September 2011 - MINDA Malaysian Directors Academy ...

FEATURED ARTICLES _ARTICLE THREEIs Board of Directors Relevant?by Datuk Dr Syed Muhamad Syed Abdul KadirPreambleThis article attempts to show that the actions taken bythe regulators to ensure directors of companies are ableto perform their roles and responsibilities are acceptablestrategies. But it is argued these actions show “what”the directors must do. While indicating or prescribing andfocusing on “what must be done” by directors is necessarybut not sufficient to create effective boards. It is imperativethat directors should not only know what are theirresponsibilities but must also garner their energies to focuson “how” to ensure effectiveness prevails in the companies.It is argued that focusing on the “how” will make directors“relevant” to the companies. This article attempts toprovide some insights on the issue.IntroductionThe articles of association of a company specify that thebusiness of the company has to be managed by a groupof persons called “directors”. This is provided in detail inArticle 73 of Table A of the Companies Act 1965. In addition,the Companies Act 1965 also defines the term “directors”,duties and liabilities of directors and also restrictions ondirectors in performing their duties. 1 The provisions inthe mentioned act and the articles of association of thecompany have the objectives to indicate what directorscan do and what they cannot do which imply to determinethe scope of responsibilities of directors. Companies whichare listed on Bursa, the directors are subject to CapitalMarket and Services Act, Bursa Listing Requirements andMalaysian Code on Corporate Governance. In the case ofcompanies that fall under the ambit of licensed financialinstitutions, the directors are also subject to the Bank andFinancial Institutions Act 1989 and Bank Negara guidelines.In summary, all the above provisions attempt to determinethe responsibilities of directors, what are expected out ofthem and also defined the liabilities of directors. Again,emphasis on the “what”, and less on the “how”.Besides the above regulatory requirements, MinorityShareholder Watchdog Group (MSWG) established on thegovernment initiative in 2000 also monitors the corporategovernance activities of the listed companies. Theprogrammes and activities undertaken by MSWG, directly orindirectly, touch on the responsibilities of directors of listedcompanies. In addition, there are many training institutionsand providers that conduct training to ensure directors areconversant with their roles and responsibilities. Some ofthe programmes are made mandatory and there are thosethat are treated as optional or voluntary. Examples of suchinstitutions are MINDA, FIDE and ICLIF. These actions can beconsidered as proactive initiatives so as to ensure directorsare able to perform their roles and responsibilities.Based on the above, it is seen clearly that the regulators areconcerned for directors to know their responsibilities andto operationalize their concerns is by establishing traininginstitutions and/or organising training programmes. Theseactions are certainly welcome by the shareholders.While the above actions are very logical steps to elevatethe capability of directors and also to enhance corporategovernance, it is equally importance to know and identifythe underpinnings of the roles and responsibilities of Boardof Directors.7BOARD VIEW_SEPTEMBER 20111Sections 131 and 132 of the Companies Act 1965 provide detailed provisions.