond to greater regulation and scrutiny, as well
as cost and complexity in the coming years.”

Since its inception in 2018, ICDM has seen more than 24,600 participants in over 400 programmes. To
date, their Director’s Registry stands at a total of over 1,000 qualified board candidates across various
industries. In 2023, ICDM initiated the ASEAN Directors Registry to build a broader, international
network with a more diverse pool of viable board talent and creating networks and opportunities for
transnational director placement, extending their board registry number by more than 17,000 members
and alumni from across nine (9) other national IoDs. In addition, ICDM’s collaboration with the world’s
pioneer Institute of Directors in the United Kingdom (IoD UK) launched last year reinforces their efforts
to drive proactive governance.

Michele continued, “Our focus is clear: as the national IoD in Malaysia, our mandate is to continue the
effort to be the benchmark of corporate governance (CG) standards and at the same time, be the
holistic platform to professionalise and support the board and director’s ecosystem. This simply means
that whilst boards and directors bring tremendous value through their years of experience, it is vital to
acknowledge that the world continues to evolve. Technology and climate change has massively
disrupted the status quo and leaders need the foresight and humility to recognise the need for selfdevelopment, direct their learning in a deliberate and intentional manner, that they are informed and
knowledgeable and, able to be good partners to senior management.”

“There is an overriding need for urgency and intensity of action, as uncovered in our recent ASEAN
Board Trends Report 2024 (ABT2024). It highlights the imperative for boards to evaluate their
effectiveness as well as shift their strategic priorities to address the key threats that are expected to
become more prevalent over the next couple of years such as having the right talent and leadership,
managing macro and geopolitical uncertainties, more sustainable and effective operational strategy,
and better board-management relationship and dynamics. Strategies moving forward must be
developed by boards in alignment with their management in order to address these potential threats.
This is vital as any misalignment in priorities and expectations leads to the lack of confidence in board
knowledge, and their ability to be the critical guide and sounding board for senior management.”

Amongst the key insights from the ABT 2024 revealed include:

  • The lesser confidence of senior management (68%) versus boards (75%) on board understanding
    of their role, authority and priorities;
  • Significantly lower perception by management (65%) that boards have the right blend of
    knowledge and experience to support the shifting business needs in the next 3 to 5 years compared
    to their boards (76%); and
  • Management is also less confident (72%) that their board (80%) deliberations bring value and
    improve the quality of decision-making, with twice as many senior management (16%) compared
    to boards (8%) citing that board members rarely express their views and disagreements.

ICDM highlighted the imperative for boards to realign their priorities, improve board-management
dynamics, drive progressive board architecture and culture, take stock of blind spots to board
effectiveness and enhance their ability to navigate sustainability challenges. A continuous and
structured candid assessment of their value enables boards to clearly identify key areas that will help
bridge the gap between current standards of governance excellence and expectations, ensuring
directors fulfil their fiduciary duties and growing responsibilities to be a positive influence on current
and future leaders.

ICDM has also been advocating for transformative change for governance excellence. Through various
initiatives including the Institute’s advocacy for external board effectiveness reviews every three (3)
years for large companies as per the practice recommended under the Malaysian Code on Corporate
Governance (MCCG) 2021, ICDM has seen an increasing demand for its Board and Directors
Effectiveness Evaluation (BDEE), indicating a heightened cognisance among corporate leadership to
heed the call to improve board effectiveness in exercising their oversight role.

In closing, Michele said, “We are acutely aware of the challenges that boards face. As such, whilst our
capacity and competency building programmes cover a broad array of services and needs, we are
deliberate in our emphasis on addressing key threats faced by boards as highlighted above. Different
factors will disrupt the status quo, therefore Boards must adopt sustainable business practices and
recognise that the business choices that we make have an impact not only on our companies but also
on the communities in which we operate and on the environment. It is therefore imperative that we
have the capacity to steer our companies to be a force for good even as we pursue growth and success.
Effective leadership, diversity, stakeholder engagement, continuous learning, and ethical practices are
non-negotiable to lead with purpose and humility to close the gaps.”

Established by the Securities Commission Malaysia (SC) and supported by Bank Negara Malaysia, Bursa
Malaysia and the Capital Market Development Fund (CMDF), ICDM strives to fulfil its role as the leading influence of excellence in governance and to build a robust corporate governance culture in Malaysia and the surrounding region. In addition to corporate advisory and bespoke programmes designed to meet the specific needs of board members and senior management, ICDM provides the cornerstone of governance and sustainability practices established under the Bursa Listing Requirements.

These include the Mandatory Accreditation Programme (MAP), for first-time directors of public listed
companies (PLCs) and the Mandatory Accreditation Programme II: Leading for Impact (LIP), which aims to provide directors with the foundation to address sustainability risks and opportunities effectively and have better oversight over their companies’ material sustainability matters. As at 31 March 2024, both programmes have seen over 3,200 directors participating since commencing in 2022 and 2023 respectively.