Mandate of the Special Representative of the SecretaryGeneral (SRSG) on the Issue of Human Rights
and Transnational Corporations and other Business
Enterprises
CORPORATE LAW PROJECT
JURISDICTION: Malaysia
FIRM: Mah-Kamariyah & Philip Koh
DATE: April 2011
This survey is an independent submission to the SRSG’s Corporate Law
Project. It is the sole work of Mah-Kamariyah & Philip Koh and the SRSG
takes no position on any views expressed or implied in this report.
More information about the Corporate Law Project is available at:
http://www.businesshumanrights.org/SpecialRepPortal/Home/CorporateLawTools.
A NOTE FROM THE UN SPECIAL REPRESENTATIVE ON BUSINESS AND HUMAN RIGHTS
OCTOBER 2009
1
A NOTE FROM THE UN SPECIAL REPRESENTATIVE ON BUSINESS AND HUMAN RIGHTS
September 2010
This survey is an independent submission to a project on corporate law and human rights under
my mandate as Special Representative of the UN Secretary-General on Business and Human
Rights: the “Corporate Law Project”. I am delighted that nineteen leading corporate law firms
from around the world have agreed to make submissions to this project, and thank them for
their engagement. The willingness of so many firms to provide their services pro bono in order
to expand the common knowledge base indicates that corporate law firms worldwide
appreciate that human rights are relevant to their clients’ needs.
It is important at the outset to understand how this project fits into my wider work. I was
appointed in 2005 by then UN Secretary-General Kofi Annan with a broad mandate to identify
and clarify standards of corporate responsibility and accountability regarding human rights,
including the role of states. In June 2008, after extensive global consultation with business,
governments and civil society, I proposed a policy framework for managing business and human
rights challenges to the United Nations Human Rights Council (Council). The Framework of
“Protect, Respect and Remedy” rests on three differentiated yet complementary pillars: the
state duty to protect against human rights abuses by third parties, including business, through
appropriate policies, regulation, and adjudication; the corporate responsibility to respect
human rights, which in essence means to act with due diligence to avoid infringing on the rights
of others; and greater access for victims to effective remedy, judicial and non-judicial. You can
read more about the Framework in my 2008, 2009 and 2010 reports to the Council, available at
my website: http://www.business-humanrights.org/SpecialRepPortal/Home.
The Council unanimously welcomed what is now commonly referred to as the U.N. Framework
and extended my mandate by another three years, tasking me with “operationalizing” the
Framework—that is, to provide “practical recommendations” and “concrete guidance” to states,
businesses and others on the Framework’s implementation. There has already been
considerable uptake of the U.N. Framework by all relevant stakeholders. It has also enjoyed
unanimous backing in the Council; strong endorsements by international business associations
and individual companies; and positive statements from civil society.
A key aspect of the first pillar, the state duty to protect, is that states should foster corporate
cultures respectful of rights both at home and abroad, through all appropriate avenues. In
particular, I have been exploring the opportunities and challenges that corporate and securities
law can provide in this regard. Corporate law directly shapes what companies do and how they
do it. Yet its implications for human rights remain poorly understood. The two have often been
viewed as distinct legal and policy spheres, populated by different communities of practice.
The Corporate Law Project will allow me to explore this area further by gaining knowledge from
over 40 jurisdictions as to how national laws and policies dealing with incorporation and listing;
directors’ duties; reporting; stakeholder engagement; and corporate governance more generally
currently require, facilitate or discourage companies from respecting human rights. I am
interested not only in what laws currently exist, but also how corporate regulators and courts
apply the law to require or facilitate consideration by companies of their human rights impacts
and preventative or remedial action where appropriate.
2
The project thus formally comprises part of my work on the state duty to protect. It will assist
me to understand whether and how national corporate law principles and practices currently
encourage companies to foster corporate cultures respectful of human rights. I will in turn
consider what, if any, policy recommendations to make to states in this area, following
consultation with all relevant stakeholders. However it is just one element of my work on the
state duty to protect, which also looks at other areas of the law and national policies which
might help states to encourage companies to respect human rights.
The project will also support my work on the corporate responsibility to respect and access to
effective remedy. In relation to the responsibility to respect, I have explained that in addition to
compliance with national laws, the baseline responsibility of companies is to respect human
rights. To discharge the responsibility, I have recommended that companies conduct ongoing
human rights due diligence whereby they become aware of, prevent, and mitigate adverse
human rights impacts. The responsibility exists even where national laws are absent or not
enforced because respecting rights is the very foundation of a company’s social license to
operate. It is recognized as such by virtually every voluntary business initiative, including the UN
Global Compact, and soft law instruments such as the International Labour Organization
Tripartite Declaration and the OECD Guidelines on Multinational Enterprises. Nevertheless, an
understanding of national laws, including corporate law, remains vital to ensure companies
understand and comply with their national legal obligations. Moreover, as my 2010 report to
the Council highlights, companies may face non-compliance with corporate and securities laws
where they fail to adequately assess and aggregate stakeholder-related risks, including human
rights risks, and may thus be less likely to effectively disclose and mitigate them, as may be
required.
The Corporate Law Project’s website is http://www.businesshumanrights.org/SpecialRepPortal/Home/CorporateLawTools. There you will find the original
press release for this project; the research template the firms have agreed to follow; summary
reports from two consultations held to date on the project; an over-arching trends paper
bringing together the main themes from the firms’ surveys; and all completed firm surveys.
My thanks again to all stakeholders who have contributed to this project.
John G. Ruggie
Special Representative of the UN Secretary-General on Business and Human Rights
3
Setting the legal landscape
1.
Briefly explain the broader legal landscape regarding business and human
rights.
Corporate and Commercial Law
In the Federation of Malaysia, commercial and corporate laws and policies have their
foundations in regulation established during the British colonial period and tend also to
be shaped by economic development policies.
Pursuant to Article 160 of the Federal Constitution, “law” is defined to include “written
law, the common law in so far as it is in operation in the Federation …” and this together
with the Civil Law Act 1956 brings Malaysia into the family of the Anglo American
constellation of common law nations. The Civil Law Act 1956 (CLA) provides for
reception and general application of common law, rules of equity and statutes of general
application so far as the circumstances of the States of Malaysia and their respective
inhabitants permit and subject to such qualifications as local circumstances render
necessary.
Section 5 of CLA 1956 also provides for continuing reception and application of English
law with respect to law of partnerships, corporations, banks and banking and mercantile
law in general.
The legal framework for corporate governance is broadly encapsulated in common law,
specific legislation, the Bursa Malaysia Listing Requirements (listing rules) of the
exchange and Codes of best practices. Principal sources are as follows –
•
Common law foundations - Historically, because Malaysia’s securities and
corporation law are based on common law traditions, laws relating to
governance issues such as directors duties, conduct of general meetings
and insider trading have been in existence for several decades.
•
Company law - The Companies Act 1965 (CA) is the principal legislation
governing company law in Malaysia. The CA drew inspiration from the
UK 1948 Act and the Australian Corporation Code of the 1960’s. The CA
provides the regulatory framework for, inter alia, incorporation, the duties
of directors and officers, the rights of shareholders, general meetings,
company accounts and auditors, and receivership and liquidation. Note
that the CA also specifically provides for regulation of substantial and
related party transactions and an oppression remedy for minority
shareholders.
•
Securities Law - In relation to securities law, the Securities Commission
Act 1993 and the Capital Market Services Act 2008 provide the legislative
framework for licensing, regulating issues and offers of securities,
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takeovers and mergers and trading offences such as insider trading and
market manipulation.
•
Exchange Listing Rules – the Bursa Malaysia is the front line regulator for
listed Malaysian corporations. In addition to the provision of conditions
for listing and requirements and standards to be maintained for continued
listing, the listing rules specifically address key corporate governance
issues, including issues such as substantial and related party transactions,
board composition, the role and function of audit committee, directors’
rights and training, as well as disclosures in relation to the state of internal
controls and compliance with the Malaysian Code on Corporate
Governance.
Human Rights
Part II (Fundamental Liberties) (Articles 5 to Articles 13) of the Constitution refers to
various human rights and freedoms. The Reid Constitutional Commission, responsible for
drafting the Constitution in 1957, considered it “right that [the Constitution] should
define and guarantee certain fundamental individual rights which are generally regarded
as essential conditions for a free and democratic way of life.”
There is however no provision in the Constitution for a remedial mechanism for the
correction of and challenge to any breach of rule of law.
Malaysia established the Human Rights Commission of Malaysia, Suhakam, pursuant to
the Human Rights Commission of Malaysia Act 1999 (the HRCM Act). The HRCM Act
was gazetted on 9 September 1999 and came into force on 20 April 2000. The functions
and powers of the Commission are defined in s.4 of the HRCM Act. Following various
legislative changes in Suhakam’s mandate, the International Coordinating Committee of
National Institutions for the Promotion and Protection of Human Rights in Geneva (ICC),
based at the .Office of the United Nations’ High Commissioner for Human Rights has
deemed Suhakam to be compliant with the Paris Principles relating to the Status of
National Institutions. Recently Suhakam has engaged with the topic of business and
human rights, conducting roundtables for government, civil society and business based
on the SRSG’s Protect, Respect and Remedy Framework. With regard to international
human rights instruments, the Universal Declaration of Human Rights is explicitly
mentioned in the HRCM Act. S.4 (4) of the HRCM Act states that “For the purpose of
this Act, regard shall be had to the Universal Declaration of Human Rights 1948 to the
extent that it is not inconsistent with the Federal Constitution.”
In terms of the core United Nations human rights treaties, Malaysia has acceded to the
Convention on the Elimination of All Forms of Discrimination Against Women and the
Convention on the Rights of the Child. It has ratified the Convention on the Rights of
Persons with Disabilities. It has not ratified the International Covenants on Civil and
Political Rights and Economic, Social and Cultural Rights. Regionally, Malaysia is
represented on the ASEAN Intergovernmental Commission on Human Rights.
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In relation to broader aspects of human rights, there is a range of legislation relating to
environment, employment, trade unions, and social welfare. The following provide some
examples of relevant employment laws:
a.
Employment Act 1955. This Act sets out the minimum terms and conditions of
employment in Malaysia. Any term or condition in the contract of employment
or service which is less favorable than the terms and conditions stipulated in the
Act or its subsidiary legislation will be considered null and void.
b.
Occupational Safety and Health Act 1994. This Act extends the safety and
health provisions covered by the Factories and Machinery Act 1967 by spelling
out the roles and duties of employers, employees and manufacturers in relation
to safety and health at workplaces. The provisions aim to introduce a selfregulatory system whereby employers and employees play prominent roles by
setting-up compulsory safety and health committees.
c.
Factories and Machinery Act 1967 (revised 1974). This Act is concerned with
the registration of machinery and the set-up of factories. Employers are required
to provide a safe place and system of work for their employees. Any failure by
the employer to take into account the provisions of this Act which results in
injury to an employee will render the employer liable for the tort of negligence,
or for breach of statutory duty.
d.
Trade Unions Act 1959. This Act provides safeguards against militancy and
unlawful activities of trade unions in Malaysia. A contract of employment
cannot restrain an employee from joining a registered trade union or
participating in the activities of a registered trade union.
e.
Employees Provident Fund (EPF) Act 1991. Contributions to the fund by
both the employers and the employees are compulsory based on the percentage
of the employees’ monthly wages. However, domestic servant generally and
certain expatriates and their employers are excluded from such contributions.
f.
Employees Social Security (SOCSO) Act 1969. Employees are required to
insure employees earning up to RM1,000. Employees are thereby provided with
coverage in the case of any disablement or death due to any employment injury
and any invalidity or death due to any cause whatsoever.
g.
Workmen’s Compensation Act 1952 (revised 1982). The Act outlines the
minimum requirements for employers to insure their employees with a local
insurance company.
h.
Workers’ Minimum Standards of Housing And Amenities Act 1990. this
Act provides for duty of Employer to provide housing amenities, health,
hospital , medical treatment and sanitation for employees.
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With respect to environmental laws, the government’s decision to enact comprehensive
environmental conservation legislation culminated in the passing of the Environmental
Quality Act 1974 (“EQA 1974”). The Department of Environment (“DOE”) is the
principal agency entrusted to administer the Act. The Minister of Science, Technology
and Environment, pursuant to the powers conferred on him by the EQA 1974, enacted the
Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order
1987 (“EIA Order 1987”) that came into effect in 1988. The EIA Order 1987 was
introduced to ensure the activities prescribed in the schedule to the EIA Order 1987
conduct an environmental impact assessment (“EIA”) process for prescribed activities.
The EIA process is designed to enable the decision makers to assess the impact of a
proposed development project on the environment and the mitigating measures to reduce
the risk and impact of such process on the environment.
Finally, the Persons With Disabilities Act 2008 addresses issues of provision for
facilities and right to employment and opportunity for persons with disabilities. In our
view, the limitation of this statute is that the provisions are framed with exhortatory
principles and is not prescriptive nor coupled with sanctions if not complied.
There has been increasing articulation of Native Customary Rights (NCRs) over land.
Plantation and infrastructure projects which are claimed to impair NCRs have received
negative publicity and have been subject to legal contestations. Sukaham is currently
conducting
a
national
inquiry
into
customary
land
rights:
http://www.asiapacificforum.net/news/malaysia-suhakam-plans-national-inquiry-oncustomary-land-ownership-rights.html.
The issue of migrant workers’ rights has also been much debated in recent years, with
claims of lack of enforcement of laws and policies to protect the rights of these workers, as
well as gaps in existing regulation as a starting point.
Regulatory Framework
2.
To what legal tradition does the jurisdiction belong, i.e. civil / common law,
mixed?
Malaysia belongs to the common law tradition.
3.
Are corporate / securities laws regulated federally, provincially or both?
The Malaysian corporate and securities laws are regulated federally. The legislation
enacted in the Parliament once in effect, is applicable to all states. The Ninth (9th)
Schedule Federal List Paragraphs 7 and 8 of the Federal Constitution relates to finance
trade, commerce and industry which places securities capital market regulation and law
of corporations under the Federal jurisdiction.
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4.
Who are the government corporate / securities regulators and what are their
respective powers?
The Securities Commission is the main regulator for listed corporations. Established on 1
March 1993 under the Securities Commission Act 1993, the Securities Commission is a
self-funding statutory body with investigative and enforcement powers. It reports to the
Minister of Finance and its accounts are tabled in Parliament annually. The powers
afforded to the Securities Commission include regulating all matters in relation to the
securities and futures markets, enforcing securities and futures laws, licensing, regulating
and supervising the conduct of market institutions and licensed intermediaries. In
addition, the Securities Commission is also responsible for encouraging and promoting
the development of the capital market and overseeing takeover and merger decisions.
The Bursa Malaysia is the front line demutualised regulator for listed corporations. Bursa
Malaysia is an exchange holding company approved under Section 15 of the Capital
Markets and Services Act 2007. It operates a fully-integrated exchange, offering the
complete range of exchange-related services including trading, clearing, settlement and
depository services. Its main governing powers are derived from the Bursa Listing
Requirements.
Further, Bank Negara Malaysia, being the central banker of Malaysia, is responsible for
the regulation and supervision of the financial institutions. It is also empowered to
approve the issue of securities by financial institutions licensed under the Banking and
Financial Institution Act 1989 and the Insurance Act and the control of the shareholding
and management of licensed financial institutions and licensed insurers.
Another major regulator of Malaysian Corporate and Securities Law is the Corporate
Commission Malaysia (CCM). All corporations (including foreign corporations doing
business in the country) come under the purview of the CCM. It regulates the conduct of
corporate officers, substantial shareholding reporting requirements, corporate accounting
and the insolvency regime and enforces offences under the Companies Act 1965. CCM is
accountable to the Minister of Domestic Trade and Consumer Affairs. The Ministry of
International Trade and Industry has a role in assisting in the governing and providing
licenses to certain industries if they are of a certain threshold in size of investment and
employment.
In addition to all of the regulators above, Malaysia has various bodies that articulate
views on behalf of minority shareholders. The main group is the Minority Watchdog
Shareholder Group which is primarily funded by the Capital Market Development Fund.
5.
Does the jurisdiction have a stock exchange(s)?
Malaysia has a single, fully-integrated exchange operated by the Bursa Malaysia Berhad.
Companies are either listed on the Bursa Malaysia Securities Main Board for larger
capitalized companies, the Second Board for medium sized companies or the MESDAQ
Market for high growth and technology companies.
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Incorporation and listing
6.
Do the concepts of “limited liability” and “separate legal personality” exist?
The concepts of “limited liability” do exist in corporate laws in Malaysia.
A company limited by shares (being the most popular) is where the company is formed
on the principle of having the liability of its members limited by the memorandum of
association to the amount (if any) unpaid on their shares.
On the other hand, a company limited by guarantee is where the company is formed on
the principle that the members’ liability is limited by the memorandum to a nominated
amount which the members respectively undertake to contribute to the assets of the
company in the event of its being wound up.
A company incorporated under the Companies Act is an independent legal entity separate
and distinct from the members who constitute it.
The exceptions to the veil of incorporation and common law categories of lifting the
corporate veil are also recognized. Within the CA, there are provisions which assist in
enforcement of minority remedies as against controlling shareholders’ misconduct and or
management negligence and defaults. In our view, it is doubtful that a shareholder can
use these provisions to secure or extend a corporation’s duty to other stakeholders.
7.
Did incorporation or listing historically, or does it today, require any
recognition of a duty to society, including respect for human rights?
No there is no statutory requirement at incorporation or listing to show a commitment to
respect for human rights, or any express provisions recognizing a duty to society more
generally.
8.
Do any stock exchanges have a responsible investment index, and is
participation voluntary? (see e.g. the Johannesburg Stock Exchange’s
Socially Responsible Investment Index.)
No, the Bursa Malaysia has not adopted a responsible investment index though in 2006, it
launched a CSR framework, aimed at providing guidance to Malaysian companies in
relation to CSR. The Framework covers four focus areas of environment; marketplace;
community and workplace.
The framework has incorporated criteria drawn from Malaysia’s national policies. Under
the marketplace segment, ethical procurement and vendor development initiatives qualify
as CSR focus areas. Human Rights are also referenced throughout guidance materials
elaborating on the Framework, most recently in a training tool for directors.
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The Framework provides guidance and is not intended to be prescriptive. This is designed
to help companies to develop meaningful CSR agendas, policies and initiatives based on
their own realities. Every company is expected to conduct its own self-examination and
identify its individual areas of relevance within the CSR framework Bursa Malaysia has
drawn up
Directors’ Duties
9.
To whom are directors’ duties generally owed (i.e. to the company, nonshareholders etc)?
S. 132 (1) of the CA states that “A director … shall at all times exercise his powers for
a proper purpose and in good faith in the best interest of the company.” The concept of
“best interest” follows the common law position that it is the interests of shareholders and
not other stakeholders that is primary. The CA does not have a provision as in its UK
counterpart that directors must take into consideration employees’ interests. However
specific legislation imposes its own set of duties on the Board with regard to labour
issues.
10.
Are there duties to avoid legal risk and damage to the company’s reputation?
If so, are they duties in their own right or are they incorporated into other
duties?
There are no specific statutory requirements or duties to avoid legal risk and damage to
the company’s reputation. However, the directors have a fiduciary duty to act honestly in
the best interest of the company. Therefore, this may include a duty not to do any act or
omission which will bring damage to the company’s reputation. Under English law
(which may be adopted by Malaysian courts), there is an emergent principle that
directors owe a duty of care to employees not to run the affairs of the company in a
manner which damages the reputation of the company – i.e., in such a way which results
in employees being unemployable subsequently. Malaysia has yet to judicially adopt
such a principle.
11.
More generally, are directors required or permitted to consider the
company’s impacts on non-shareholders, including human rights impacts on
the individuals and communities affected by the company’s operations? Is
the answer the same where the impacts occur outside the jurisdiction? Can
or must directors consider such impacts by subsidiaries, suppliers and other
business partners, whether occurring inside or outside the jurisdiction? (see
e.g. s.172 UK Companies Act 2006)
The duties of directors as provided in the Companies Act do not specifically include a
duty to consider the company’s impacts on non-shareholders, including human rights
impacts on individuals and communities affected by the company’s operations inside or
outside the jurisdiction. However, there is nothing to prevent directors from considering
such impacts as part of their oversight duties provided it is in the best interests of the
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company to do so. Likewise if ignoring such impacts could put the company at risk, it is
possible that the director would be duty bound to consider such impacts.
Other laws may prescribe that directors play an oversight role in this regard – for
instance, in relation to requirements for certain companies operating certain types of
production to obtain certain environmental licenses under environmental laws.
Government linked corporations (through Khazanah – the investment holding arm of
the Government of Malaysia) have non legislative templates enjoining consideration of
CSR
(eg.
The
Silver
Book
on
CSR
summary
in
http://www.pcg.gov.my/PDF/3.5%20Section%20III.5.pdf.)
12.
If directors are required or permitted to consider impacts on nonshareholders to what extent do they have discretion in determining how to do
so?
Directors’ discretion will have to be exercised within the boundary of serving the
interests of the company albeit indirectly. Within that boundary, the directors will have
discretion to address such impacts and manage trade offs between immediate gain and
medium to longer term interest of the company.
13.
What are the legal consequences for failing to fulfill any duties described
above; and who may take action to initiate them? What defences are
available?
In relation to abuse of laws other than the CA, such as environmental laws, the relevant
government agency will be the body to take up enforcement action (e.g. Department of
Environment for breaches of environment laws). Penalties prescribed will range from
monetary fines to orders to comply with relevant prescriptive norms.
Violation of human rights may take the form of contravention of criminal laws. For
example corporate officers may be prosecuted for offences under the Penal Code 1997 or
statutory offences under specific legislation if it can be found that they are the directing
mind of the commission of the offence. The offences of aiding, abetment and conspiracy
including that of criminal reckless negligence may in certain circumstances be attributed
to Board members or officers of senior management (See Tesco Supermarkets Ltd v
Nattrass [1972] AC 153; HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd
[1956] 3 All ER 624, 630; Meridian Global Funds Management Asia Ltd v Securities
Commission [1995] 3 ALL ER 918; Re Odyssey (London) Ltd v OIC Run Off Ltd
[2000] 3 ALL ER 182.)
In relation to breaches of directors’ duties under the CA, other bodies may lack locus
standi to bring action and even shareholders who are desirous to enforce corporate duties
are faced with procedural hurdles in form of the common law rule whereby the right to
take action belongs to the company and not to shareholders and the decision to litigate
vests normally with the Board of directors.
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S. 181A and 181B of the CA now provide that on application a court may give leave to a
complainant acting in good faith and being able to demonstrate prima facie that he is
acting for the best interest of the company, to intervene in or defend an action on behalf
of the company.
14.
Are there any other directors’ duties which might encourage a corporate
culture respectful of human rights?
As observed, the formal legal duties of directors do not encapsulate any distinct duties
which explicitly require directors to consider human rights. However, some of these
duties may imply such a duty. Indeed, as implied above, it may be that if news goes out
that the corporation is persistently disrespectful of human rights this may impact the
reputation of the corporation, potentially exposing the company to legal risks as well as
market driven consequences. Such results may then lead to allegations that the directors
have not acted for a proper purpose in the best interests of the company.
15.
For all of the above, does the law provide guidance about the role of
supervisory boards in cases of two tier board structures, as well as that of
senior management?
Malaysian companies have single-tier boards. Pursuant to S 131B of CA the board of
directors the company’s business and affairs must be managed by or under the direction
of, the board of directors. Further the Board of directors has all powers necessary for
managing and for directing and supervising the management of the business and affairs
of the company…( S 131 B (2). This requirement is specifically expressed in the
statutory provision that vests duties and obligations on the Board. Fiduciary duties may
also be imposed on senior officers, who may be deemed de facto directors.
Reporting
16.
Are companies required or permitted to disclose the impacts of their
operations (including human rights impacts) on non-shareholders, as well as
any action taken or intended to address those impacts, whether as part of
financial reporting obligations or a separate reporting regime?
Unless such issues are considered to have risk management implications, there are no
requirements for companies to disclose the impacts of their operations on nonshareholders or employees, even in its annual report. The CSR Framework of Bursa
Malaysia encourages voluntary disclosures on CSR related issues.
At a minimum, Public Listed Companies (PLCs) are required to disclose their CSR
activities or practices (and of their subsidiaries) and if there are none, a statement in this
regard. However, the suggested elements and content of the CSR statement is strictly
voluntary. The Framework aims to give PLCs clear guidelines and actionable ideas for
implementing their own CSR initiatives. The intention is to raise the awareness of CSR
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and encourage PLCs to integrate the practice of CSR as part of the way they work and
think.
17.
Do reporting obligations extend to such impacts or actions outside the
jurisdiction; to the impacts or actions of subsidiaries, suppliers and other
business partners, whether occurring inside or outside the jurisdiction?
There is no legal rule for reporting on impacts on non-shareholders under this rubric. As
noted above, the voluntary disclosure regime from Bursa is wide enough for PLCs to
disclose if they so choose to do.
18.
Who must verify these reports; who can access reports; and what are the
legal consequences of failing to report or misrepresentation?
There are no legal implications for non–disclosure of human rights impacts where they
are not relevant to risk management, or any validation process. There are some bodies
e.g. Minority Shareholder Watchdog Group that produces Corporate Governance
Scorecards incorporating elements of CSR compliance.
More generally, reporting rules, including the consequences of misrepresentation and
failing to report, are set by the Securities Commission and the Bursa Malaysia, depending
on the type of company.
Stakeholder engagement
19.
Are there any restrictions on circulating proposals which deal with impacts
on non-shareholders, including human rights impacts?
There is no regulatory norm that restricts circulation of such proposals. However, there is
also no prescriptive right for the same. One risk is that some controlling shareholders
may use defamation suit threats to dampen any strong news that places corporation in a
negative fashion.
20.
Are institutional investors, including pension funds, required or permitted to
consider such impacts in their investment decision?
One of the key institutional investors in Malaysia, the Employees Provident Fund
(“EPF”) governed under the Employees Provident Fund Act 1991 is a national social
security organization operating through a provident fund scheme in Malaysia. Its
principal members are the private and non-pensionable public sector employees. There is
however no distinct requirement for EPF to consider the impacts on non-shareholders,
including human rights impacts.
Unlike certain Pension Fund counterparts in other countries, EPF has not adopted explicit
CSR principles in their investment portfolio decisions.
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Another key institutional investor established by the government is Khazanah Nasional.
Khazanah Nasional is the investment holding arm of the Government of Malaysia and is
empowered as the Government's strategic investor in new industries and markets. As
trustees to the nation's commercial assets, its main objective is to promote economic
growth and make strategic investments on behalf of the Government which would
contribute towards nation building. Khazanah is also the key agency mandated to drive
shareholder value creation, efficiency gains and enhance corporate governance in
companies controlled by the government, commonly known as Government-Linked
Companies, or GLCs.
Due to its role primarily being to promote economic growth and pursuing the nation’s
long-term economic interests, its focus is more on income generating projects rather than
on social aspects, including human rights. However as pointed out, through the Silver
Book GLC Transformation project of the Khazanah, the organization does articulate a
CSR policy to encourage GLCs to consider various stakeholders and social obligations
issues in their corporate performance. In an effort to provide a platform for international
discourse on key issues, Khazanah also provides an annual lecture series. In 2011 this
lecture was presented by Mary Robinson, former High Commissioner for Human Rights
and President of Ireland.
21.
Can non-shareholders address companies’ annual general meetings?
No unless such attendance is permitted by the Chair and is not refused by the
shareholders.
Other Issues of Corporate Governance
22.
Are there any other laws, policies, codes or guidelines related to corporate
governance that might encourage companies to develop a corporate culture
respectful of human rights, including through a human rights due diligence
process?
As noted above, institutions such as the Bursa Malaysia and Khazanah are engaged in
promotional CSR activities aimed to encourage more socially responsible corporate
cultures in Malaysia. Malaysia also has a local network for the UN Global Compact
(http://globalcompactasiapacific.org/gcasia/CountryNetworks/Malaysia.aspx),
the
world’s largest voluntary CSR initiative. According to the UN Global Compact there are
presently 70 participants from Malaysia in the Compact. The Roundtable on Sustainable
Palm Oil (RSPO), a multi-stakeholder initiative to promote responsible practices in the
palm oil industry, has 93 Malaysian participants, the largest contingent of any country.
The RSPO’S Secretariat is based in Kuala Lumpur.
23.
Are there any laws requiring representation of particular constituencies (i.e.
employees, representatives of affected communities) on company boards?
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There is no specific legislation requiring representation of particular constituencies on
company boards.
24.
Are there any laws requiring gender, racial / ethnic representation; or nondiscrimination generally, on company boards?
Although there are no specific laws requiring specific gender, racial / ethnic
representations on company boards, there are instances where applications for licenses or
listing had been rejected as the company lacks a certain ethnic representation on the
company boards. For example, certain corporations will have to have Malay Bumiputra
representation for the corporation to qualify to tender for certain projects. This is part of
the national affirmative action policy.
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