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INTRODUCTION


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This article preview:

Is the introduction of new law to encourage and

protect whistleblowers sufficient to improvecorporate governance in Malaysia

Suggestions to internal whistle-blowingpolicies


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ISSUES IN WHISTLE-BLOWING

Whistle-blowing is defined as the an act by a

person who disclose corrupt, illegal, fraudulent or

harmful activities by the organization which he or

she serves.

Employees reluctant to disclose misconduct ofothers :(1) fear of retaliation

(2) loss of friendship with colleagues


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BACKGROUND OF RESEARCH

Only applicable in Malaysia context

Across all industries, with focus on the public

listed companies(PLCs)

East Asian economies & financial crisis

1997/1998

Global financial crisis 2010


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Awareness of good corporate governance

Whistle Blowing Act 2010

A PricewaterhouseCoopers (PwC) survey verifiedthe positive contribution of the whistleblowers in

combating misconducts in organizations


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RESE RCH METHOD


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DESK RESEARCH METHOD

Also know as Secondary Research

Collecting data from existing resources

Low cost technique

Could lead to waste of time if the researcher does not

have the proper knowledge of how the research inperformed


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EXAMPLE OF DESK METHOD

Online Desk Research

- Data that available on internet

- Results are promising and relevant

- Example: Pevious research report and journal

Government published data

- Related to social, financial and economical aspects

- Example: Government and NGO statistic


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LITERATURE SEARCH

Reviewing all readily available professional materials

Fastest and inexpensive method of gathering information

From newspapers, magazines, on-line data bases, and any

other published materials

Most associated with academic-oriented literature

Include theoretical and methodological contributions to a

particular topic

Example : Thesis, journal article


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REGULATORY REVIEW OF

WHISTLEBLOWERS PROTECTIONIN MALAYSIA


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THE MALAYSIAN ANTI-CORRUPTION

COMMISSION (MACC) ACT 2009

Section 65

Protection for informers who helped in

combating corruption

Section 72

Protection to employees reporting corruption.

Protects any person who disclose information

from any proceeding or civil liability.


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CAPITAL MARKETS AND SERVICES ACT 2007

Section 320 Mandatory duty on auditors of a listed corporation

to report:i. what is in his professional opinion,

ii. a breach of the securities laws,

iii. Bursa Malaysia Listing rules or

iv. any other matter which adversely affects to amaterial extent the financial position of thecorporation

to the Securities Commission and Bursa Malaysia.

Section 320(2)

No auditor shall be liable to be sued in any court


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Section 321 Protection for CEO or officer who discovered any

breach affecting financial position of a public-listedcompanies.

Protection against any retaliation, suspension,

demotion

Section 321(2) No CEO or a secretary of a listed corporation shall be

liable to be sued for any report submitted by suchperson in good faith and in the intended performance

of his duties.


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COMPANIES (AMENDMENT) ACT 2007

Section 174(8A)

- auditor to report in writing the Registrar in the belief that

fraud or dishonesty is being or has been committed by officer

Section 368B

An officer may report to the Registrar in writing upon any

discovery of fraud committed by other officers


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Witness Protection Act 2008, Section 24- Protection for witnesses who give evidence in good

faith

Whistleblower Protection Act 2010- Protection to informants who give confidential informationto government enforcement agencies

Unless:- exposes information to the media

- suspicion of misconduct as to providing misleading

information


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WHISTLE BLOWING IN M L YSI


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In 2002

Malaysian Institute of Accountants (MIA)

Monitor the quality of work performance byexternal auditor


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In 2010 Auditor oversee board was formed by the

Securities Commission

Oversee the auditor of public interest entities Protect the interest of investors by promoting

confidence in the quality of reliability


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5THGLOBAL CRIME SURVEY

PricewaterhouseCoopers

In 2009

Increase economic crime during economic

downturn


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Economic Crime

Inccentive or Pressured

Opportunity

Attitude/rationalization


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ECONOMIC CRIME DURING ECONOMIC DOWNTURN

Asset misappropriation

Accounting fraud

Bribery Corruption


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CORRUPTION PERCEPTION INDEX (CPI)

By transparency international

In 2009 Malaysia rank 56 out of 180 nation

4.5 score out of 10

A fall of 0.6 (5.1) from previous year


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PricewaterhouseCoopers do some research

fraud detection is directly link through internal

sources-internal audit

Poor or biased external and internal auditing

system


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Malaysia has revamped its laws to offer greater

protection and encouragement to whistle

blowing

Structure of Malaysia PLC not encourage

whistle blowing

In Malaysia PLC majority of company shares is

own by family.


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The guide urges companies to ensure thatemployees can raise concerns about

misdemeanors in confidence and sets out some

suggestions for whistle blowing reportprocedures, including a sample whistle-

blowing policy


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Bursa Malaysia on its part has taken action,more often through public reprimands, against

companies for not complying with the Listing


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CULTURAL IMPLICATIONS

GLOBE = Global Leadership and Organisational

Behavior and Effectiveness Research Program

a research program - cross-cultural research andorganisation practices

Conducted in 62 nations included Malaysia

uncertainty avoidance, power distance, societal collectivism,

in-group collectivism, gender egalitarianism, assertiveness,future orientation, performance orientation and human

orientation


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Power distance, Collectivism and Assertivenesswill be discussed

Hofstedestudied the impact of culture

Defines : the collective programming of the mind thatdistinguishes the members of one group or category from another


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POWER DISTANCE

Refers to interpersonal power of influence between two

people as perceived by the less power

Greater power distance, power of powerful person ,

resistance of powerless person Asian Societies is more value on status than achievement

Hofstedesstudies : Malaysia has the highest level of

power distance among the societies

Globes studies : Malaysias score index is 5.17 out of 10


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REASONS :

In goverment-linked companies, shareholdings are

controlled by the government investment agencies and

the BOD may comprise political appointees.

such action might be aimed by the politicians or Malaysiagovernment in the board

Eg : SimeBerhada government linked company hadannounced losses of RM 1 billion

no minority shareholders query the board as the Chairman andsome directors have powerful political connection to the Msia

Government


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COLLECTIVISM

Individualism= individual is acting on his or her own, makingown choices, responsible for his or her own choices

Collectivism = views the group as the primary entity , value in-groups goals as opposed to personal goals, interdependent , full fill

high level of demands from their in-groups Collectivism having a sense of belonging to in-groups is

high therefore conflicts are swept under the carpet


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concern about face, therefore they are less criticize

to the others as will cause loss of face to the one that

being criticized

Have different opinion but do not air their view as

shown loyalty to the group the closed relationshipbetween directors and

shareholders in companies has caused difficulty to

function in their respective positionsto perform check

and balance of the company


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GLOBEs survey = revealed Malaysias in group

collectivism score 5.51 above average score of 5.13

among 62 countries

Malaysian arepride and show loyaltyto their in-groups Invest in relationships which do not benefit

Do not make a rational assessment to the decision


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ASSERTIVENESS

Trompenaars and Hampden-Turner = studied

level of assertiveness by observing societies

adaptability to surrounding

Inner-directed=believe they can control and subjugatetheir surrounding environment

Outer-directed= have to maintain harmony and

sometimes subjugate themselves to it


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Asian societies fall into outer-directed group

Accept everything happens as Gods will

Believe peace is a sensible way to approach life

and no point to fighting over


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GLOBEs survey :Asian societies have lowassertiveness scores

Malaysia is 3.87 below average score of 4.17

Lehmann : Malaysian culture is preferring tokeep things to ourselves or not being in our

nature to do that


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CORPORATE SCANDAL

Transmile Group Berhad (cargoairline)

Special audit carried out by Moores Rowland

Risk Management Sdn.Bhdrevealedoverstatement of MYR 530 million of companyrevenue

pre-tax losses of RM 77 million for year 2005

and MYR 126 million for year 2006 pre-tax profits of MYR 207 million for year 2005

and MYR 120 million for year 2006 as originallyreported


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Cause drop of share pricefrom MYR 8.90 to

MYR 6.00 in year 2007

Under billing or non-billing of CEN Worldwide

Sdn Bhd of RM103 million debts to the company

One of the directors of CEN Worldwide was a

nephew of founder and director of the company

There is no whistle blowing by the shareholders

and/or employees


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THE W Y FORW RD


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external whistle-blowing provision

Same important to encourage internal whistle-

blowing provisions

( Malaysia culture & composition of MalaysianPLCs)


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DEVELOPING INTERNAL WHISTLE-BLOWING

POLICIES

Internal auditors

Ability, resources and equipped to investigate

Duty: ensure whole process of whistle-blowingare correct without undue damage or disruption to

others.


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1. identifying objectives - foster cooperative cultures & encourages staff to

report misconduct internally & allow report to be

thoroughly investigated. - Staffs comply with organizations code of

conduct.

- increase awareness of orgscode of conduct - to cascade the ethically focused core values from

chairman.


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2. definition of key terms commonly used in

the policy

3. Main part:

Procedures for reporting, investigating

Roles, duties, rights of all people involved inthe process


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4. Other initiatives encourage internal

Whistle Blowing

Conduct training

Provide financial incentives

Allow anonymous whistle blowing


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Q & A SECTION


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THE END

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