By Amalina Anuar
In a world hyper-aware of scandals, the importance of corporate governance cannot be overstated. At the Malaysian Institute of Accountants’ (MIA) annual Accounting Students Conference 2018, an expert panel broke down this key concept in simple manner to the future leaders of tomorrow.
What is corporate governance?
Put simply, corporate governance is about company behaviour.
Good corporate governance is when a company behaves responsibly towards its stakeholders, explained Dato’ Yusli Mohamed Yusoff, President, Malaysian Institute of Corporate Governance (MICG). Meanwhile, bad corporate governance is when companies short-change customers through unsustainable practices that harm society, the environment, and its employees among other things.
Dr.Nurmazilah Dato’ Mahzan, CEO, MIA, explained further that in any organisation, four key players— directors and the management, along with external and internal auditors— must be working together effectively and efficiently to ensure best corporate governance practices.
Since companies are run by humans, she noted that “what is important in corporate governance is the attitude of the people surrounding the organisation and corporate governance structures.”
Integrity, accountability, transparency and disclosure must be embedded in the company’s standard operating procedures (SOPs), systems, and processes, added Dr.Nurmazilah.
In this sense, Dr.Zarina Zakaria, Head of Accounting Department, University Malaya, explained that corporate governance is both institutional and social. “Institutional [corporate governance] are the rules, the process, the system and the social [aspect] is where we are coming from, the impactors interacting within that system. It’s every one of us.”
Why is it important?
Without good corporate governance, explained Dato’ Yusli, “in the long run, the business of the company will not be sustainable.”
Stakeholders hold businesses to high standards in the current era. Failure to meet expectations will not only invite judgement and reputation risk, but potential loss of profit and eventual business failure.
Accountants must be on the ball vis-à-vis corporate governance, noted the panellists. This is because, as noted by Dr.Zarina, “accountants to a certain extent, will definitely be involved very, very deeply in any scandal that we have these days.”
Because of this, corporate governance is a process that must begin early.
“Discussions on corporate governance are important at various levels,” said Dr.Nurmazilah. “It’s not just a discussion that needs to happen among business leaders, among the political leaders, but needs to happen especially among students because all of you will become the leaders of tomorrow.”
Dr.Zarina stressed that people should forget the misconception that corporate governance only begins in the boardroom.
“All of us are actors within corporate governance. It’s not just that Board, just that management,” she continued. “The values that you have within you don’t accumulate within a day or two.”
Why do corporate governance breaches occur?
“Most of the problems arise because of human greed,” said Dato’ Yusli. “Sometimes the checks and balances don’t work, because the people who are supposed to be controlling these things, they either close one eye or they look another way or they are also greedy.”
Setting the tone from the top is therefore crucial, he added. “The role model is very important. The people at the top have to lead by example.”
The panellists also highlighted that stakeholders must not condone illegal practices and step up as whistleblowers when necessary.
Meanwhile, Dato’ Mohammad Azlan Abdullah, CEO, Prolintas, emphasised the importance of having enforceable controls that are continuously enhanced, especially with regards to having limits to authority. He cautioned against concentrating power in the hands of any one individual.
“The moment that happens, the fundamentals of internal controls will be weakened,” he noted. “There’s no check and balance. There’s no segregation of duties.”
How can students instil corporate governance values?
Better awareness and understanding of corporate governance practices, as well as of how accountants can get mired in illegal practices, is imperative for any future accountant.
In addition to reading up on corporate governance case studies, Dr.Zarina suggested watching a Netflix documentary on Dirty Money and scouring YouTube videos for more information.
Textbook knowledge can only carry accountants so far though, as real-life situations that require good corporate governance can be very challenging. On the ground, acknowledged Dato’ Azlan, there will be situations where “something is not right”.
Manoeuvring these circumstances will require soft skills, including good communication and critical thinking. “You need to combine all your academic knowledge, your work experience and how you interact with your stakeholders to be able to present and justify whether we should proceed.”
Still, even with knowledge and soft skills, the panellists concluded that there is no substitute for robust work ethics and a strong moral compass.
“The starting point is that integrity must be in our DNA,” noted Dato’ Azlan.
Dr.Zarina added, “If integrity is at stake, then the whole corporate governance system, no matter how good it is, will collapse.”
Dato’ Yusli emphasised that everyone has a choice; the only question is if it is going to be an honest or dishonest choice.
“The right choice from a corporate governance perspective is to make sure you take care of the interests of the company, of the stakeholders,” explained Dato’ Yusli, “and most of the time, it may mean not taking care of your own interest.”
In this sense, he explained, corporate governance is about service above self.
Overall, corporate governance is an integral part of doing business, a concept every student and aspiring practitioner should inculcate.
Dr.Nurmazilah cautioned, however, that any accountant should not fail to see the forest for the trees.
“Governance is not just about corporate governance,” continued Dr.Nurmazilah. “Governance is also about public governance and it’s about social governance. At the end of the day, we have to see the harmonisation of people within any system so we can deliver value to the stakeholders.”